THE GIST
BrewDog has opened what it’s calling “the world’s first alcohol-free beer bar” at a prime location in East London, in the latest in a series of moves to dominate the alcohol-free beer category.
Housed in the new, glass-fronted Bower development just north of the Old Street roundabout in Shoreditch, the BrewDog AF bar has picked a bold and expensive location for its revolutionary concept. Old Street is home to tech start-ups and high-net-worth individuals, and is nicknamed the “Silicon Roundabout” as a result. By not specifically targeting Brewdog’s main audience of beer drinkers, the new venue backs the brewery’s stated aim: to change the conversation around alcohol-free beer for everyone.
Billed as a “pilot” site, and located in a former Draft House bar (a chain of pubs BrewDog bought in March 2018), it has 15 taps and a large fridge of BrewDog and guest beers under 0.5% ABV. BrewDog hopes to expand quickly off recent growth in the low-alcohol sector. It recently announced plans to open 30 new bars this year, compared to the 20 it opened in 2019. The company hasn’t ruled out including any further “AF” sites as part of that 10, which would also include “traditional” bars that serve full-strength beer.
The rise of low- and no-alcohol beer has been well documented over the last few years. Data from craft beer distributor Eebria Trade shows that beers below 0.5% ABV now represent nearly 1.5% of the whole U.K. beer market. Adjusted to exclude the bias of Dry January, low- and no-alcohol beer still represents 1.2% of all beer sales in 2019. For comparison, countries leading non-alcoholic beer sales include Germany and Spain, where NA beers make up 6.5% and 12% of the beer market, respectively. In the U.S., non-alcoholic beer was .37% of total beer dollar sales in grocery, convenience, liquor, and other chain stores last year.
WHY IT MATTERS
Across the world, this burgeoning category is dominated by multinational breweries because of the complicated and expensive processes needed to produce low-alcohol beer. The biggest successes, however, have all been extensions of core name brands—Heineken 0.0, Beck’s Blue, and San Miguel 0,0 are the best-selling brands in the U.K.
As a result, there has been a perceived lack of variety in the category, and this is the gap BrewDog has started to exploit with its recent moves. With the craft beer market tightening as competition increases, a drop in drinking among young people, and a Brexit trade deal still years away, finding new avenues for growth is vital for the U.K.’s mid-sized breweries.
BrewDog introduced its first low-alcohol beer in 2009 in response to a public backlash against its 18.2% Imperial Stout, Tokyo*. Nanny State started life as an alcohol-free IPA but has evolved into a dark, hoppy ale closer to a Black IPA. It is the sixth best-selling, low-alcohol beer in the U.K.’s off-trade locations, selling more than full-strength Brooklyn Lager and Goose Island IPA, according to Ben Lockwood, on-trade marketing manager for the brewery.
In May 2019, BrewDog took a page out of Big Beer’s playbook and launched a brand extension of its core IPA called Punk AF, backing it with a national advertising campaign that spelled out most of a swear word and predictably fell foul of the industry advertising watchdog—likely the aim of the poster in the first place. The beer was launched at all BrewDog bars and its success across its estate has likely led the brewery to believe in the future of the NA beer category.
BrewDog accompanied the opening of the BrewDog AF bar by offering free refills of Punk AF across its estate and releasing two new low-alcohol beers across its bars and supermarkets: Hazy AF, a 0.5% New England IPA; and Wake Up Call, a 0.5% Coffee Stout. The bar also has a selection of low-alcohol kettle sours on draft.
“BrewDog AF is all about changing perceptions and offering a new choice to drinkers,” co-founder James Watt tells GBH. “Sales so far in our bars and also via our major customers like [supermarket chains] Tesco and Sainsbury’s show that there is a huge, and growing, appetite for AF beers that provide quality and taste.”
Variety isn’t the only issue in the category. One of the main barriers to growth has been retail price—drinkers have been disinclined to play full price for non-alcoholic beer, especially when soft drinks are typically much cheaper in the on- and off-trade. This is because while there is no alcohol duty on beers below 0.5% ABV, the cost of producing them can be significantly higher. Even a brewery the size of BrewDog has found costs challenging.
Watt says Punk AF is actually more expensive to make than Punk IPA. While both beers use the same amount of hops and malt, the process is longer for Punk AF, and uses large quantities of lactose. BrewDog also makes Punk AF on a smaller brew system compared to Punk IPA, which means the brewing process is less efficient in scale.
“So we save a bit on duty, but the liquid itself costs us more,” Watt adds.
It’s of note that low-alcohol beer is the last part of the beer industry that BrewDog’s sworn enemy—multinational breweries—has a monopoly on, although BrewDog’s marketing efforts seem revitalized by having a new cause for which to fight. But the cost that has gone into this month’s exertions and ambitious expansion plans shows how serious the brewery is about the category.
The non-alcoholic beer category is one of the industry’s few growth areas, and is a shrewd focus for the brewery. As experts predict increased sales and strong competition in the sector in the coming years, it offers one more chance for BrewDog to bring its brash attitude to a new space.
Words by Jonny Garrett