THE GIST
Pop quiz: What percentage of the U.S. packaged beer market is made up of non-alcoholic beer?
The answer is 0.51%. Yes, just half a percent of all beer sold. That’s up from 0.42% in January 2020—and it represents a $4.1 million gain in sales—but it’s still less than a drop in the big bucket of American beer. (Those percentages come from market research company IRI, which tracks packaged beer sold in chain retailers like grocery stores and convenience stores.)
Consider this: NA beer grew its share of the beer market .06% in the first half of January 2021 compared to January 2020. In that time, craft beer grew its share of the beer market by 0.32% and flavored malt beverages (FMBs), which include hard seltzer, grew their share 0.56%, nearly 10 times the growth of NA beer. And both craft and FMBs started with a much higher base of volume than NA beer did.
If you’d only scanned headlines, though, you might be shocked to find that non-alcoholic beer is such a fractional slice of the market. After all, NA beer sales are “surging.” NA beer is “having a moment.” NA beer is “creating a buzz.” While NA beer has grown as a category in recent years, much of that growth—and media attention—is attributable to new brands entering the marketplace, with tens of millions in their marketing budgets, rather than a huge spike in sales.
So what fuels predictions that NA beer will be the next big thing? In short order: Anecdotal examples of alcohol-free drinking occasions, sales numbers from European markets, references to wellness trends, and growth statistics that don’t put NA beer’s market share in context. Taking a closer look at each of those four pillars reveals a more measured truth: NA beer is growing modestly, but remains a blip in the overall brewing industry.
WHY IT MATTERS
NA beer’s share of media coverage far outpaces its share of actual beer sales, creating a disconnect between perception and reality.
“It is news of examples, not news of data,” says Lester Jones, chief economist for the National Beer Wholesalers Association (NBWA), describing most of the conversation around NA beer.
New product launches create the impression of a category exploding with energy and innovation. That latter part, at least, is true. With new NA beers from breweries like Budweiser, Heineken, Athletic Brewing Company, Brooklyn Brewery, Boston Beer Company, and Dogfish Head Craft Brewery launching in the last two years, there are more booze-free options than ever before. And, as media outlets have rightly pointed out, it’s generally accepted that these new options are an improvement, flavor-wise, over the traditional NA beer choices.
“That’s part of what we love about craft: the variety. And I think for so long, non-alcoholic was just pigeon-holed into a ‘style,’ and I truly feel like the team has unlocked Pandora’s box for non-alcoholic,” John Walker, Athletic’s brewer, told GBH. “I think people have come to realize that you can do whatever you want in this realm, too. We have just begun.”
But it’s not proven that those new brands are riding a wave of consumer demand. Jones explains that new brands will, of course, inflate the NA beer category, but their sticking power is far from proven.
“I’m skeptical that they will get to one [percentage] share of the market,” Jones tells GBH of the NA category. “That’s basically the story. It’s less than one share of the U.S. market. It’s been less than one share for so long.”
Mark Meek, CEO of IWSR Drinks Market Analysis, points out that new brands coming to market are a major factor in keeping the category of NA beer growing.
"Brand owners will have an important role to play in the future development of no- and low- alcohol, as increasing the breadth of products available to consumers and their price points will support category growth and broaden its appeal,” Meek told The Spirits Business.
This is a common refrain: When discussing NA beer, most coverage frames the category in terms of potential rather than proven results. That’s despite the fact that NA beer as a whole has existed in the U.S. for decades. The reasons cited for such unrealized potential prove, on further inspection, to be less than sure bets:
NA beer makers and media reports often cite the following examples of times a person might want to drink an NA beer—if they’re pregnant, they have to drive, they’re on a lunch break from work, they’re not drinking for health reasons, or they’re training for an athletic competition. Beer companies don’t generally have to qualify their other beers this way; it’s not as though IPAs are only marketed to a specific type of occasion. Jones sees these occasion-specific reasons for drinking NA beer as examples of their limited appeal, calling them “circumstance occasions” to delineate them from the idea of traditional drinking occasions, like eating a meal or meeting friends at a bar. “It's not going to be this large base of people coming in repeatedly to buy this brand over and over again. It's going to be very specific.”
Spain and Germany often come up as examples of how large the U.S.’s NA beer market could grow. NA beer makes up 13% and 6% of beer sales in those countries, respectively. But in both countries, beer-drinking culture and NA beer’s place in it aren’t perfectly analogous to the States. Jones uses cider as a cautionary tale: Around 2012, when Angry Orchard and other large cider brands launched, some suggested the U.S. cider market could eventually grow to the level of the U.K.’s, where cider represented roughly 15% of the overall alcohol market. “As we know today, cider is less than 1% of the [U.S.] market,” Jones says. “It never went there.” Given NA beer’s limitation within “circumstance occasions,” the category likely has even less runway than cider. Cider has an even split between male and female drinkers—beer consumers still skew male—and is popular among Millennials. The cider category includes a robust presence for small and regional cider makers, whereas NA beer is heavily dominated by the largest national players. And cider can claim mainstream drinking occasions: Its top sales holidays are the Fourth of July and Thanksgiving.
While drinkers say they’re health-conscious, their purchases often tell a different story. High alcohol content—and associated high calorie contents—continues to grow in popularity. According to Nielsen, dollar sales for Double IPAs brewed by Brewers Association-defined craft breweries grew +8.7% in 2019, second only to Hazy IPAs in terms of growth. Drizly saw Double IPA and Imperial IPA sales increase +512% year-over-year as of October 2020, ahead of Drizly’s baseline growth of 350% that year. With huge hits like Sierra Nevada Brewing Co.’s Big Little Thing and New Belgium Brewing’s Voodoo Ranger Imperial IPA, 8% or 9% Double IPAs are effectively mainstream, grocery-store brands these days. Meanwhile, Michelob Ultra maintains its near-stranglehold on the “better-for-you” beer market as competitors flail.
NA beer grew chain retail dollar sales by nearly 31% in 2020. No doubt that is double-digit growth. But put another way: Volume-wise, NA beer sold just 18% of what fruit beer did in 2020. Porters and Stouts, as a category, grew more than 17% across the same time period—and few mainstream publications are singing their praises. (In fact, just two years earlier, those beers were said to be in danger of extinction.) IPAs were up more than 23% while maintaining a base of volume eight times greater than that of non-alcoholic beer. Growth for the NA beer category is notable, but it’s still the smallest of 16 style categories (like IPA, Pale Ale, Wheat, etc.) tracked by IRI.
This is not to say there aren’t good reasons for breweries to sell NA beers. There are certainly people who like them, and especially for those who can’t consume regular beer for health reasons, they’re a welcome way to enjoy the beverage’s flavor and overall drinking experience. But expecting them to take off in a massive way among mainstream drinkers—who have more exciting tea, kombucha, seltzer, and other non-alcoholic beverages to choose from than ever—is far from a certain bet.
Individual companies may find long-term success offering NA beers. But Jones says it’s not realistic to think that all of these NA brands will succeed. For smaller breweries, NAs also raise the issue of opportunity cost. If a retailer only has space for two of a brewery’s beers on its shelf, is the brewery losing out by not making both of them more popular styles like IPA or Fruit Beer?
Companies have put big marketing dollars behind the category in the past—e.g., Miller’s NA brand, Sharp’s, in the early ’90s—only to eventually realize the marketing spend wasn’t worth the small fraction of the market such a beer could potentially garner. Heineken 0.0, for example, launched in the U.S. with a $50 million ad budget and Budweiser Zero—newly released in 2021—was featured in a Super Bowl commercial.
“Non-alcs have been around for decades. I mean, they’ve always been there,” Jones says. “Is this the second wave? Third? Fourth? Fifth?”
The only different thing about this latest NA beer wave is the attention it’s garnering. The jury’s out on whether that’s enough to radically alter the category’s status at the bottom of beer’s sales hierarchy.
Sightlines will go deeper into lessons learned from this year's Dry January in the Sightlines Premium subscription newsletter publishing next week. You can subscribe now for weekly insights and analysis into industry changes and trends.
Words by Kate Bernot