Alcohol — The “Better-For-You” Revolution is Hitting Your Cocktail
With the New Year and evermore popular conversation around Dry January last month, I have been thinking a lot about consumer habits and mindsets in the alcohol category and how they are shifting.
In a market where most would never have suspected the “better-for-you” trend to infiltrate, there are three clear themes that are transforming the alcohol category: 1) clean ingredients 2) transparency 3) lower abv or zero proof options.
Today’s Health-Conscious Consumer
Consumers are demanding more from their alcohol choices than ever before and seek healthier alternatives to traditional products. Large segments of consumers want drinks that are gluten-free, low-carb, low-sugar, low-calorie, low ABV, and made from simple & clean ingredients.[i] More simply, consumers want to enjoy the ritual of drinking, but still feel good the next day.
Some might say that is a lot to ask for. However, in 2021, health and wellness conscious consumers have upgraded almost every aspect of their lives, from their exercise, diets, supplements, to their personal care and beauty products. Consumers today will pay over $200 for 100% organic cotton bed sheets from Boll & Branch and $18 dollars for natural deodorant in the pursuit of healthy living. They even analyze the ingredients in their dish soap. Consumers want clean products that do not require compromising health principles, overall enjoyment, or values, and believe that what they eat, and drink greatly impacts how they feel and function. This is no longer a trend or a movement, it is simply the new reality for how consumers live their daily lives and make choices.
A Multi-Billion Dollar Market with a Lack of BFY Options
The US alcohol market is $256 BN market, yet today, the options for low-ABV and BFY options are still limited. If consumers want “BFY” options, they are constricted to a low-carb beer or a hard seltzer. In fact, if you look at High Noon’s pitch to consumers, it is centered around the simplicity of its ingredients — real vodka, real juice. Their clear focus on clean ingredient speaks volumes about their target consumer’s preferences.
Decoding the Hard Seltzer Craze
Better drinking is the real consumer trend underpinning the hard seltzer phenomenon. It just has been vaguely disguised in its kitschy, college party origin. These types of flavored malt beverages (“FMB”) are not only easy to drink, low in calories and carbs, low in alcohol content with most brands containing less than 5% alcohol, but also a gluten-free alternative to beer. In many ways, hard seltzers are the first better-for-you alcohol option in the market for the modern drinker. Hard seltzers are expected to be a $14.5 BN market by 2027 (growing at a 16.2% CAGR) and they are taking market share from every corner of the alcohol space — 40% from wine and spirits and 60% from beer.[ii] In 2018, off-premise retail sales of beer were relatively flat, where seltzer dollar sales jumped 169% to approximately $488 million on a 181% volume gain and only 4% of U.S. households purchased hard seltzers for the 52 weeks through the first quarter of 2019, according to Nielsen.[iii] Unfortunately, for beer and wine brands seltzers are not going away and will only continue to take market share because the modern drinker is here to stay. In my opinion, seltzers are forming a new category in alcohol and are just the first version of what is to come. There are a number of new beverage brands that are making large strides to make you feel good about your drinks.
Clean Ingredients — Let’s Simplify What We’re Drinking
RXBAR made headlines in the food industry almost a decade ago with a simple approach — food made from real ingredients. Consumers have made a big push towards understanding what is in their food and being able to read the label. This is now one of the biggest trends in alcohol and brands like Haus are at the forefront of reimagining what alcohol can be. Haus makes aperitifs designed for the modern drinker. Their products are “farm-to-bottle” made from only real fruits, herbs, and botanicals and contain no sketchy additives. Doesn’t this remind you of Bud Light’s recent attack on its closest competitors about their ingredients? It shows that legacy brands are trying to adapt, but progress is slow. While they argue over corn syrup, disrupter brands like Haus are cleaning up ingredient labels to today’s standards.
Transparency — We Know What is in Our Dish Soap but Not Our Wine?
Did we ever believe that the alcohol market was going to turn into a “what’s in the bottle” market? The craze that started with Whole Foods and personal care has made its way into your liquor store. We know the contents of almost everything we put in and, on our body, but do you know what is in your wine? Needless to say, wine is not just grapes. And did you know wine is not necessarily vegan? Most wines are filtered through egg whites or fish bladder linings. Unfortunately, even if you want to learn more about what is in your wine, it is almost impossible to figure out because winemakers are legally required to disclose very little. There is no obligation to the consumer to disclose how grapes were grown or name the more than 70 additives that are used in the winemaking process to alter taste, color, and mouthfeel. Wine, traditionally thought of as a healthier alcoholic beverage choice, turns out to be not so good for you. Fortunately, brands like Avaline, which makes clean, organic wine, free from unnecessary extras, are working hard to change this outdated reality for consumers.
Low ABV — Is the 9% Craft Beer Trend Dying?
Drinking culture is also starting to change and consumers are looking to enjoy the ritual and social connection associated with drinking, just minus the hangover. 58% of consumers are drinking more non-alcoholic beverages than last year while 61% of consumers want better choices when it comes to NA drinks.[iv] The no-and low-ABV sector has grown 506% since 2015 and additional data expects the non-alcoholic sector (including soft drinks) to reach $280 MM in revenue this year. Annual growth for the category is expected to hit 7.1% by 2025.[v] It is important to note, that most of these drinkers are not complete abstainers. They are just consuming more mindfully and trying to break up their alcohol consumption. Despite the trend, options are limited with the low-and no-alcohol segment representing only 0.5% of the total alcohol market in the US.[vi] Am I saying that the craft beer craze with 9% ABV beers is going away? Of course not, but at the same time, what about the other end of the spectrum. Why can’t we enjoy low-ABV or no-ABV drinks that still taste great? Jiant, a better-for-you alcohol company dedicated to sourcing the highest quality organic, botanical ingredients, is elevating this emerging low ABV segment with their hard kombucha. Not only is it delicious and sessionable, but its low carb, low calorie, low sugar, and only 4.5% ABV. Incumbent brands need to watch out because better drinking alternatives are here, and they are hard not to like.
Other alternatives — Is alcohol going plant based?
Lastly, more zero proof and non-alcoholic brands are emerging to offer consumers alternatives to alcohol. Hemp and THC based liquids are the most interesting development in this historically un-cool category dominated by non-alc beer. Brands to watch are Cann and Aplos. Cann makes alcohol-free tonics that are micro dosed with THC that are free from artificial sweeteners, flavors, and sugar substitutes and only contain 35 calories per serving. Aplos is a hemp-infused, non-alcoholic spirit that calms, without the negative effects of alcohol. Perhaps alcohol is also quickly following the plant-based movement that is already dominating the conversation on our plates.
The Next Generation of Brands
We are in the early innings of the “clean-up” of the alcohol category and there are a number of emerging brands that are working hard to deliver better products that are not only clean, transparent, and better-for-you, but also reframing the conversation in an outdated category. Companies like Bev, a canned wine company made by chicks, is helping to change the narrative around drinking culture, infuse the industry with more diversity, and create different social norms around gathering. We live in an era where consumers have immediate access to almost everything, an insatiable appetite for newness, and want to consume and connect with brands that align with their values. It is time for alcohol to be reimagined.
[i] https://www.theiwsr.com/wp-content/uploads/Press-Release-IWSR-US-Bartender-Study-with-infographic.pdf
[ii] https://www.thespiritsbusiness.com/2020/07/hard-seltzer-sales-could-reach-14-5bn-by-2027/#:~:text=The%20US%2Dbased%20market%20research,among%20millennials%20in%20developed%20markets.
[iii] http://marketwatchmag.com/hard-seltzer-sales-chug-toward-1-billion/
[iv] https://www.forbes.com/sites/katedingwall/2021/01/10/non-alcoholic-spirits-are-popping-up-everywhere-but-the-category-still-has-a-few-lessons-to-learn/?sh=422613d37166
[v] https://www.forbes.com/sites/katedingwall/2021/01/10/non-alcoholic-spirits-are-popping-up-everywhere-but-the-category-still-has-a-few-lessons-to-learn/?sh=422613d37166
[vi] https://www.forbes.com/sites/thomaspellechia/2019/02/20/lowno-alcohol-beverages-are-in-the-worldwide-future-says-latest-report/?sh=2515b7641c85
