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Why alcohol giants are (also) focusing on sobriety

Over the past five years, the “no alcohol” trend has swept the globe.
Instead of finding itself outdated, the alcohol industry has found an opportunity for growth.

 

Without alcohol, the party is even crazier. For Heineken, that is. The Dutch brewer generated 7.7% more in revenue last year, thanks to the success of the non‑alcoholic version of its famous lager, Heineken 0.0, launched in 2017. “Even if it’s still a niche market – only about 2% of the 400 millions of hectolitres brewed each year in Europe – the low- or non‑alcoholic beer sector is booming,” said Pierre‑Olivier Bergeron, secretary general of Brussels lobby The Brewers of Europe. “Growth is particularly strong in traditional markets such as Belgium and Germany.”

Germany’s consumption of “0%” brands went from 2.3 million hectolitres in 2007 to more than 6.2 million in 2017, which is 6% of national production. This unprecedented growth is even more surprising given that non‑alcoholic beer is not new. For example, Swiss brewer Haldengut was making a non‑alcoholic beer, ironically named "Perplex", as far back as 1908. Driven by Tourtel and Kronenbourg, the sector experienced a small media comeback in the 1980s. But consumers didn't like the beers, saying they were bland or only for former alcoholics.

“For a long time, non-alcoholic beer had a bad reputation, simply because it didn’t taste good,” said Bergeron. “Today, the taste is much closer to alcoholic beer. And honestly, in blind taste tests, I sometimes haven’t been able to tell the difference.” Marcel Kreber, director of the Swiss Breweries’ Federation, agrees: “It was an old market that faded away, or never even took off, really. It has now been revived with the launch of new products. Increased demand pushed brewers to be more creative. They innovated and created better beers.”

But more than the supposed quality of the beer, Moshmi Kamdar believes that this growth is actually due to changes in behaviour: “People want to lead healthy lifestyles. There is an underlying trend for drinking more healthily and in moderation,” said the analyst from Union Bancaire Privée (UBP). “This societal shift has caused the non‑alcoholic drinks industry to thrive.”

And beer giants have jumped on the bandwagon. ABInBev, Heineken and Carlsberg have all made 0% alcohol versions in the last five years. But this isn’t the first time these companies have tried the non‑alcoholic trend: Heineken has sold alcohol‑free beer under the brand Buckler for a long time, as has Carlsberg under its subsidiaries Kronenbourg and Feldschlösschen. But none have tried under their flagship brands. In 2015, the Danish company Carlsberg started the movement with the launch of Carlsberg 0.0. It was followed by ABInBev, which released Budweiser Prohibition and Corona Cero in 2016, and Heineken, which launched Heineken 0.0 in 2017 and Affligem 0.0 in 2019.

“That means, from a marketing perspective, that these groups are no longer scared of harming their brand image with these products,” said Karine Gallopel‑Morvan, professor at the EHESP School of Public Health and a specialist in the marketing strategies of the tobacco and alcohol industries. In other words, driven by its new healthier, cooler image, non‑alcoholic beer has gained some status. Budweiser and Corona estimate that 20% of their total production will be low‑alcohol or alcohol free by 2025.

According to The Economist, the revival of non‑alcoholic beer is also due to its success in the Middle East. During the 2022 World Cup in Qatar, 0% beverages are likely to be flowing, with the country having decided to introduce a new alcohol tax on 1 January 2020 that will make a 24‑pack of Heineken cost about 100 Swiss francs.

DON’T FORGET WINE AND SPIRITS

But while alcohol‑free beverages are now becoming a part of the brewing landscape, perhaps more surprising is that wines and spirits are doing the same. “In 2004 when we launched Côte de Vincent, our range of alcohol‑free wines, everyone thought we were crazy,” said Bruno Marret, head of the company Signatures de Prestige. “Now, sales are increasing every year.”

Tesco, Britain’s top supermarket, recently released a range of wines with less than 0.5% alcohol. Marks & Spencer has also developed alcohol‑free wine, as have Migros, Coop and Denner in Switzerland. However, the reputation of 0% wine still has some way to go, with wine lovers unconvinced by its particular taste. “It took decades for non‑alcoholic beer to become popular,” said Marret. “It will be the same for wine.” While numbers in traditional wine‑growing countries are quite low, between 2018 and 2022 the non‑alcoholic wine market is expected to grow 4% annually in Germany, 6.6% in Great Britain and, most significantly, 18% in the United States, according to a report from International Wine and Spirit Research (IWSR).

There is more enthusiasm for spirits: “The low‑ and zero‑alcohol market is booming,” according to Ulrich Adam, director general of Spirits Europe. “Many start‑ups are developing vodkas, gins and whiskies with a low ethanol percentage. And mocktails are becoming increasingly popular. This spirit‑free movement is a real trend in the industry.” According to specialised website The Spirit Business, at least 10 new brands of low‑ or zero‑alcohol spirits were launched in 2019. Faced with this new competition, traditional brands are reacting. In August, top spirits producer Diageo announced it had acquired a majority stake in Seedlip. Created in 2015, the UK‑based start‑up is the first company to market a high‑end spirit that contains no alcohol. Its beverages are now available in more than 25 countries.

“Diageo’s acquisition of Seedlip is proof that the big names are carefully watching the growing non‑alcoholic spirits industry, even if it’s not a real threat to their business due to its still limited volume,” said Virginie Roumage, food and beverages analyst for investment bank Bryan, Garnier & Co. In 2018, Diageo also released two “ultra‑low alcohol” gin and tonic drinks via its Gordon brand. And the British giant isn’t the only one taking an interest in the sector. In 2018, Pernod Ricard, which has sold Pacific (a non‑alcoholic aniseed‑flavoured aperitif) since 1982, partnered with premium brand Ceder’s, a direct competitor of Seedlip. While the French giant is currently content with just distributing bottles from the company that produces “gin without alcohol”, it will no doubt acquire the start‑up if sales take off. And that may very well happen: according to estimates from the IWSR, between 2018 and 2022 sales of “low‑ and no‑alcohol” spirits are expected to grow annually at a rate of 81% in United Kingdom, 37% in Spain and 7% in the United States.

Instead of taking the traditional alcohol industry head on, the “no‑alcohol” segment provides new alternatives to companies in the sector. “Consumers aren’t just pregnant women or people looking to cut back on their alcohol consumption,” said Moshmi Kamdar of UBP. “For example, many people no longer drink beer or wine at lunch during the week, because it is no longer acceptable in a professional setting. With the no‑alcohol trend, it is once again possible. This new offer considerably expands the market.”

IS IT REALLY ALCOHOL‑FREE​?

In Switzerland, Article 2 of the Swiss Federal Department of Home Affairs’ regulation on alcoholic beverages states that “the percentage of ethyl alcohol in non‑alcoholic drinks cannot exceed 0.5% vol.” In other words, non‑alcoholic beer may still contain some alcohol. It’s a contradiction, but it’s legal. Feldschlösschen, for example, contains 0.5%. However, new arrivals on the market such as Carlsberg 0.0 and Heineken 0.0 are focusing their messages on the fact that there is no trace of ethanol in their drinks. In 2017, alcohol‑free varieties made up 3% of total beer production in Switzerland. For spirits, there are all kinds with either very little alcohol or none at all. But generally, they cannot be named the same as their alcoholic counterparts. To officially be called whisky, for example, a drink must contain at least 40% alcohol. So brands must get creative when it comes to names, such as the Spanish non‑alcoholic “whisky” WhisSin, the US brand WKNO and the Scottish label Glen Haggis, which are clever nods to whisky lovers.

 
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