The no- and low-alcohol drinks category is experiencing a transformative period of growth, driven by evolving consumer behaviours and a strengthening momentum for no-alcohol.
To 2028 and across ten key markets, the combined no- & low-alcohol category is expected to expand by 4% volume CAGR, with no-alcohol driving the majority of this growth, at +7% volume CAGR, while low-alcohol volumes remain broadly static.
The no-alcohol segment is expected to deliver incremental growth by 2028 of over US$4bn.
Latest findings from IWSR’s ‘No- and Low-Alcohol Strategic Study 2024’ show that the no-alcohol segment recruits more new consumers than its low-alcohol counterpart, with an increase of 61m buyers versus 38m for low-alcohol (2024 compared to 2022) in ten large markets (Australia, Brazil, Canada, France, Germany, Japan, Spain, South Africa, the UK and the US).
Across markets, new recruits entering the category are skewing younger than the core buyer demographic and demonstrate higher frequency and intensity of consumption. In line with global trends, alcohol purchases among no/low buyers are decreasing, particularly in beer and wine. Across the ten key markets, per-capita consumption in litres of pure alcohol is at 80% of its level in 2000.
As the no/low category develops and more products come to market, other drivers besides alcohol moderation are rising in importance to drive consumption frequency, particularly in emerging no-alcohol subcategories. Factors such as taste, availability and brand are increasing in importance in segments outside of no-alcohol beer.
“As the no-alcohol category matures, consumers want more than just an absence of alcohol,” says IWSR’s head of no- and low-alcohol insights, Susie Goldspink. “They want products that deliver on taste, complexity and overall drinking experience.
“This evolution is pushing the category further, prompting brands to innovate and raise the bar in terms of quality and variety.”.
No-alcohol will continue to drive future growth
Throughout this year, strong growth across no-alcohol has continued, with RTDs expected to have the fastest growth rate through to 2028, off a lower base (+10% volume CAGR, 2024-2028). Beer will rise at 7% volume CAGR, and will continue to lead future no-alcohol growth in absolute volume terms.
No-alcohol’s share of TBA across the ten key markets will increase to over 3% by 2028, with its share of the US’s total beverage alcohol category doubling in that time. Brazil, Canada and the US will see higher rises in the no-alcohol segment in the near future, whereas growth is predicted to be more gradual in Spain, South Africa and Germany.
The US and Brazil emerge as top markets
No-alcohol growth in the US (+18% volume CAGR 2024-2028) and Brazil (+10%) is expected to come from the recruitment of new consumers, increased frequency of consumption and higher incidence in both markets. Growth in the US will come from a wider array of no-alcohol subcategories, while in Brazil, growth will be led almost entirely by beer.
Smaller markets such as Canada and Australia, also offer attractive opportunities with relatively high growth rates (7.5% and 5% respectively) off a lower base.
No-alcohol consumption frequency led by Gen Z and Millennial consumers
Markets with a younger legal drinking age (LDA) consumer base for no-alcohol, for example Brazil, the US and South Africa, continue to show heavier consumption per occasion, while markets with an older consumer base, such as Japan and Spain, report fewer drinks per occasion.
Gen Z consumers who have recently reached legal drinking age are more likely to substitute non-alcoholic drinks, especially soda and energy drinks, while older age groups are more likely to substitute alcohol, especially beer/cider.
Moderation attitudes vary by age cohort
Of the ten key markets, the US has the largest proportion of ‘occasional’ moderators. Along with the UK, it’s a market in which more buyers have participated in alcohol-free challenges.
Younger buyers are more likely to adopt an occasional moderation strategy, limiting alcohol consumption during defined periods or participating in alcohol-free challenges such as Sober October or Dry January (albeit from a small base).
Occasional moderators are more likely to choose no-alcohol beverages based on social influence and training for sports.
Overall, markets skew non-loyal to brands, while younger buyers show more loyalty
Markets such as Spain, UK and Japan tend to be less brand-loyal. In Spain, which has a wide range of available brands, consumers are more likely to choose a different brand in the same beverage category. Meanwhile in South Africa, the US and Brazil, consumers are more likely to stay with their preferred brand.
Brand loyalty also varies by age cohort. Frequent drinkers and younger consumers, who are more engaged with no/low, are more likely to be driven by brand and sensory characteristics. Up to 57% of Millennials, meanwhile, are swayed by brands they are familiar with, compared to only 45% of Boomers, who are less engaged and claim more occasional consumption of no- & low-alcohol.
“Younger consumers are more likely to be moderating alcohol, but they also drink less alcohol to begin with. These consumers tend to participate in a wider repertoire of no/low subcategories, and to be more brand-loyal,” notes Goldspink. “Older consumers are less likely to be moderating but more likely not to drink alcohol at all, and their preferences tend to be skewed to no/low beer and alcohol brand extensions.”
Availability remains the main barrier
The biggest reason preventing people from drinking no/low more frequently in emerging no/low markets such as Brazil, South Africa and the US is availability. This is a barrier for fewer no/low consumers in more established markets such as Spain, France, Japan and Germany. Greater product availability in the on-premise and via e-commerce is helping to enable category growth.
Pricing is not a main barrier to purchase for consumers, but has a part to play in no/low’s future trajectory. In the UK and Spain – both are more developed no-alcohol spirits markets – pricing becomes more aligned with full-strength offerings as the category gains traction.
Innovation trends
NPD investment continues to focus on functional attributes. The Free AF brand, for example, offers no-alcohol beverages that feature Afterglow, a patented 100% natural, gluten-free and vegetarian botanical extract that is said to mimic the warming sensation of alcohol. Meanwhile, Parch Spirits & Cocktails has launched a line of no-alcohol agave cocktails containing desert botanicals and adaptogens such as ashwagandha, L-theanine and ginseng.
Products that do not have added functionalities and are not directly analogous to alcohol categories are also on the rise. Examples include sparkling teas, hop waters and vinegar-based switchels.
