Analyst Corner: Is There Money In Moderation?

Last week Diageo, one of the world’s largest spirit makers, announced it had increased its holding in non-alcoholic spirit brand Seedlip to a majority stake, having previously bought 20% of the company back in 2016.  Since then, Seedlip has expanded to more than 25 countries and seeks to cater for the growing consumer trend in drinking less alcohol, or even none at all.

According to a 2018 report from the Office for National Statistics, teetotalism in Britain increased to 22% in 2017.  Among 16-24-year olds, the number is even higher at just over one in four – roughly 8% more than 10 years ago. Indeed, research in MCA-Insight’s Hot Topics May 2019 Report found that a fifth of consumers say they are drinking less alcohol compared to 6 months ago. Initiatives such as Dry January have also gained serious traction with Alcohol Research UK estimating that 4.5 million people took part in the event this year. So why are consumers cutting back? There are several driving factors, including more health-conscious lifestyles, rise of the free-from movement and changes in the way people are socialising.

Up until recently, the no-and low-alcohol market hasn’t been the most innovative. Mocktails are notoriously pricey and never quite live up to the real thing. However, much the same as we saw a raft of new vegan-only products launching, we have increasingly seen several big-name brands releasing no/low alcohol alternatives. Product launches vary by category, but beer is definitely one that has made significant inroads. Notable launches include Heineken 0.0, Budweiser Prohibition and Guinness Open Gate Pure Brew Lager, which are all 0.5% alcohol by volume or less. 

Brands are also not the only ones capitalising in on this trend. Operators have opened up alcohol-free spaces such as Redemption Bar in East London which promises punters delicious tasting drinks without the next day hangover. Just last month, Sainsbury’s tested the water by opening a pop-up pub, serving only non-alcoholic and low (up to 0.5%) ABV alternatives to wines, beers and spirits. The grocer said it decided to launch this concept following a spike in the no and low alcohol category at Sainsbury’s. Whilst other retailers haven’t gone to the same extent just yet, several are starting to stock a more expansive range of low/no alcohol products. Only last week Waitrose announced its debut in the non-alcoholic aperitif’s category with the launch of Æcorn– a sister brand of Seedlip.

Having said all of this, cost is clearly still a huge factor to be considered particularly as low/no alcohol alternatives are often no cheaper. When we asked consumers the reasons behind why they were drinking a lot less, 41% said health benefits but just behind this was 38% who said it was too expensive (Hot Topics May 2019). Interestingly, 50% of 18-24-year olds, the group often highlighted as a key demographic driver of this change, say they are drinking less because they have less interest in going out. Opening alcohol-free pubs and bars may be a great idea, but if there is a shift in the way people are choosing to socialise then operators will have to innovate to give people a reason to visit and retain their custom. However for retailers, this could present an opportunity to capitalise in on this trend by growing sales through low/no alcoholic alternatives to appeal to consumers who wish to consume their drinks at home.  

Research in HIM and MCA’s Healthier Eating Report also highlights the polarisation in behaviours amongst the youngest generation of potential alcohol buyers, with a fifth of 18-24s also saying they are drinking more, twice the UK adult average. Teetotalism is most prevalent for the 75 and overs, although after the 65+ age groups, the next biggest share is among 18-24s. 

This apparent contradiction underlines how the drinks market is constantly changing but mindful drinking does look to be a major trend going forward, presenting opportunities for operators and retailers alike.