Unlike some consumables, there’s clearly a threshold for how much alcohol people (should) consume throughout the year. That can make it challenging for brands to find growth, especially as new options come to market. The U.K. beer category is certainly not lacking in options, but one unlikely sub-category has pulled away from the pack. In fact, without the contribution of non- and low-alcohol options, annual sales in the beer category would be in the red.
Impressively, non- and low-alcoholic beers, which account for a very small portion of the total beer category (1.6%; up from 1.3% a year ago) drove £15.2 million in annual sales growth for the year ended Jan. 25, 2020, representing a spike of 28.4% over the prior year period. The 1.6% share is a clear sign that brands should not rush to dial back—or remove—the alcohol from their beer lines. But it does speak to a growth opportunity—and it’s one that we expect to continue over the next two years.
The non- and low-alcohol trend isn’t unique to the U.K., and it’s not limited to Dry January. When we look at how health and wellness is becoming increasingly important for consumers in the U.K., as well as elsewhere around the globe, the growth of non- and low-alcoholic beers is hardly surprising. And when it comes to adult beverages, health-focused consumers do gravitate toward options that are lower in alcohol content (ABV) and have fewer calories. These two traits, for example, are largely responsible for the hard seltzer boom in the U.S., which we’re tracking both in retail and at bars and restaurants.
The slowed growth of the U.K.’s total beer category isn’t an isolated phenomenon. In the U.S., for example, Danny Brager, SVP of Nielsen’s U.S. alcoholic beverage practice, says growth in the U.S. beer category this year will come from just about everything but beer, such as acquisitions, new “hard” beverages and ready-to-drink cocktails. In the U.K., non- and low-alcoholic beer are sharing the growth spotlight with craft and super premium options.
Importantly, “craft” is not limited to beer options with traditional ABV levels, and as craft becomes more a part of the non- and low-alcohol beer group, price points will rise. Across the two primary beer styles (lager and ale), lager maintains the lion’s share of the non- and low-alcohol market, but ales are growing in prominence and share. They’re also more expensive per liter.
From a retail perspective, non- and low-alcoholic beer is more likely to bolster the bottom line than the total beer category. That’s because significantly less is sold on promotion. It’s also worth noting that approximately 10% of beer pricing reflects taxation, but those taxes don’t apply to beers under 1.2% ABV.
As with the broader beer category, there is no shortage of variety across the non- and low-alcoholic beer space. A handful of major beer companies have developed beers for this growing category, and several account for significant category sales. That said, however, much of the sub-category’s recent growth has come from new brands. In the year ended Jan. 25, 2020, new products in the non- and low-alcohol space contributed 30.2% of the total value growth. And during that period, Brewdog Punk AF claimed 36.5% of the value sales from new products. Success in the space, however, depends on more than simply being a new option for consumers, as Nirvana Karma (now called Hoppy) Pale Ale accounted for 58% of the total value share that was lost during the same period.
Notably, the number of new brands entering the beer category has been in steady decline in recent years, with the biggest drop (41%) occurring between 2016 and 2017. Importantly, however, new product sales in the beer category have been steadily rising as the number of new entrants has decreased. Additionally, new brands are more successful than they were back in 2016. In 2019, 86 new brands generated £100,000 in year-one sales. Comparatively, only nine brands could make that claim back in 2016.
Compared with more the traditional options in the beer category, the non- and low-alcoholic sub-category is posting significant growth in terms of both value and share. In the year ended Jan. 25, 2020, unit sales were up 4.5 million, and we forecast additional unit growth of 2.6 million a year from now. And what’s more, non- and low-alcohol beer consumers are open to premium options, which means they command higher price points. And that should be something that manufacturers and retailers alike can raise a glass to.