Clash of the beverage titans - what's next for alcohol-free?
Neverbland?
London’s pioneering Digital Product Agency, building amazing digital business solutions.
Is the future of social drinking already here - and are alcohol brands ready for it? 2024 was…an interesting year for the alcohol industry. Despite what may sound like a contradiction, Alcohol-Free (AF) drinks continued to dominate as the fastest-growing segment. But, if we zoom out and swap ‘Alcohol-Free’ for the broader term ‘Alcohol Alternatives’, a much bigger story comes into focus. This isn’t just about booze-free versions of your favourite tipples – it’s about entirely new beverage categories.?
Think kombucha, energy drinks like Red Bull and ZOA Energy, oat milk concoctions, and functional drinks like Dr Funk’s or the nootropic pioneers over at Peak and Trip. The beverage landscape is growing faster than a bar tab at Thursday after-work drinks.?
The big three: what drives Gen Z’s choices?
A broader view helps highlight the key factors driving younger consumers’ choices - novelty, health and value.? And let’s not underplay value – it’s a make-or-break consideration in today’s cash-strapped climate.?
For many Gen Z and sober curious drinkers, skipping out on booze is about more than just dodging the hangover and saving a bit of cash, it’s a lifestyle choice centred on fueling peak performance - physically and mentally.?
Roughly 25% of this group choose low or no-alcohol drinks for functional and nutritional benefits – think: prebiotics and vitamins. Take Dr Funk’s Lemon & Elderflower Immune drink, for example. It’s packed with Zinc, Vitamin C and other nutrients, designed to support immunity and overall well-being.? Or Peak, infused with Ashwagandha and lots of other nootropic goodies, purpose-built for its feel-good mental health benefits. Or Smiling Wolf’s range – mix something AF that tastes like a cocktail with mood-enhancing ingredients (already available to the On Trade).
Price wars: spirits vs. soft drinks?
But there’s a catch. Cost and value remain critical factors in their decision-making.? Compared to regular non-alcoholic beverages, AF wines and spirits are often significantly pricier as alcohol brand owners aim to replicate the high margins of their alcoholic counterparts.? Sure, there might be additional production costs, but profit margins remain unapologetically hefty.?
For high-margin spirit brands, replacing a bottle of gin with an AF version demands the same or better profitability. Meanwhile, soft drink behemoths like Coca-Cola thrive on a high-volume, low-margin model.?
Let’s break it down for ease:??
Dr Funk’s ￡2.27/Litre?
AF Gordons & Tonic ￡5.25/Litre?
(Both available on Sainsbury’s online 7/1/25 Nectar & Multi-Buy offers applied)
That’s one hell of a price gap. Competing on value is a tall order for alcohol brands against functional drinks offering more bang for their buck.?
领英推荐
The rise of wellness culture?
Look around London, and you’ll notice something rather telling – there are now more 24-hour gyms than there are bars. This shift in social norms signals a cultural shift toward wellness, where function is King and people have swapped pints for protein shakes.?
Traditionally, alcohol producers have avoided functionality– mostly due to stricter regulations around health claims. But AF drinks? They’re free to flex their functional benefits. Opportunity knocks…?
A new era of drink innovations?
The days when the only alternative alcohol choice was a J2O or a Coke have long gone. Diageo gobbled up Seedlip in 2019 and devoured Ritual more recently. Meanwhile, Coca-Cola holds a piece of the pie over at Monster and has even nibbled on kombucha brands like Health-Ade and MOJO. The big players are circling.? The stage is set for the new beverage bake-off.
Innovation and technology
Many of the new wave of functional soft drinks are using D2C as their main channel to their consumers, ditching traditional retail. They are also using digital media as their only comms channels rather than a mix of media channels like the big spirits brands.
You can also be assured that these brands are, and will be embracing AI solutions at a far faster rate because of both necessity and their entrepreneurial spirit.
The big questions?
The coming clash is monumental: high-margin spirits vs. high-volume soft drinks. Diageo vs. Coca-Cola. A clash of the beverage titans.? A battle for the ultimate prize — the share of your throat.?
Who will own the AF Protein Espresso Martini? If Gen Z doesn’t care much about alcohol, what power do traditional brands even wield anymore? Could soft drink giants swoop in and dominate entirely new social occasions? And as functional drink startups lean heavily on D2C channels and digital marketing, will legacy alcohol brands be able to keep up?
Marketers – how will you evolve to meet these shifts in consumer preference??
Innovators – where do you see the biggest opportunities to reshape the beverage landscape??
Guest Author: Tim Hawley Drinks Specialist
Board Advisor Zamora Company, Puerto de Indias Gin, Garage Beer Barcelona, Tom Savano Cocktails.
1 个月Great article Tim Hawley! You were one of the RTD pioneers when you worked on Hooch and Breezers and your view on these potentially tectonic shifts in today’s consumer choices are extremely useful. Got to give Dr.Funk’s peak performance drinks a try??
Drinks Branding and Innovation
1 个月Great article Tim. At the heart of social drinking is shared experience and so, if a person decides not to drink alcohol then there are three scenarios for drinks innovation: 1. If the individual wants to inconspicuously opt out of alcohol, then non-alcoholic beer is doing a great job of disguising this choice, and fizz and aperitifs have untapped potential - but, is it just me, or do NoLo wines and spirits still feel like an oxymoron? 2. If the social gathering leaves the pub, then the drink moves from purpose to punctuation (at the gym or art gallery café), and so the question for drinks innovation becomes “what needs are not?being met by coffee, tea, soft drinks and, increasingly, non-alcoholic beer?” 3. Finally, if the individual wants to unwind without consuming alcohol, then legal foodstuffs such as CBD, lions mane, and ginseng, can only deliver a mild psychoactive effect. This means that consumers must choose between soft drinks like Trip, which focus on taste but have a negligible effect, or alcohol alternatives like Sentia, which focus on effect, but need to be mixed to become palatable. This area has great potential, but perhaps alcoholic drinks is the wrong place to start. Perhaps we need to think outside the bottle…
Marketing Director, Comptoir Group
1 个月Tim Hawley interesting read indeed … not sure if a long term macro trend or not… time will tell… In a parallel category a few years ago growth of veganism and veganuary was deemed as the next big thing… however now the over processed nature has caused a backlash which has flipped that growth on its head … be interesting to see if this happens with functional drinks…because of the ‘additives’ vs naturally present…
Marketing Director | Brand Director | Marketing & Business Strategist
1 个月Great article Tim Hawley and thx Neverbland? for sharing. Hugely insightful
I help emerging & established businesses grow faster.
1 个月Thanks for sharing Neverbland? Tim Hawley - congratulations to your great article and the profound insight ! Indeed, a big shift from “absence of alcohol” thinking to adding in new functional benefits. Looking at it with my health & wellness hat on, the emerging customer need is likely to be a function of a better understanding/appreciation of mental health, exercise, sleep, nutrition etc through education..the ZOE programme, new wearables like WHOOP and education/podcats like The Diary Of A CEO from Steven Bartlett have contributed, just to mention a few. From a D2C perspective AI driven insight & segmentation tools are available & fundamental to optimise conversion funnel from awareness/consideration to purchase. Allowing you to create a level of insight and segmentation like never before, at a fraction of cost and time than a few years ago - the addition of psychographic and behavioural data to our segmentation gives us a much richer basis to drive people through the funnel. Exciting times !