Brewers Large and Small Take Aim at Non-Alcoholic Beer Segment

In an effort to attract a growing number of drinkers who are moderating alcohol consumption, several beer companies are looking toward non-alcoholic brews as a way to boost sales and court the 30 percent of U.S. adults who don’t imbibe.

Among major producers, both Heineken and Pabst have recently announced plans to roll out non-alc offerings nationwide in the first quarter of 2019. There’s also an emerging group of startups focused exclusively on crafting alcohol-free libations.

While NA offerings carry less stigma in international markets, widespread acceptance in the U.S has been a challenge. According to Nielsen, the domestic market for “near beer” is tiny: The near beer category has accounted for just 0.3 percent of total off-premise beer sales year-to-date, or about $80 million of a $29 billion market.

Meanwhile, the worldwide market for NA beer is projected to double by 2024, to about $25 billion, according to market research firm Global Market Insights.

Countries such as Germany — the second largest market for NA beer in the world — and China are seeing growth within the sector. Despite an overall beer declines between 2011 and 2016, consumption of non-alcoholic beer in Germany increased 43 percent, according to Euromonitor International. In China, about 30 percent of the new beers launched in 2016 were non-alcoholic, according to market research firm Mintel.

In recent years, Anheuser-Busch InBev (Budweiser Prohibition Beer) and Molson Coors (Coors Edge) have unveiled NA beers in Canada, but those two companies have yet to make significant investments in the U.S.

But that’s beginning to change. A-B InBev — which sells alcohol-free brands like O’Douls, Beck’s, and St. Pauli N.A. — is beginning to make no- and low-alcohol offerings a bigger priority. A-B has a stated goal of growing that portion of its portfolio to 20 percent of its global volume by 2025. Last year, no- and low-alcohol offerings made up about 8 percent of A-B’s worldwide volume.

In the U.S., Heineken is making one of the bigger bets on the future growth of the NA beer segment. In January, it plans to launch Heineken 0.0, which was successfully introduced across Europe last year. The company is investing $50 million to promote the brand through media, events, sponsorships, activations and samplings.

“We’re going to be investing in this as a growth engine for the Heineken brand,” Katharine Preville, Heineken 0.0 lead brand manager, told Brewbound. “We are really going to make sure people know what this is, and people fall in love with it as much as we have here.”

According to Preville, NA beer offerings could account for 5 percent of Heineken USA’s business by 2023. Preville said Heineken has proven the concept internationally as it accounts for 20 percent of Heineken Russia’s business. Heineken’s NA beer sales also account for 7 and 5 percent of business in Spain and the United Kingdom, respectively.

Despite volume declines of mainstream lager beers, Preville said leveraging the cache of the Heineken brand helps establish the non-alcoholic offering. The goal, she said, is to reclaim some of the lost volume by attracting non-drinkers as well as millennials and Generation Z consumers who are seeking healthier alcohol alternatives.

“It’s not just about 2019, but the future of the beer category,” Preville added. “We’re really looking to broaden the category as opposed to take away from Heineken original occasions.”

Meanwhile, Pabst Brewing Co. is releasing a series of Pabst Blue Ribbon line extensions, including an NA version of the flagship beer as well as a lower-alcohol offering.

Pabst Brewing Company marketing director Justin Medcraft told Brewbound that the launch of a non-alcoholic beer and PBR Easy, a 110-calorie, 3.8 percent ABV lager, represent a “rebirth” as a “recruitment brand” as it attempts to reach new legal-drinking-age consumers.

“The brand is moving from being just a Blue Ribbon beer brand to being a Blue Ribbon lifestyle drinks business,” he said.

Pabst’s Blue Ribbon strategy now is now centered around creating “sessionable beers” that meet different lifestyle needs, Medcraft said. By offering a non-alcoholic version of PBR, the company is giving people who do not drink alcohol a way of participating in social situations, he said.

“We don’t want people to feel excluded from that social occasion if they’re not drinking or feel like not drinking,” he said. “Our strategy is about bringing more people together. ”

As more mainstream beer companies launch NA options, several craft breweries focused exclusively on the non-alcoholic segment have emerged, including Athletic Brewing (Stratford, Connecticut), Wellbeing Brewing (St. Louis, Missouri), Surreal Brewing (Campbell, California), and Partake Brewing (Canada), among others.

Athletic Brewing co-founder Bill Shufelt told Brewbound that his company is looking to tap into the 30 percent of drinking occasions that are being lost to people who do not drink alcohol.

“We think that we’re going to add all of these occasions into the craft beer market rather than cannibalize them,” he said.

Athletic Brewing’s core offerings include a 50-calorie golden ale and a 70-calorie IPA. Each contain less than 0.5 percent ABV. Those products hit shelves about five months ago, and they are aimed at attracting “young, healthy, active professionals” who are still looking for a beer.

“There’s a population in America that’s been dying for these beverages, and there have been just really low-quality options on the market,” Shufelt said, adding that previous “near beer” offerings were viewed as “penalty box” drinks. “This sector hadn’t seen any innovation in 30 years really.”

Shufelt added that he doesn’t view the renewed interest in NA beer from the world’s largest beer companies as a threat.

“As people look at the category with fresh eyes, they’re just going to look for the highest quality products made with the best ingredients,” he said. “Those marketing dollars will do nothing but help our cause, I think. There’s just so much room for growth across the category.”

Athletic, which currently sells its products across Connecticut and Massachusetts, is on pace to end 2018 with sales of around 1,500 barrels. The company’s beer is also sold in Total Wine stores in about 30 states, and available via Athletic’s website nationwide.

“It seems like retailers have been dying for a product like this,” Shufelt added.

Still, some retailers, including Lowes Foods director of center store beverages Charles Slezak, remain “a little skeptical” about the likelihood of non-alcoholic beer breaking through. According to Slezak, NA options are typically the first “suggested deletes” when he digs into sales per point of distribution data.

“I have to protect them from all the metrics because you’ve got a guest out there, who, that’s what they really want, or we’d have nothing,” he said.

Nevertheless, Slezak said he would order some of the new products in order to gauge demand, but those orders will come at the expense of the grocery store chain’s “days of supply” for existing mainstream domestic lager brands that are already in decline.

“We’ll definitely have a few out there,” he said. “Will we have a 12-foot section? No.”

Slezak contends that lower-alcohol offerings, such a Michelob Ultra, Corona Premier and Dogfish Head SeaQuench Ale, have a better chance of success than true non-alcoholic items.

“There’s definitely space for that [lower-alcohol offerings],” he said. “I’m genuinely skeptical about the other.”

Several other U.S. beer companies are poised to attack the lower alcohol drinking occasion in 2019. Boston Beer Company has a trio of products being released, including 26.2 Brew (a 4 percent ABV gose), Wild Leaf (a 5 percent ABV hard tea) and Tura (a 4 percent kombucha).

Meanwhile, Bend, Oregon-headquartered Deschutes Brewery is planning to release a 4 percent ABV American pilsner called Da Shootz, while Molson Coors is preparing for the U.S. debut of Molson Canadian 67, a 3 percent ABV, 67-calorie light lager.

Pabst’s Medcraft agreed that there is “a lot of opportunity” for a brand such as PBR Easy, which he said meets millennials’ desire for sessionable, easy drinking beers.

Medcraft said Pabst is open to innovating in other areas in order to attract 21-year-old consumers, including spiked seltzer, spirits and potentially cannabis beverages, although the company currently isn’t developing one.

“If we don’t make a significant shift as a category, then we’re going to be managing a declining business over the next five to 10 years, and we don’t want to do that,” he said.

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