When non-alcoholic spirit Drink Monday launched in 2019, it was an exclusively digital brand. But as the company continued to grow, CEO Ken Young began pondering the path forward.
“It’s all about how do we continue to be a prestigious brand, how do we continue to show up digitally and then really, how do we expand into retail with unique activations?” said Young.
Drink Monday is one of a growing number of non-alcoholic spirit companies wrestling with similar questions while angling for a share of the $11 billion no/low beverage alcohol market. No/low-alcohol consumption is forecasted to increase by a third by 2026, and the pace of growth is expected to surpass that of the last four years, up +7% from 2022 to 2026, according to the IWSR Drinks Market Analysis.
One indication of that growth is Dry January’s momentum. Combined, non-alc subcategories saw a 70% share increase in January 2023 compared to January 2022 on Drizly. This year leading non-alc brands saw a 56% increase in direct-to-consumer sales from December, amounting to $4.7 million according to Shelfbase. But as economic conditions have increased the cost of direct-to-consumer shipping, Drink Monday has shifted its targets beyond e-commerce and towards retail and on-premise channels.
Within a rapidly evolving market, it’s not the only non-alc spirit company updating its playbook.
Pursuing The Non-Alc Cocktail
Yong, a beverage alcohol veteran, joined Drink Monday in January, stepping into the company’s +25% lift in sales in 2022. The brand, which makes whiskey, gin and mezcal alternatives, currently sells direct-to-consumer on Amazon and to roughly 1,000 retailers through wholesale platforms, as well as via Drizly and Total Wine in select markets. The company also has a subscription program, and boasts a 20% reorder rate on its website.
But looking forward, Young sees on-premise as the new frontier.
“We want to be a true to trade on-premise spirits brand,” said Young. “As a drinks guy, I know that’s where brands are built.”
Positioning Drink Monday as a luxury non-alcoholic spirit, Young is initially aiming for deep penetration in key markets: Los Angeles, Boston, Brooklyn and Chicago. The company launched a $3 million raise last week to fund the new expansion plans. Young is also driving the brand towards placement in cocktail bars and lighthouse accounts that have embraced the no/low movement, and will be looking into traditional distribution in those key geographic areas.
That strategy should position the company well for approaching more retailers, according to Matt Haun of Shelfbase, which released a report on non-alc brands in February.
“Based on our data, it looks like brands that begin with a strong emphasis on the on-premise channel, selling in restaurants and bars, rather than just in retail, are ending up with better overall outcomes when they start to approach larger retail chains,” he said.
Starting with foodservice, particularly for brands that are working with novel flavors or functional ingredients and can benefit a lot from in-person education from a bartender, he added.
Mixoloshe is a non-alc spirits brand that initially launched with a line of alcohol-free cocktails and added 750 ml gin, tequila, and whiskey alternatives in March. The company is also moving its focus from online to on-premise and retail, but has positioned itself in a different price tier ($19) compared to Drink Monday ($42) or leading brand Seedlip ($32).
“It’s premium from a taste standpoint, but the decision to really run on a slim margin is just a decision I can make because I’m the only investor in this company,” said founder Kristina Roth. “And specifically because I want to grow this category and I want to make it more mainstream.”
She argues that restaurants should help make the no/low movement mainstream by not separating non-alc menus, and simply offering a non-alc spirit substitute for traditional cocktails.
As the company makes inroads in grocery stores and other outlets, Roth aims to work with beer distributors, comparing her brand to a Heineken 0.0 or other non-alcoholic beers that are positioned as replacements versus beverages offering functional benefits. The company signed last year with Kehe Distributors and UNFI to reach natural grocery stores. Offering an RTD may help open the door at those accounts, according to Haun.
“A lot of brands have started with large spirits bottles as their core DTC product but we’re seeing that they need to add a single-serve RTD format to get real momentum in grocery,” he said.
He added that multi-serve spirits bottles continue to perform relatively well via direct-to-consumer but haven’t seen them gain traction in grocery or convenience stores.
Going Where Alcohol Can’t
As non-alc brands descend on the cocktail bar, they are also finding shelf space where alcohol can’t. Drink Monday is now sold in Anthropologie stores and online, and Young is in talks with other fashion and premium brands, such as Bloomingdales and Neiman Marcus. At those retailers, non-alc spirits skirt licensing issues faced by their alcoholic competitors. They can also be served in cocktails at any time of day without consumers worrying about effects, a bonus Young is using to sweeten retailer partnerships.
“That’s the type of really unique or luxury activation that we are going to try to do in real life at these different premium establishments,” he said. “We have ambitions to partner with other premium brands, because that’s really where we see Monday as a standout with our consumers.”
Creating a Unique Experience
But as non-alcoholic spirits target natural grocery stores or other wellness affiliated spaces, their ingredients face more scrutiny. Unlike spirits, non-alcoholic versions are not exempt from nutritional or ingredient requirements.
“The first step of our review is vetting whether or not the brand or specific item meets our quality standards for products sold at Whole Foods Market,” said Taylor Cathala, the spirits senior category merchant for WFM in the U.S. and Canada. “Alcohol is an effective natural preservative, but when you remove that ingredient, some brands will attempt to substitute artificial preservatives to keep the item stable.”
The biggest opportunity for non-alcoholic brands to come to market and differentiate themselves is an overwhelming focus on quality, he added.
“The days of non-alcoholic being ‘less than’ are long gone, as customers recognize the products in this space have a lot to offer and are true artisanal beverages, crafted with quality ingredients to rival their alcoholic counterparts,” he said.
As the category grows, Cathala aims to “not just build a space where non-alcoholic versions of popular cocktail styles live,” and instead is trying to cultivate an innovative and unique experience where sober curious shoppers can try something that sets itself apart from the category.
That’s in line with the mission at Bar Nuda, Mexican-inspired pop-up billing itself as Los Angeles’s first completely non-alcohol experience. Bryant Orozco, a writer and bar consultant who designed the menu, was torn between creating entirely new cocktails or versions of the classics. Orozco heard some feedback from the sober community that exact replicas of classic cocktails can be triggering.
“From the cocktail world you have your variations of margaritas or old fashioned, so you can do riffs off of that, but is it time to establish a new branch of cocktails for the non-alcoholic world?”
Orozco’s question underscores the infancy of the non-alcoholic segment, and the possible directions for brands to appeal to mixologists. Flavor is key for the longtime bar director, as some spirit replacements are closer to the real version of others, making them easier to work with. The menu was sponsored by non-alc spirit Ritual, and included a riff on a manhattan with housemade vermouth, and a tequila-inspired cocktail. But a root beer using Mexican herbs and ingredients without a spirit replacement was also a hit, hinting that non-alc spirit brands will need to keep up with the bar industry’s own innovations. The pop-up sold out, and like other mixologists, Orozco will continue experimenting with ways to approach the new category.
“It was just throwing darts and seeing what stuck, and all the cocktails stuck with different crowds and different palates,” he said.