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As no- and low-alcohol drinks become a staple in modern lifestyles, the category is evolving beyond simple substitutes to offer a spectrum of complex, high-quality options. From functional beverages to innovative no-alcohol cocktails, the sector is redefining inclusivity and wellness for today’s consumer. Heidi Dillon, CEO of Distill Ventures, explores.

Think about your average consumer. They might start their day with an oat milk latte, have a Beyond Burger for lunch and finish with an Aperol spritz and a charcuterie board.

Almost without us realising, meat and milk alternatives have become a part of our daily lives, so mainstream they barely register as inclusive. Non-alcoholic drinks are set to do the same – in fact, we believe this future is right around the corner, where great options exist on every shelf and back bar for when you're not drinking, making that spritz moment zero proof as well.

Consumer lifestyles as well as our respective industry is moving further from the old binaries of meat/no-meat, dairy/no-dairy, alcohol/soft-drink. Instead, today’s food and drink consumers are regularly presented throughout their days with an incredible spectrum of choices. Choices that are familiar and built into our everyday habits.

In the UK, we know that 77% of LDA adults are now actively moderating their alcohol intake but at the same time, consumers drinking and purchasing no- and low-alcohol beverages are still highly engaged in the alcohol category, with 60% still regularly consuming alcohol. In the US around one in seven of all US On Premise visitors drink non-alcoholic alternatives, rising to a quarter of under 35s.

We can take from this that while consumers are exploring the no- and low- category, they're not feeling the need to commit themselves wholly to a non-alcoholic lifestyle. Instead, an equilibrium has emerged as the modern drinker enjoys the best of both worlds.

Inclusivity, moderation and wellness

We’ve seen that non-alcoholic drinks are incremental for both the on and off trade. And with good reason. Data from the US shows purchasers of 'non-alcoholic' spend 59% more on 'total category alcohol' versus those that are exclusively buying alcohol.

This consumer is spending more on a range of spirited and non-alcoholic drinks, making them an incredibly valuable segment of the market – again to reiterate – this is incremental volume to retailers and bars and restaurants. A really exciting opportunity.

Building on this point, consumers are asking for more choice and variety in drinks, both out of curiosity and to drink responsibly while still enjoying their social lives. We as an industry have a responsibility to give consumers options that align with their more wellness focused lifestyle.

Retailers and Hospitality (bars, restaurants and hotels) need to be prioritising the consumer demand as 94% of non-alcoholic buyers also purchase beer, wine and spirits containing alcohol showing these consumers are more valuable than those drinking solely alcoholic products.

Providing options that cater to diverse preferences and needs driven by consumer demand is essential. The food sector has become increasingly welcoming of dietary choices and requirements – it’s time for drinks to catch up.

Predictions

We would like to see non-alcoholic develop the same complexity as the alcohol category, if not push even further.

Ensuring the range and quality of serve matches that of alcoholic options is key as an increasing number of guests transition between the two during the same occasion. In a sector that continues to mature in scale, liquid quality, expanded occasions and stylistic diversity, non-alcoholic has the opportunity for founders of all sizes to develop delicious liquids that mirror analogue alcohol categories – and then, without the limitations of traditional alcohol regulation and expectation holding them back, expand the boundaries beyond traditional analogue expectations.

We’re looking forward to seeing founders explore this expanded curiosity of flavour and spirits coding as they lean into spirits cues of product, process and provenance- including richness of story, sense of place, brand and ingredients- as well as practices in fermentation, distillation and ageing with profiles inspired by spirits counterparts.

With more than one-in-three visits to the UK on-trade now alcohol free (KAM Low+No 2023: The Customer Perspective), I look forward to seeing deeper aspects of cocktail culture, diversification led by occasion, and drink strategies develop in the non-alcoholic space, giving consumers innovative options for spritz serves, aperitivo moments, with food, evening sippers, and night caps as well as health and wellbeing inspired moments from 'without to with' via functional attributes and more.

Bridging the gap

As the nascent non-alcoholic category began to develop, it was natural that many products sought to create analogue alternatives to alcohol styles: a non-alcoholic 'whisky' for example, or a 'rum'. Such products offer established alcohol drinkers an easy bridge into the non-alcoholic 'equivalent' to either replace their normal drink or, more commonly, to supplement it.

As production techniques and processes have become more refined over recent years, there are now many excellent non-alcoholic options available, such as Ritual Zero Proof. Ritual was created with a vision to give consumers a simple and accessible way to enjoy their favourite cocktails without alcohol.

Today the brand’s award winning portfolio contains one for one spirit alternatives for tequila, rum, gin, aperitif and whiskey. With the rise of ‘zebra striping’ where consumers opt for non-alcoholic and then alcoholic beverages, or for those who simply choose not to drink alcohol for a social occasion, brands such as Ritual are delivering a premium effective alternative to simple soft drinks.

A merging of trends we see is the low-alcohol spritz serve and non-alcoholic coming together. Consumers in the UK are expressing a preference for spritz serves and in the US the spritz is now the 8th most popular cocktail in the US – this is a trend that I see not only continuing but increasing. And in the next few years I look forward to seeing a non-alcoholic landscape that is as infinitely complex and diverse as its alcoholic counterpart. Such entrepreneurship and artisanship empowers everyone – from makers to consumers.

Growth of functional ingredients

What makes the non-alcoholic sector so fascinating is that while all of the development is happening, whole new segments are also being created without the limitations of the alcohol sector (whether in terms of production or legislation or expectation). There are some exceptional non-alcoholic brands emerging which defy any kind of traditional alcohol equivalency.

Taking functional or nootropic starting points instead, such products are innovating in a way that has not really been possible before to deliver wellness benefits or a more natural change of state effect without alcohol.

What’s more, from a consumer standpoint, there is a substantial audience who are not ‘converting’ from a palate already familiar with alcoholic categories as well as a sizeable proportion of drinkers who simply want to try something truly novel. And this section of the non-alcoholic category has the possibility to tread new ground and satisfy the excitement and curiosity of such consumers.

Between these two – the increasingly complex analogue and the completely unique – is it any wonder that we at Distill Ventures are fascinated by the non-alcoholic category, and continue to explore and support it as much as we are able?

Future-proofing growth

Availability and access for consumers to purchase no- and low-alcohol beverages is key for the future growth of the category. We need wide availability – in stores, bars, restaurants, hotels and stadiums, in order for new customers to enter the market and for exploration of the category to follow.

This means leaders in the on-trade having dedicated no-and-low menus to give more inclusive options to consumers, and for retailers and buyers to give space for expanded shelf sets of no and low beverages to purchase, and for all of us in the industry to make this category approachable and well understood for consumers to continue to be educated on what, where and how to drink.