While some companies have focused on creating alternatives that mimic alcohol, others are using ingredients like guayusa and green tea extracts to produce a natural, alcohol-free buzz or, on the other end of the spectrum, sleep promoting ingredients to wind down at the end of the day. Taste has become increasingly important as well, with more companies looking to botanicals for sophisticated flavours intended to be sipped and savoured, further distinguishing the category from traditional soft drinks.
According to FMCG Gurus, major drivers include a growing number of health conscious consumers and, in light of Covid-19, an awareness of the role that healthy foods, beverages and dietary patterns play in supporting the immune system.
Healthier drinking habits
FMCG Gurus carried out a global consumer survey in October 2020 looking at factors affecting mental wellbeing, including alcohol consumption habits. Presenting the results, Mike Hughes, head of the research and insight division at FMCG Gurus, said:
“About eight in ten consumers say they intend to eat and drink more healthily as a result of Covid-19.”
Looking at beer consumption specifically, the market researcher found widespread consumer interest in reducing beer intake, but only 13% said they drank non-alcoholic beers.
“This shows that there’s a real opportunity to position non-alcoholic beverages as a safer, indulgent, and healthier way to enjoy moments of escapism from the pressures of everyday life,” Hughes said.
Instead of simply imitating the flavours of alcoholic beverages, a new generation of alcohol-free ‘spirits’ aims to provide something different, using functional ingredients to tap into consumer desire for an altered – and improved – mental state.
UK-based Edi’s Spirited Euphoria, for example, is non-alcoholic spirit distilled from hemp with added CBD, nootropics and adaptogens. It is intended to provide relaxation benefits without the negative effects of alcohol. Another UK-based company, Three Spirit, uses botanical extracts, including lion’s mane mushroom and cacao in its Social Elixir, positioned as a mood elevator, and valerian root and lemon balm in its Nightcap, positioned to promote relaxation.
Differentiation – and regulatory challenges
According to Euromonitor International, “There are still challenges to overcome in terms of consumer education and acceptance, nevertheless, functionality provides an important point of differentiation in the increasingly competitive non-alcoholic sector.”
The market researcher suggests that innovation in the sector will remain dynamic in Western Europe.
“However, legislation presents a potential obstacle in the region,” it said. “Rules governing the use of ‘new’ ingredients and health claims tend to be relatively strict, and amendments take time. Outside of herbal tea, the penetration of many product claims remains low. Within the existing legal framework there are still opportunities for beverage products to benefit from a clear and well-communicated functional positioning. Education from brands around ingredients will be crucial.”
Alcohol, wellbeing and sleep
The rise of functional alternatives to alcohol comes at a time when many consumers have made changes to how and why they consume alcohol.
According to FMCG Gurus, 32% of its global survey respondents said they recently had eliminated or reduced their alcohol intake in an effort to improve their sleep quality.
“There is also an opportunity to grow the non-alcoholic beverage market to help people address their mental wellbeing,” Hughes said. “…One in five consumers say they often turn to alcohol to help get them to sleep in the evening.”
The market researcher suggested that many consumers had turned to alcoholic beverages to help them cope with everyday anxieties. However, consumers were well aware of the potential for longer term impacts on health and mental wellbeing, and this was reflected in the fact that around a third of consumers said they planned to reduce their alcohol intake once the Covid-19 crisis had passed.