From functional spirits to on-trade led NPDs, Millie Milliken outlines the low and no spirit trends retailers should be keeping their eyes on
There is no doubt that retail has the upper hand on the on-trade when it comes to the low and no-abv opportunity. According to Lumina Intelligence, 53% of consumers discovered the category in the off-trade (2021), compared to 9% in bars and 6% in restaurants. And with the category growing by 200% MAT (Nielsen, 2021), that opportunity is huge.
“The hospitality industry is perhaps the weakest part of the market for low and no,” says Christine Parkinson, founder of low/no NPD and strategy specialist company Brimful Drinks. “Supermarkets have got a better range, and I know a lot are starting to prioritise it [moving forward].”
So, what should retailers be looking out for? We’ve found six growing areas in the market where the off-trade can thrive.
CBD, guayusa, adaptogens: more and more low and no brands are adopting the angle of functionality as the USP for their product. Camille Vidal, founder of La Maison Wellness and mindful drinking pioneer, has been exploring the world of functional no-abv drinks and “biohackers” – a growing consumer base who make incremental changes to what they consume to improve their physical and mental health. “Functional [low and no] spirits is the fastest-growing category in the functional food and drink market,” she says.
With the news that Three Spirit, a trio of “plant-powered elixirs”, has secured $3m (£2.3m) in funding from San Fran tech company Circle Up to further expand its offering following a successful US launch in 2021, it is clear there is demand for this subcategory of low/no spirits.
“We always knew we’d want to raise money, to allow us to continue at the pace we were going, to allow us to launch in the US, and to ensure we were able to invest in people and products, both present and future,” says co-founder Tatiana Mercer. “Drinks companies require a lot of investment and the US market is a big beast, so finding a partner who understood the market, both wellness and alcohol/non-alcoholic categories as well as D2C, was a dream.”
There’s been a growing trend towards premiumisation in the alcoholic beverage market, so it follows that non-alcoholic counterparts are moving in the same direction. Tropical non-alcoholic spirit Caleño has enjoyed impressive sales growth since it launched in 2019, and positions itself in the premium no abv market.
“Our products are an upgrade from a soft drink, not a downgrade from a non-alcoholic spirit, so we need to ensure premium cues flow through our branding,” says founder Ellie Webb. But communicating the value of low and no products is something retailers will have to work on, as there is a perception that they cost less than alcoholic products to produce and should therefore cost less to buy.
“There’s this subconscious messaging that alcohol is the value, and [no-abv] isn’t the real deal,” says Camille Vidal, who points out that making alcohol-free products often involves making a full-abv spirit and then dealcoholising it. “We really need to talk more about this, as well as the difference between soft drinks and alcohol-free spirits, to help consumers understand why they are paying the same price.”
The Covid-19 pandemic brought the canned cocktail and RTD market into the minds – and hands – of consumers like never before. And now, no-abv drinks are getting in on the opportunity. In April 2021, Strykk launched its own RTD range, Not G*n & Tonic and Not R*m & Cola, while Three Spirit is also putting part of its £2.2 million investment towards NPD.
2021 saw the beginning of a slew of products being launched into the space between low/no and full-strength: otherwise known as “light spirits” – a trend we can expect to see continue into this year. These range between the 10% and 30% abv mark, and they have been designed for people looking to continue drinking but in moderation.
One such product is Twenty Light Spirits, the brainchild of Grant Neave and invested in by bar operators Ali Burgess and Adam Papa. Sitting at 20% abv, and lower in calories than mainstream spirits and liqueurs, it’s made the same way as a London Dry gin before being diluted. It was launched to address the perceived all-or-nothing attitude to current offerings in this space.
“There were a lot of all-or-nothing products [on the market],” says Burgess of why Twenty was launched. “You’re either drinking full spirit or going down the Seedlip/Aecorn route… There was no-one else out there doing it.”
Joined by similarly positioned Sollasa and Quarter, it looks like this sub-category will continue to grow.
Asking consumers to spend money on a low/no product they have never tried – and which sits in a category they are still in the process of understanding – can be one of the biggest hurdles for brands to overcome, says Camille Vidal. One way to counteract that is by offering more in-store and experiential opportunities to sample those products.
This is something Caleño is looking at implementing for 2022. “The next 12 months is about building our brand awareness, growing our distribution footprint and trialling our liquids,” says Ellie Webb.
“We know once people try Caleño they love it, so our focus is very much on the sampling experience, and getting the brand out to as many people in the UK as possible, in the most distinctive and joyful way.”
While the on-trade might be behind in its low and no offering, popular alcoholic cocktails are driving some NPD. This is the case for Strykk, which launched its Not Vanilla V*dka last summer as a response to top cocktail trends. “Our innovation has been demand-driven and informed by qualitative and quantitative insights, working with research agencies,” says co-founder Alex Carlton. “A good example of this is the Passion Fruit Martini, [a] top-selling cocktail which led us to innovate a vanilla vodka alternative.” Carlton also says that Strykk has four new products teed up for this year, based on the same methodology.