From zero to hero: investors raise a glass to non-alcoholic drinks

Did you take part in ‘Tournée Minérale’ (ed. the Belgian version of 'Sober October' and 'Dry January') in February? If so, you are not alone! We are drinking less and less alcohol and more and more alternatives are appearing on the market. Alcohol-free and low-alcohol beverages are on the rise. But are they also a good investment? 


In volume terms, non-alcoholic beverages still account for only a fraction of the total market. In percentage terms, however, we are seeing substantial growth, both in sales figures and the range of products available.

Dea Shehu, Thematic Portfolio Manager KBC Asset Management

Breakthrough for the 'no alcohol' trend

‘Non-alcoholic versions of alcoholic beverages now represent about 1% of global alcohol sales,’ says Dea Shehu, Thematic Portfolio Manager at KBC Asset Management. ‘That seems an almost insignificant figure, but it has been a consistent trend over the past decade. We saw steady growth from 5 billion USD in 2009 to 18 billion USD in 2022. Last year alone, the non-alcoholic market grew by 33%. That growth admittedly came from a low base, but we can definitely say that alcohol-free is no longer just hype; it’s definitely a trend, and it is now a permanent presence in the market.’  France, for example, which is usually seen as the epitome of a wine culture, is one of the fastest growing markets for non-alcoholic beverages. More and more wine producers are experimenting with flavours and options. ‘Large multinationals, such as Pernod Ricard, are also investing in the sector,’ Shehu adds. 

The market is ready for it. Social acceptance for 0.0% is high. Nobody laughs at alcohol-free anymore.

Dea Shehu, Thematic Portfolio Manager KBC Asset Management

Initiatives such as Tournée Minérale are leading to increased availability of high-quality non-alcoholic beverages. The hospitality industry also makes an important contribution, with alcohol-free alternatives being given a permanent place on the menu. Many restaurants have developed a beer menu in recent years, or even appointed a beer sommelier, with non-alcoholic speciality beers claiming a place of their own. ‘Guests are no longer willing to settle for just one non-alcoholic alternative; they want to have a choice. A medium-sized to large hospitality business today will as a minimum offer around five good-quality non-alcoholic alternatives, preferably including a local variant,’ says Shehu. 

‘Another trend is to combine non-alcoholic alternatives with food, creating an ecosystem that enables new habits,’ notes Shehu. 

Who are the non-alcoholic consumers?

Alcohol-free drinkers are sophisticated, knowledgeable about brands and follow trends. A great illustration of this is Kylie Minogue's non-alcoholic sparkling wine, which was a sensation in the UK this past holiday season. Even now, it remains a top seller at Tesco supermarkets in the UK. 

This brings us to another trend: celebrity involvement in the industry. As with alcoholic wines and spirits, celebrities are also involved in low-alcohol and non-alcoholic beverages. Lewis Hamilton, the Formula 1 star, has launched a premium non-alcoholic tequila; Katy Perry has launched an alcohol-free aperitif; and Bella Hadid is one of the founders of Kin Euphorics.

Younger people in particular seem to be drinking less. ‘ It was after all the Millennials (ed. people born between 1980 and 1995) and then Gen Z (ed. born between 1996 and 2010) who invented Dry February and later Sober October,’ says Shehu.

Why are people drinking less? A wider range of alternatives and the fear of drunken antics being caught on camera and posted on social media are some of the reasons. ‘Above all, though, health plays an increasingly important role,’ Shehu believes. ‘In January 2023, the World Health Organisation (WHO) published a scientific study showing that there is no healthy level of alcohol consumption. This is the first time the WHO has come out with such a conclusion, following the long-standing view that moderate alcohol consumption is OK, and can even be beneficial.’ The aim of initiatives like Tournée Minérale is to give your body a break from alcohol and reflect on your alcohol habits.  

Consumers are happy to pay for the experience

People are drinking less alcohol than previously. And when they do drink alcohol, they are more likely to choose a more expensive, higher-quality product. ‘We have become more sophisticated as consumers and see alcohol more as an experience than as a product. That applies just as much for non- lcoholic alternatives. The aperitif, for example, is all about the moment: taking the time to enjoy the feeling of starting the weekend with friends or family. You can have a nice wine, but a non-alcoholic alternative is just as good. And let's face it, a 0.0% beer or cocktail is cooler than a glass of water or a cola,’ says Shehu.

‘Consumers are not willing to drink alcohol-free beverages just for the sake of it,’ Sheha adds. ‘They also want it to taste good and want a high-quality product. Image is also important. That explains why the market for non-alcoholic beer is growing so fast. Brewers have been much more successful in replicating the taste and celebratory character of alcoholic beer in their non-alcoholic alternatives.’ Almost 90% of non-alcoholic beverage sales are accounted for by the beer industry. 

‘Consumers are quite happy to pay for an alcohol-free alternative,’ says Shehu. ‘Especially since price is often associated with quality. If you make non-alcoholic products too cheap, consumers often see them as being an inferior quality product compared to the alcoholic version. This allows producers to earn a slightly higher margin. And that’s precisely where the opportunities lie for investors.’ 

Growth potential and higher margins

The non-alcoholic market generates attractive profit margins for companies, simply because non-alcoholic beverages are usually sold at a slightly higher price than the alcoholic versions. The standard response to this within the industry is: higher production costs. ‘In part that’s true,’ Shehu states, ‘but there’s definitely another factor at play, too: the 'taxation' factor makes up for a lot.’ 

Many countries tax alcohol heavily. Alcohol-free variants are taxed less heavily, while at the same time they can be sold at a higher price as a luxury product.

Dea Shehu, Thematic Portfolio Manager KBC Asset Management

‘Brewers can benefit greatly from this trend. Heineken, for example, has announced that its alcohol-free Heineken yields one-and-a-half times the gross profit per hundred litres compared to a regular Heineken,’ says Shehu. ‘When you consider that the market for non-alcoholic beer is growing three times faster than the beer market as a whole, you get an idea of the opportunities.’ The major advocates in the brewing industry are investing massively in alcohol-free beer. They see this as the path to growth. 

‘We are also seeing new players entering the market,’ Shehu adds. There are so many types of non-alcoholic beverages on the market, especially beers, that consumers' basic perception is changing. Younger beer lovers, in particular, like to try new things. ‘Apps like 'Untappd' are readily capitalising on this.’ 

Being choosy is essential

There are big differences in the market, especially for investors. ‘The alcohol- ree beer and non-alcoholic spirits markets are for example not growing at the same rate,’ says Shehu. Local players, in a market where sales are still limited in
absolute numbers, also tend to have a harder time than the big global players, who offer non-alcoholic variants alongside their alcoholic counterparts. ‘Think of Pernod or Campari, for example, or Heineken or Carlsberg in the beer segment,’ says Shehu. ‘These are big names in the beverage industry. When they entered the market with a non-alcoholic variant, sales were already guaranteed, purely based on the brand name. It’s a different story for smaller players or new entrants.’   

As an investor, it’s important to diversify and choose high-quality names. The beverage companies that have done the best job with 0.0 alcohol products are the ones that will make the difference.

Dea Shehu, Thematic Portfolio Manager KBC Asset Management

Non-alcoholic beverages are on the rise. And it’s a trend that’s continuing. Thanks to non-alcoholic beverages, a fresh wind is blowing through the sector. As a thematic investor, you can benefit from this, but you need to choose carefully. ‘There are definitely opportunities for investors,’ concludes Shehu, ‘but like any other investment, you have to do your homework and make judicious choices.

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This article is informational only and should not be considered investment advice.