Good Beer Hunting

Hidden Shame — Non-Alcoholic Beer Grows Globally, But What About the U.S.?


Drinkers got a harsh jolt in August 2018, when national and international media outlets jumped on a new study proclaiming dire straits for anyone who consumed alcohol.

“No amount of alcohol is safe, health experts warn”
“World’s Most Depressing Study Confirms All Alcohol Is Bad for You”
“Alcohol is a leading cause of death, disease worldwide, study says”

Published in The Lancet, the findings were plainly stated in the paper’s title: “No level of alcohol consumption improves health.” As readers might assume, the study, which analyzed more than 700 other research efforts from around the world, concluded that any amount of alcohol consumption was detrimental to health.

However, as some outlets worked to prove after the ensuing media maelstrom, the results were seen as not exactly fair, or even correct. In addition, the peer-reviewed medical journal carries with it a history of questionable publication decisions, including a retracted study connecting vaccines and autism, a misleading paper looking at men’s health screenings, and incomplete assessments of nutrition and diet.

Naturally, as 2018 came to a close, the study’s results came clawing back in time for year-end reviews and New Year’s resolutions.

Across the U.K., this month offers an opportunity for millions to reset their alcohol intake as part of “Dry January,” abstaining for reasons of health or finances. But in the U.S., a somewhat puritanical point of view toward alcohol has long been the norm. In lieu of a 31-day period of abstention, conversations in and around the industry are focused on reasons to avoid or change public relationships with alcohol.

In a December edition of the Brewbound Podcast, Brooklyn Brewery CEO Eric Ottaway spoke about his company’s foray into non-alcoholic beer as a way to diversify Brooklyn’s offerings and build a buffer against beer’s overall slowing sales in the U.S. Special Effects, a hoppy Lager with an ABV of 0.4%, is now available in Sweden, but will enter additional, unnamed markets this year.

In the podcast recording, Ottaway said that the U.S. has had it backwards when it comes to non-alcoholic beer, which has long been “stigmatized.”

“If you're drinking a non-alc, there was something wrong with you. It was kept in the back of the bar fridge and carefully poured into a glass and given to you so nobody would see that you're drinking non-alcoholic beer,” he said. “It was kind of an embarrassing thing. Whereas you go in Europe and it's celebrated. It's treated as the opposite in most countries. People would never sneer at you or look down at you like you have a problem.”

The difference between the countries where non-alcoholic beer is a normal part of life and the U.S.—where it accounts for about 0.3% of the roughly $35 billion spent in IRI-tracked supermarkets, convenience stores, and other outlets—is the underlying perception of alcohol. Countries like Spain (12th), the Netherlands (24th), and Russia (32nd), where Heineken 0.0 has seen strong sales, are among the top-35 countries in the world for beer consumption per capita. The U.K. has seen its non-alcoholic beverage market grow by 15% over the last two years, and is 25th on the list.

In America, the percentage of legal-age, drinking adults who consume some amount of alcohol has remained relatively constant for 75 years, and typically hovers at around two-thirds of the population, according to Gallup polling. And yet, James Hedges, the Prohibition Party’s 2016 presidential candidate, garnered the most votes for his party since the 1988 presidential election. He received only 5,617 votes in total—nearly all of which were cast in Arkansas, Colorado, and Mississippi—but the vote highlights the persistent stigmatization of alcohol in the U.S.

“A lot of politicians have this misguided idea that by growing the alcohol industry, they’re helping the economy, but that’s not actually the case,” said Jonathan Makeley, chair of the New York State Prohibition Party (Makeley also ran as a write-in candidate in the state’s 146th Assembly District during the 2018 elections). “What alcohol is doing is allowing a small segment of people to accumulate money for themselves while hurting the economy and society. It’s to the detriment of economic interest.”

Along with support for issues that include stricter legal protections for children and more affordable higher education, Makeley said his political efforts and ambitions are driven by a desire to increase public discourse around alcohol. He noted that Senate hearings during the confirmation of Supreme Court Justice Brett Kavanaugh, during which the then-nominee repeatedly addressed his consumption of beer and behavior in relation to sexual-assault allegations, most recently showed the “darker side of drinking culture.” There are a dozen official members of New York’s Prohibition Party, and Makeley said “several others” have shown increased interest in joining in recent months.

“The problem of alcohol is often treated as some kind of individual problem, but it’s also a social and economic problem,” he says. “To an extent, the government has an ability to impact it, so it’s also a political problem.”

Religion-based prohibitionist stances have existed for more than 100 years. More recently, they were at the center of a 2015 report in The Atlantic, which explored how and why the South has had fewer breweries than the rest of the country. In Joe Pinsker’s findings, there was an ideal, if paradoxical, alliance formed between voters who opposed alcohol and corporations like Anheuser-Busch InBev or MillerCoors.

“The support of Baptists provides Southern politicians with a reason to hinder brewers that politicians in other regions don't have,” Pinsker wrote. “As a result, the states with the most Baptists tend to have the fewest breweries.”

In Georgia, religious stances against alcohol began to diminish when it became clear the tax revenue generated by sales would be necessary to help boost communities. Instead of claiming non-alcoholic beer as a stigma, it would be best to identify it—and America’s curiosity with the challenges and benefits of booze—as part of a larger conversation.

Despite NAB’s small percentage within overall beer sales, lots of people are already buying the stuff. With the U.S. ranked No. 21 in the world for beer consumption per capita, the non-alcoholic market has the potential to grow here as it has in Europe.

In 2018, there will be 13 or 14 non-alcoholic beer brands that will surpass $1 million in IRI-tracked sales. Half of those will sell $5 million or more. O’Douls, the category leader, will match about the same in IRI dollar sales as the Cigar City family of beers. Busch’s non-alcoholic entry is the equivalent in dollar sales as AB InBev-owned 10 Barrel.

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Despite the relative success of these brands, it doesn’t mean the category itself is showing great health. According to Beer Marketer’s Insights, non-alcoholic beer has dropped from a peak of 2.4 million BBLs sold in the early 1990s to around 900,000 in 2017. Part of the reason, the trade publication says, was because the beers “suffered from their taste reputation and offer of no (alcohol) bang for same or premium buck.” With Heineken 0.0 launching in the U.S. this month, it’ll be a good test to see how the product marketed as “beer without alcohol” fares by selling at the same price as its 5% ABV sister brand. The company plans to spend $50 million in marketing to try and make it happen. Heineken USA wants 5% of its volume sold to be its non-alcohol brand by 2023, which Jonnie Cahill, chief marketing officer of Heineken USA, said would be good for the alcohol-included brand, too.

"I can't say where this for sure turns out, but I can say, for us, this isn't a January to March go," Cahill said in an interview with CNBC. "We believe the consumer's ready. We believe this is good for beer, and we're going to go for it. So I don't see us blinking anytime soon."

Bill Shufelt is also betting on growing interest, plus the premiumization of the non-alcoholic beer space. In the second half of 2018, his company, Athletic Brewing, sold about 1,500 BBLs of non-alcoholic Golden Ale, IPA, Stout, and Gose. He suspects production will more than double in 2019 for his beers sold in Total Wine & More, Whole Foods, and through his brewery’s website. It’s about an even split between in-store and e-commerce sales, he said.

Like Ottoway, Shufelt used “stigma” as a way to describe America’s perception of non-alcoholic beer. He also acknowledged how that’s changing within the context of broader discussions around alcohol, and what the premiumization of products across beer, wine, and spirits can do for tastes and ideas.

“Part of the reason was the quality of options were so terrible,” he says. “You’d relate it to someone who would choose to drink those beers because something terrible must’ve happened, and that’s a scary unknown.”

With the runaway success of Michelob Ultra, Shufelt feels products in the non-alcoholic space will hold continued appeal for healthy and active adults. Consumers have shifted expectations of flavor experiences and have increased conversations around different lifestyles and occasions for beverages, whether they pack an ABV punch or not.

“It’s a corner of the store that hasn’t changed in 30-plus years,” he says, “and we’re really excited to be part of turning that on its head for people.”

If business owners and market research are to be believed, the incremental success of non-alcoholic beers is thanks to increased attention to overall health and wellness among consumers. That doesn’t necessarily mean that drinkers are giving up alcoholic beer for its alternative, but in the U.S., opportunities for growth are often framed around “occasions.” Companies want to put a bottle or can in someone’s hand during a moment in which a normal, full-strength beer would seem uncouth. To succeed, there needs to be a “fundamental reset to our psyche,” GBH’s Michael Kiser wrote in 2017.

Last year, Jeff Stevens, co-founder of non-alcoholic beer producer WellBeing Brewing, told GBH that a key market would be people who normally drink soda and sugary drinks during the day or with meals “because those can be the same occasions” for non-alcoholic beer. It’s been a similar refrain used by Brooklyn Brewery CEO Eric Ottaway, who has said that the goal of his NAB is a beer that fits in “during midday lunch breaks, work happy hours, pre-workouts, post-workouts, watching the kids, very late nights at the bar,” and more. “If we can articulate those moments, that’s where I think we can win,” Stevens told GBH, also noting that an integral market is people “mindful of consumption.”

Success in the category could also be tied in with the premiumization of beverages that has taken hold in the U.S. in recent years. Across the board, alcohol has seen growth not through overall volume sales, but in dollars. The act of “trading up” isn’t just for booze, either. “Value-added water” is one of the biggest consumer packaged goods on the market, and kombucha was set to break $1 billion in sales last year.

In a small way, this has been the case with beer. By the Brewers Association’s definition, total volume for its “craft brewer” members in the U.S. is about 13%. While growth has slowed in recent years, the raw number of breweries has steadily increased beyond a record-breaking 7,000. An important source of that increase actually came during the tough economic times of the Great Recession. At its start in 2008, BA-defined “craft” was growing at 6% and more than doubled to 13% in year-to-year volume growth by 2011. The trade-up in beer was happening.

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All of this matters for the argument being made around non-alcoholic beer. If companies like Athletic Brewing or WellBeing Brewing want to make their value proposition argument, it’s not around the old assumption of drinking non-alcoholic beer because something’s wrong with you. It’s because you believe there’s something right with what’s in the glass. Conversations are now based around the idea of these products tasting authentic rather than the secondary needs of an essentially no-ABV beer.

When Minneapolis’ Bauhaus Brew Labs became Minnesota's first brewery in almost a century to make and sell a non-alcoholic beer last month, a main selling point from head brewer and COO Matt Schwandt was that “It tastes like real beer!

According to projections from at least one multinational conglomerate, non-alcoholic beer can’t be ignored for long. AB InBev believes NAB will make up 20% of its overall production volume by 2025. Carlsberg started its NAB brands in 2015 and expects those revenues to grow three times faster than its beer sales. Non-alcoholic versions of Budweiser and Corona were launched in 2016. Heineken 0.0 is now available in the U.S. and Open Gate Pure Brew, a 0.5% ABV Lager, was announced by Guinness at the start of last year.

The category is small, but fighting for its success is valuable. It may only represent about a third of a percent of overall beer sales, but even fractional gains equate to millions of dollars.

It’s also a worthwhile time to strike while the fire is hot in the Mich Ultrafication of beer. The brand can’t be stopped, thanks to its associations with health (low calories) and/or wellness (ideal for active lifestyles), leading breweries like Lagunitas, Saint Archer, and more to try to replicate its success. If NABs want to grow presence, understanding, and ultimately appreciation in the U.S., this sandbox is the ideal playground.

Getting there, however, requires not only sales, but also consumer education. Bill Shufelt, the founder of Athletic Brewing, believes the outgoing and intellectually curious collection of shoppers that make up the "craft community" is the perfect case study. He says some people laugh at the idea of even considering a beer without regular ABV, while others consider it in the context of functional beverages like LaCroix or kombucha.

"Beer just wasn't participating in that conversation," he says. But it’s certainly started talking now.

Words by Bryan Roth