Study from CGA with IWSR and Distill Ventures reveals new innovation and growth potential

17 May, 2019

Interest in non-alcoholic drinks increases, presenting opportunity for growth

Following eight months of research conducted in conjunction with leading trends and insights consultancies CGA and IWSR, Distill Ventures, the world’s first independent drinks accelerator, has released a study today reaffirming the economic potential of Non-Alcoholic drinks (Non-Alc). The full study is outlined via a whitepaper available online.

Summary

The growth of Non-Alc drinks is most evident via new product offerings and increasing menu visibility in key cities including London, New York, and Los Angeles. In the last 12 months, there have been 271 ‘premium soft drink’ launches in the UK. As of October 2018, there were 42 Non-Alc spirits on the UK market, up from just four in April. In bars and restaurants, Non-Alc drinks are earning their own place on the menu. In London, 55% of restaurants provide these options, and in Los Angeles, 40% present offerings, with no signs of a slowdown. In fact, 42% of the wider London on-trade are expecting Non-Alcoholic spirits and aperitifs, alongside Non-Alcoholic beer and wine, to play a key role in their overall sales mix over the next 12 months.

Key growth drivers

The growth is driven largely by clear consumer demand: 61% of consumers reported they want a better choice when it comes to Non-Alcoholic drinks. Meaningful experiences, curiosity around flavour and a plethora of choices remain relevant trends in socialising and how people spend their free time. The confluence of these trends has underpinned the exponential growth of Non-Alcoholic drinks in influential bars and restaurants, supermarkets and other retail spaces.

There is also evidence of growing interest in Non-Alc online. Searches with the word ‘Mocktail’ are up 42%, suggesting that consumers are looking for ways to drink a bit less without sacrificing social experience. Global consumers explicitly mention ‘Non-Alcoholic’ 81% more often than just one year ago, with 17% of conversations around Non-Alcoholic drinks coming from consumers between the ages of 35-44.

New York & Los Angeles – Sentiments and sales

Though the growth is steady, sentiments differ regionally. 83% of bar managers in Los Angeles believe Non-Alcoholic cocktails are part of a growing trend. Yet in New York, 71% of bar managers don’t see Non-Alcoholic cocktails and drinks as part of a wider trend, with less than 1 in 5 influential bars and restaurants giving visibility to Non-Alcoholic drinks. And while those sentiments are strong, the numbers speak otherwise. Among the 76 bars & restaurants surveyed in Los Angeles and 75 in New York, the incremental revenue generated from Non-Alcoholic drinks exceeded $2 million, which was nearly evenly split among the two cities. Together, these accounts sold nearly 150,000 Non-Alcoholic drinks; the average account generated an additional $13,300 in revenue in Los Angeles and $10,500 in New York yearly.

In Los Angeles, about a third of cocktail bars have their own Non-Alcoholic drinks menu, with venues that don’t have them reporting they are planning to.  Though fewer bars have dedicated drinks menus, almost a third of New York restaurants have a dedicated menu, suggesting that those Non-Alcoholic drinks are more closely associated with meals than with nightlife.

Consumers are still going out

Interestingly, the increase in Non-Alc drinks doesn’t mean that consumers are going out less. In the UK, 59% of people are ordering Non-Alcoholic drinks on nights out when they are also drinking alcohol. And they’re not just happy to drink it on occasion, they’re demanding it: 75% of influential consumers3 in the UK expect the venues they visit to offer a range of niche and interesting drinks.

The DV perspective

Shilen Patel, Co-Founder and Non-Alc Lead at Distill Ventures, said: “It’s incredibly exciting to see these Non-Alcoholic drinks develop and it’s something that we at Distill Ventures fully believe in. Over the last three years, we’ve rapidly grown our dedicated Non-Alc practice within the core business to help founder-led brands grow. Non-Alc founder-led brands now account for around 25% of the brands within our company’s portfolio.

The bartender's perspective

Rich Woods, author of The Cocktail Guy and Co-founder of Weapons and Toys Drinks Consultancy, London, said: “We’re no longer seeing ‘mocktails’ reduced to the back of the menu. These incredibly creative Non-Alc cocktails are now taking centre stage on menus, sharing an equivalent portion of the limelight with their alcoholic siblings. Not wanting to compromise on taste, top bars are innovating really quickly to ensure that equal experiences are given to every guest, regardless of whether or not they’re drinking alcohol.”

‘Non-Alcoholic Drinks: A Growth Story’ follows Distill Ventures’ ‘Better Drinks When You’re Not Drinking’ Drink Trend Spotlight, which was first published in 2017 and highlighted opportunities for entrepreneurs in what the accelerator called “the most exciting opportunity in the industry”.

For full methodology and data sources, please download ‘Non-Alcoholic Drinks: A Growth Story’ from Distill Ventures’ website: https://www.distillventures.com/.

     

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