Non-alcoholic beverages seek a new frontier this year: retail doors

This month, many welcomed the new year by joining the annual Dry January craze, pushing alcoholic libations to the back of the cabinet for a month of post-holiday sober solace.

It’s essentially the Super Bowl for non-alcoholic (NA) beverages, a new category that’s emerged amid the rising “sober curious” movement, offering those who choose to skip booze a more sophisticated alternative to soda or juice—from dry aperitifs and mocktails to zero-proof beer and spirits.

• Last Dry January, NA aperitif brand Ghia saw a 40% boost in customers, and the interest actually extended beyond short-lived New Year’s resolutions, with a return rate of 35%, it told Retail Brew.

Growing interest in the space has translated into growing sales: In 2021, NA sales were up 33.2% YoY through October, hitting $331 million, per NielsenIQ. E-comm sales of non- and low-alcohol beverages alone skyrocketed 315% in the last year.

When you consider that online sales for alcoholic beer, wine, and spirits only rose 26% in the same time frame, it’s no surprise everyone wants in on NA.

Spirits giant Diageo acquired a majority stake in zero-proof spirit maker Seedlip in 2019, and holds a minority stake in Ritual Zero Proof in 2020, while Budweiser, Heineken, and Corona have rolled out NA beers. Even celebrities like Blake Lively and Katy Perry have joined the buzz.

• The segment is growing so fast it even has its own association, the Adult Non-Alcoholic Beverage Association (ANBA), which went live last month.

“The tide lifts all boats,” Ghia’s founder, Melanie Masarin, said. But for the brands that have spent years carving out a niche, they’re ready for the next frontier: retail doors.

BYOB

Ghia debuted DTC in June 2020 and has since found a home in NA beverage shops, a rising trend in cities across the country. It’s carried in NYC’s Spirited Away and Boisson and LA’s Soft Spirits.

“On the one hand, it’s like you’re there with all of your competitors, so it’s hard to stand out. But on the other hand, it’s so great that the category is big enough that it justifies having stores like that,” explained Masarin, who was formerly head of retail and offline experiences at Glossier. “The team there [at an NA beverage shop] is really, really well trained on the nuances of this really new category.”

• In Q3 of 2021, Ghia’s wholesale sales grew from $10,000 to $180,000 YoY, it said.

Beyond upscale markets Foxtrot and Erewhon, the brand has focused on more small, curated local shops in cities where it’s done well in DTC, she said, rather than target larger grocers, so it can self-distribute smaller volumes and avoid high merchandising fees needed to stand out on conventional retail stores’ shelves.

“We want to make sure that when people see us in the store, it’s not the first time they’ve seen the brand,” she said. “It’s important for us that the marketing and distribution work hand in hand.”

Zero-proof spirits maker Ritual, meanwhile, is ready to take on grocery. Founding partner Marcus Sakey said online has helped the brand “build familiarity and crowbar open the door” since its launch in 2019. (The company said it notched 531% YoY revenue growth in Q1 2021 and a 225% sales boost for the year.) But he said e-commerce is “so 2021,” as Ritual hopes to reach shoppers IRL.

It entered ~100 Whole Foods doors in October and this month expanded to nearly all 500+ locations. Ritual is set to hit more chains in the coming months, Sakey told us.

• Whole Foods named “buzz-less spirits” a top trend for 2022 after the category’s “record growth” in its stores last year.

Take your best shot: In-store placement is a “work in progress,” Sakey said. Besides zero-proof beers who have found a clear space in the beer aisle, NA drinks don’t have a specific set to call home yet, especially in grocers that don’t typically carry alcohol. Sakey mentioned comparisons between where NA brands find themselves now and the early days of Impossible Foods or Oatly, who had to carve out their own space on shelf, he said.

“Any time you’ve got a kind of a genre-busting new product, it takes a lot of discussion,” he said.

When grocery chain Bristol Farms brought on its first NA spirits brand, Seedlip, in 2018, Geoff Nicoll, director of wine and spirits at Bristol Farms, said he was “given a little grief” from some stores for bringing on a “mid-$30 flavored water,” but it ended up performing well in the locations that chided his choice.

Marcos Salazar, CEO of ANBA, the newly minted association for the NA category featuring 40+ brands, is hoping the organization can encourage more success stories. By raising awareness among stakeholders like retailers, distributors, and wholesalers, as well as consumers, the ultimate goal is to add some legitimacy to NA as it grows.

• “I saw that there needs to be some infrastructure in this category,” Salazar said. “We all needed to come together a unified voice.”

That voice could help Sharelle Klaus, the founder and CEO of zero-proof drink maker Dry Botanical Bubbly, who feels at times like she’s been “screaming into a void” since her brand’s 2005 debut.

A very early entrant in the space, Dry started in stores and is now in 10,000+ grocers like Kroger and Safeway. But without a defined category of NA drinks in retail to anchor it, Dry has often gathered dust in the alcoholic set’s bottom shelves or gotten lost within mixers or snacks along the way.

• A new offering in the nascent NA wine space has been particularly difficult to place in stores, she said.

“When I started, I naively thought that one brand could create a category,” she said. “And clearly, I have learned that is not possible.”

Drinking buddies: While the ultimate dream—a dedicated in-store NA bevs set—may be a year or two out, Klaus noted, the new entrants are helping inspire retailers to reevaluate the category’s place in store, starting with introducing Dry January–dedicated end caps.

But end caps are premium real estate, noted Bristol Farms’ Nicoll. It’s an issue of too many “productive” grocery departments and not enough shelves (many NA bevs are currently merchandised with cocktail accessories), but he sees “considerable potential” for the category.

“There really does need to be a destination,” he said. “We will have to create a set of these, [but] haven’t yet figured out what category will give up space.”

There’s still plenty of work to be done (and as restaurants and bars better find their footing post-pandemic, Klaus said she’ll look to make a push in that channel as well), but in grocery and beyond, she’s glad she’s no longer going it alone.

“I felt like I was pushing this rock up a hill by myself,” she said. “All of a sudden there’s 100 people pushing this rock up the hill, and it’s pretty cool.”