5 Brands Diversifying From The Alcohol Market
Updated: Sep 10, 2019
With Heineken headlining its 0.0% brew and Diageo acquiring an alcohol-free spirits company, has the alcohol market turned a new corner?
With the decline of alcohol consumption in the U.S., many producers such as Heineken (AMS: HEIA) and Diageo (NYSE: DGE) have started diversifying its portfolio into the ever-growing non-alcoholic industry.
Alcohol sales in the U.S. reached roughly $254 billion in 2018, up 5.1% on the previous year. However, the International Wines and Spirits Record (IWSR) found that 52% of adults in the U.S. who drink alcohol were looking to reduce its consumption.
The alcohol industry seems to have identified this gap in the market, as despite higher demand for non-alcoholic alternatives, alcohol-free beverages only account for 0.5% of the U.S. beverage market so far, with companies not previously giving it much investment. AB InBev (EBR: ABI) is expecting no- or low-alcohol beers to make up 20% of its total volume worldwide by 2025, up from 6% at present, and according to Cees’t Hart, the CEO of Carlsberg, non-alcoholic beer grew three times faster than the overall beer market in 2016, and is now expected to grow by 4.7% year-on-year during the period 2018-2023.
Below we will take a look at five companies looking to fill this gap in the market.
Anheuser Busch Inbev NV
Standing proud as the largest alcohol company in the world, the seemingly untouchable parents of Budweiser has used it its excellent marketing department which helps it to dip its toes into non-alcoholic alternatives. The company, which prides itself on its “ambition to reduce the harmful use of alcohol by 10% by 2025”, first stepped into the alcohol-free market full-scale with its “Budweiser Prohibition”, playing on the brief period of U.S. history where alcohol was criminalized.
The beer has seen limited success, especially in its home market, but the company continues to expand its alcohol-free range which will soon launch in the relatively untapped market of India, the world’s second-most populated country.
Molson Coors Brewing Co
Molson Coors (NYSE: TAP), the company behind Coors Light and Canadian, boosted its alcohol-free portfolio in 2018 by moving beyond beer and purchasing California based Clearly Kombucha. The company acknowledged the rise in demand for alcohol-substitutes from its market base, and only this month launched a hopped-sparkling water in the U.K.
These alcohol-free beer alternatives coincide with the brands ‘Coors Edge’ release in the U.S. this year, a non-alcoholic lager trialed in Canada last year with success. The company intends to further step up its alcohol-free strategy, aiming “to provide quality low- and no-alcohol choices to 100% of the countries where we have larger...operations."
One of the biggest names in beer for decades now, the Amsterdam-based powerhouse has long had a reputation of staying true to its original brand and recipe. Despite owning over 170 various brands of beer or cider, the Dutch brewers had never released an alcohol-free option with the Heineken brand name attached; that is until earlier this year.
Heineken spends roughly $450 million on advertising per year, and a large chunk of that was dedicated to pushing its 0% alcohol beer. As of August 2019, Heineken has seen success in the brand in Europe but has not made plans for a release in the United States as of yet.
The world’s largest spirits firm, Diageo, took a big step into the alcohol-free market this year with its acquisition of the world’s first distilled non-alcoholic brand, Seedlip. The company was launched in 2015 and enjoyed success with 170% year-on-year growth since launch, leading to Diageo acquiring a majority share in early August.
The drinks giant behind Guinness and Smirnoff first invested in the brand in 2016, but this latest move on non-alcoholic spirits has been heralded as an endorsement for the untapped world of high-end drinks for teetotalers. Seen as an alternative to alcohol-free beer, the industry has very few outliers, but perhaps Diageo will fill that role.
Constellation (NYSE: STZ) are another massive brand expanding into the alcohol-free space, but not in the way you might think. The Fortune 500 company behind Corona and Modelo changed the game back in 2017 when it invested $4 billion in Canadian weed company Canopy Growth Corp, rather than expanding its non-alcoholic range. Constellation has certainly reaped the rewards of this investment in the two years since.
Canopy, now the world’s largest pot company, has gone from strength to strength, acquiring U.S. based Acreage Holdings Inc. earlier this year, pending federal legalization of marijuana in the U.S. As it stands, Constellation owns 35% of Canopy, and have made almost $2 billion from its shares.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Diageo and Constellation Brands. Read our full disclosure policy here.