Investors Tap Into The Zero Proof and Non-Alcoholic Beverage Market

Recess mocktail, mood and supplements

Courtesy of Recess

If you’re not in the sober or sober curious camp, you may not have heard of the zero proof movement, but the non-alcoholic beverage market is buzzing, and quietly chipping away at the $570 billion U.S. alcohol industry. Consumer data from Gallup found that the percentage of U.S. adults who say they consume alcohol has fallen to a record low of 54% in 2025 (down from 62% in 2023), with the primary driver being health concerns, including risks of cancer. I spoke with several industry executives about the shift in consumer drinking preferences and why investors are driving real capital into the niche non-alcoholic (NA, or “non-alc”) beverage industry.

A Snapshot of the Non-Alcoholic Beverage Industry

According to NielsenIQ (NIQ), NA beer is the leading product in the broader non-alcohol category, accounting for 83% of NA sales, compared to 11.2% for NA wine and 5.7% for Spirits (including ready-to-drink, or RTD mocktails). And while the spirits / RTD / mocktail segment makes up the smallest market share currently, it is the fastest growing, with 70% growth between 2024 and 2025.

Amanda Paul-Garnier, VP of Marketing at the Daily Pour and Co-Organizer of the Drinks with Benefits Festival shared, “I’ve been working in wines & spirits for 16 years and have been watching this small category grow double digits while other categories decline. Though it represents a small portion of the total alcohol category, it is the only thing that is really growing.”

While NIQ estimates the U.S. NA market at roughly $1 billion, using off-premise retail sales data (i.e., grocery stores, convenience stores, liquor stores and e-commerce vs. “on-premise” restaurant and bars), that figure captures only a fraction of the broader opportunity. Many zero-proof RTD beverages which include specific amino acids, adaptogens and/or minerals (i.e., Hiyo, Mingle Mocktails and Recess) overlap with the $24.5 billion “better-for-you” functional-beverage segment—which includes energy, hydration, and mood-enhancing drinks—making the true market size difficult to isolate within standard retail tracking data.

Zero Proof Represents a Cultural Shift

For Gen Z and Millenials, who prioritize wellness and are purchasing more wellness products and services than older generations, the shift towards NA alternatives is not surprising.

Picking up on this trend, there are more third spaces popping up to accommodate young people who “want to be included in a nightlife culture, and don’t want to feel like the social lubricant is just alcohol,” commented Michael DiBugnara, Event Producer of the Drinks with Benefits Festival. For instance, in New York City, alcohol-free bars such as No More Cafe, Hekate, and the soon-to-open Maze Social Club are creating upscale NA experiences for a new generation of drinkers.

Abbey Conrad, a Tampa-Bay based influencer and ambassador in the zero-proof community explained, “we are setting the tone for modern drinking culture….we don’t want to be seen as an afterthought—we want to be included.”

Paul-Garnier and DiBugnara tested this theory with their inaugural Drinks with Benefits Festival hosted in partnership with the Daily Pour, on September 27, 2025 in New York City. The Festival welcomed over 1,000 attendees into an instagram-worthy wellness experience where guests sipped and sauntered, exploring over 70 NA brands. The event featured omakase-style food and drink pairing stations from top restaurants like Spring Cafe Aspen, The Butcher’s Daughter, Adoro Lei, Seatopia, and Cipriani, along with VIP tasting rooms, live DJ sets, podcasting lounge and guided meditations.

But the moderation trend is not confined to Gen Z or Millennials. Interestingly, you’re also seeing Gen X —now in their late 40s to 50s— show strong growth in spending on NA beer, wine, and spirits, meanwhile Baby Boomers remain the largest spending cohort overall.

The Trend is Not to Stop Drinking, But to Drink Less

Beyond the broad cross-general interest in NA drinks, part of what makes the market opportunity so interesting, is the fact that it isn’t just for the purely sober community. 92% of NA buyers are also purchasing alcohol-containing beer, wine, or spirits.

In a recent study, nearly 80% of Gen Z and millennial respondents who drink reported they enjoy alcoholic beverages at least once a week. And 64% reported that they typically consume more alcohol during the holidays than at other times of the year.

Ultimately, the NA market is driven by consumers who want to cut back on alcohol during specific periods (like Dry January or Sober October), or who may drink less during the week and reserve drinking for the weekend, rather than eliminate alcohol entirely.

Investors Tap the Growing Non-Alcoholic Market

Tracking with growing consumer appetite for non-alcoholic beverages, investors are tapping in, to accelerate growth for category leaders.

In July 2024, General Atlantic led a $50 million equity financing round for Athletic Brewing, which is the no. 1 NA beer brand by sales in U.S. grocery stores, at an $800 million valuation (roughly double its valuation from two years prior). Andrew Crawford, global head of General Atlantic’s consumer sector shared with the WSJ, “the penetration [of the nonalcoholic market] is still really low in North America,” but there is interest in backing brands that are defining the category.

Many smaller brands have struggled to raise capital from traditional VC, and have relied heavily on angel investors, consumer syndicates, or family offices precisely because institutional investors often see the NA space as too fragmented and early for big checks. DiBugnara explained that many of the brands showcased at the Drinks with Benefits Festival “don’t have money,” and “we partnered with them for shoestring budgets to make them look beautiful.”

One of the larger NA beer brands featured at the festival – Best Day Brewing – shed some light on the elaborate brewing process and fundraising challenges his company has faced. CEO Tate Huffard remarked, the manufacturing process for non-alcoholic beer is extensive, beginning with brewing traditional alcoholic beer and then using a “reverse osmosis, highly pressurized filtration process” to remove the alcohol. But, “raising capital has been a grinding journey. We’ve managed to do it successfully, mostly through individual investors…true best-day believers and evangelists. But, it’s a harder journey than finding one VC who’s gonna write you a $20 million check…it’s basically been crowdfunding.” In total, Best Day Brewing has raised approximately $22.5 million since their founding in 2021.

Noteworthy institutional investment interest has been in the faster-growing RTD segment of the spirits category, where growth is up 123% from one year ago according to NIQ. For example, in February 2022, THC-infused drink brand Cann, raised a $27M Series A with participation from top consumer venture capital fund Imaginary Ventures, to fuel its international expansion. In June 2023, Aplós, which produces RTD beverages containing adaptogens and amino acids like lion’s mane mushroom extract, l-theanine, magnesium, moringa and ginseng, announced a $5.5 million Series A led by McCarthy Capital.

More recently in October 2025, Recess, a leader in both the functional beverage, supplements and RTD mocktail space, closed a $30 million Series B led by CAVU Consumer Partners (an early investor in Poppi before its $1.9 billion acquisition by Pepsi), with participation from Rocana, Midnight Ventures, Torch Capital, Doehler Ventures, KAS Venture Partners, Vanquish, and Craig Kallman. Recess has scaled its business significantly since launching in 2018 and is currently sold in over 15,000 stores across the country including Target, HEB, Kroger, Sprouts, Trader Joes, and Whole Foods.

I spoke with co-CEOs Benjamin Witte and Kyle Thomas about the company’s growth trajectory. “We’re battle-tested…we’ve been at this for seven years,” Witte said, and “we’ve evolved our product offerings from starting with CBD to expanding into the functional beverage and supplements space, offering relaxation, stress-relief and mood benefits with ingredients such as L-theanine, lemon balm, and Guayusa.” Thomas, who is a 25-year beverage industry veteran, elaborated, with our focus on the health component, Recess “can live in different parts of the store” including the functional beverage and supplement isles.

And this versatility in SKUs, distribution channels and ultimately market penetration is exactly what investors are seeing as the billion-dollar opportunity as NA brands mature.

What’s Next in the Non-Alcoholic Beverage Market Growth Story?

Despite all the excitement, the non-alcoholic beverage market still faces real fragmentation and logistical roadblocks to widespread distribution.

There are hundreds of small brands competing across overlapping categories—from NA beer and wine to functional mocktails and adaptogenic drinks—each with limited scale and scattered retail presence.

And as far as distribution channels, while these brands have marketing advantages traditional alcohol companies don’t — they can sell direct-to-consumer online, build community, and gather powerful data about who’s buying and why — scaling beyond D2C is tough in part because of different state regulations. Paul-Garnier explained that “there is no on ramp for people to find or try these beverages.” Every state has different laws but in New York State, for instance, you are “not allowed to sell non-alcoholic beverages in wine and liquor stores.” There are also varying state restrictions on the sale of hemp and other cannabis products containing THC; California, for instance, prohibits hemp-based THC products unless they are sold in a dispensary.

Ultimately, these challenges bring an opportunity for consolidation, particularly among traditional alcohol brands with strong distribution channels that want to diversify into the NA space. Heineken’s early move into non-alcoholic beer in 2017—and its clear market dominance today, with Heineken 0.0 now available in more than 100 markets—sets a blueprint other incumbents are likely to follow, whether through innovation or acquisition (build or buy). Several strategic investments have already emerged in the spirits subcategory, including Diageo’s acquisition of Ritual Zero Proof in September 2024, Constellation Brand’s minority investment in Hiyo in February 2025 and Stoli Group’s $3.6 million investment in non-alcoholic spirits brand Pathfinder in September 2025. As these partnerships expand, they could provide the distribution muscle and regulatory know-how needed to turn today’s fragmented non-alcoholic beverage market into a mainstream category.