Why GenZ Is Drinking Less And What This Means For The Alcohol Industry

When writing (and reading) about trends, it is sometimes easy to get lost into what is trending and harder to decipher the actual cultural and behavioral shifts that will last and impact businesses for the long-term. One of the macro trends that has grown over the past few years and is intrinsically linked to the boom of health and wellness is mindful drinking and the ‘NoLo’ movement (no and low alcohol), with millennials and Gen-Z driving the demand for alternatives to alcoholic beverages.

The non-alcoholic category is expanding thanks to both higher demand and innovation within the space, with volumes expected to grow by 25% between 2022 and 2026. The world’s largest brewer, Anheuser-Busch InBev, aims for its no and low-alcohol beers to account for one fifth of sales by 2025, while the launch of new non-alcoholic spirits, wine and beers is booming. So, what is fuelling the growth of this segment and what are the key drivers of success for brands that want to address this consumer need?

Mindful drinking is about moderation more than abstinence

The non-alcoholic category surpassed $11 billion in 2022, driven by the demand for non-alcoholic beer, wine, spirits and ready-to-drink products. Interestingly, this growth in demand comes from consumers switching from both soft drinks and alcohol. IWSR data indicates that 82% of non-alcoholic drinkers also consume alcohol, highlighting that it is more about moderate consumption rather than complete abstinence. According to Solène Marchand, head of marketing for Pernod Ricard’s non-alcoholic products, “ 71% of the consumers of these new non-alcoholic spirits also consume alcoholic spirits. So, that’s really interesting for the way we communicate to our consumers. They already know about how to consume an alcoholic cocktail and the idea is to give them the same alternatives but within a non-alcoholic version,” she shared in an article earlier this year.

Marchand also expressed that while launching 0% versions of popular alcoholic brands is the strategy for many leading players, the focus for the group is more on developing unique blends to surprise and satisfy consumers: “New-to-the-world brands are easier in a sense because we can go all out in terms of creating different tastes and profiles. Not all tastes are technically easy to create non-alcoholic versions of.” This confirms the belief that consumers are looking for genuine tasteful alternatives rather than pure replicas of alcoholic drinks.

Sober curious drinkers are prioritizing taste over effect

The rise of mindful drinking is driven mostly by younger generations, with youth drinking being in decline across most high-income countries. Gen-Z drink on average 20% less than millenials, who also drink less than the previous generation, mainly because of an increased awareness of the dangers and effects of alcohol and the rise of health-consciousness as a lifestyle. In fact, an overwhelming 86% of Gen-Z consumers believe that their mental health is as significant as their physical health when considering drinking alcohol.

This shift in behavior has led to the rise of many no or low alcoholic brands that focused on delivering tasteful, innovative drinks to market that feel indulgent rather than punitive for those choosing not to drink. This isn’t an easy task: because the ferments turning a drink into an alcoholic one are what gives drinks their taste, brands emerging within the category need to be extra inventive to develop flavorful drinks. In addition, as non-alcoholic drinks are often perceived as too sweet and poor in taste, brands are addressing this consumer pain point by innovating with high quality, tasteful blends made with botanicals to provide indulgent and elevated drinking experiences.

Providing quality and an elevated experience, from product innovation to brand communication is therefore key to attract consumers, who are seeking desirable and flavorful drinks that are not seen as alternative or substitute options but rather enjoyable, tasteful drinks. Today, the list of NoLo brands is exhaustive: in the U.S., non-alcoholic beverage retailer Boisson carries more than 80+ relatively small or new brands that are making their way into consumers’ homes and gaining traction, while global alcoholic beverage groups are also launching 0% options to gain a share of this growing segment.

NoLo offerings are growing across distribution channels

While shoppers often discover new product launches (in the food and beverage space) directly on shelf at their local grocery store, their first interaction with non-alcoholic drinks often spans outside traditional grocery retail. Interestingly, non-alcoholic alternatives seem to be making their way first through non-traditional channels, with retailers waiting to see a rise in demand before allocating more shelf space to this segment. Consumers are therefore usually first engaging with NoLo brands outside the home or supermarket, and many initiatives have launched to cater to their needs and help them discover NoLo alternatives.

Jetblue recently became the first airline in the U.S. serving non-alcoholic beer following a partnership with Athletic Brewing Company. Passengers flying on domestic flights can now purchase the brand’s popular golden ale with no alcohol and enjoy a refreshing beverage without the negative effect on one’s body or mind. Adoption of such beverages are also largely influenced by initial trial in social settings, so when Coachella announced this year it would have its first-ever non-alcoholic partner, one could agree this trend can no longer be dismissed as a passing one. In fact, The New Bar, the non-alcoholic drinks platform, experienced vast success, with customers returning to the booth 5-7 times a day. Bars and restaurants are also starting to upgrade their non-alcoholic beverage menu to cater to this growing consumer segment and meet expectations with appealing beverages.

The rise of health and wellness has driven younger consumers to moderate their alcoholic consumption on average and become more sober curious. Mindful drinking implies brands must better understand drinking occasions and how to tap into health-conscious consumers who switch between alcohol and NoLo drinking, while providing tasteful, high-quality beverages to meet high consumer expectations. Consumer education, category acceptance within retail and bartender adoption will definitely be key to facilitate the acceleration of the shift to NoLo, and while it currently represents a niche market, it will certainly normalize in the years to come, laying the foundations for a new way of drinking.