Nonalcohol's Uphill Battle

One of the world’s largest brewers raised some eyebrows recently when it traded its iconic green label for a blue one—the color often used as an indicator for nonalcohol beer.

Heineken’s 0.0, a nonalcohol lager, will be available in 14 markets this year. The company cited a 5% compound annual growth rate from 2010 to 2015 in the nonalcohol segments in Europe and Russia as one of the reasons behind the new product.

Though the company said it has no plans to introduce 0.0 stateside, the overseas rollout raises the question of whether the United States could see similar growth in the $11.2 million nonalcohol segment anytime soon.

Take the long view, and alcohol-free beer is not exactly flourishing. For the year ending Dec. 24, 2016, convenience-store dollar sales of nonalcohol beer were down 12.4% vs. the prior year, according to IRI data. Top brands such as O’Doul’s (down 15.9%) and Busch NA (down 11%) struggled.

"I don’t see any potential growth in a category that’s been dying for 25 years,” says Eric Schmidt, director of alcohol research for Beverage Marketing Corp., New York, comparing the prospect to “pushing a rock uphill.”

“There is a chance [for brewers in] stagnant segments to do well, but you really have to differentiate your product,” he said. However, a closer look at recent data reveals a sliver of growth in the very area a company such as Heineken might be primed to exploit. “There does appear to be an opportunity in convenience stores for imported nonalcohol beers,” says Dan Wandel, senior vice president of Chicago-based IRI’s Beverage Alcohol Market Insights Group.

IRI data for the year ending May 14, 2017, shows imported nonalcohol beers grew dollar and volume sales by 8.7% and 9%, respectively, in convenience stores. The overall category, meanwhile, was down 6.5% in dollar sales and 7.2% in volume sales during the same period.

Those numbers come with a caveat: Imported nonalcohol beers make up a little less than 5% of volume share in the already relatively small nonalcohol subcategory.

Wandel says he wasn’t aware of any new brands in particular that might be driving the increase in imports. Nonetheless, the uptick represents a potential step forward in nonalcohol beer’s steep climb.

Click through to see two additional new nonalcohol releases slated for release in the coming year.

Molson Coors

This year, Molson Coors Brewing Co., Denver, started testing fresh varieties of nonalcohol lagers in preparation for a 2018 unnamed rollout in Canada. If all goes well, the brew will be released in the United States. The new variety will join 18 other low- and nonalcohol beers from the brewing giant, including its Coors Non Alcoholic and Sharp's brands currently available in the United States. Despite a lack of much focus on nonalcohol up to this point, the company says European sales of low- and nonalcohol beer and other malt-based beverages are compelling enough reasons to give the segment a bit more love in the United States.

"In Europe today, it's anywhere between 4% and 14% of the beer market, depending on the country," Kandy Anand, chief growth officer of Molson Coors, told The Denver Post. "We think conditions are right for what happened the last five years in Europe to start happening in North America."

Budweiser Prohibition

Last month, Anheuser-Busch InBev released Budweiser Prohibition Brew in the United Kingdom. The beer was launched in Canada last year. The beer, originally brewed here in the United States during prohibition in the 1920s and 1930s, is reportedly an identical recipe to regular Budweiser, but without the alcohol. The brand's U.K. marketing manager told Marketing Week that they hope the new brew appeals to a growing number of young consumers who are limiting their alcohol intake or totally abstaining. 

"Budweiser is the No. 2 brand in U.K. retail, " she said. "And [it's] been growing 15% year on year. Being a brand that people love in the United Kingdom, we feel that this is a great opportunity to meet consumers' needs in this new sphere—there is a huge moderation trend happening."