Booze-free beer is no longer a punchline - and big brewers see a billion-dollar opportunity

By Bill Peters

Nonalcoholic beer is catching on even with people who also buy alcohol, as Americans look to moderate their drinking

Cans of beer are packed at Athletic Brewing's nonalcoholic brewery and production plant in Stratford, Conn.

While many Americans may be looking ahead to a tipsy July 4 weekend, the nation's largest booze makers are increasingly bragging about their momentum with drinks that don't contain any alcohol.

Constellation Brands (STZ) became the latest to do so on Wednesday. The company, which sells beers like Corona and Modelo in the U.S., called out double-digit growth in its nonalcoholic Corona beer.

"That's a great example of white space that didn't really exist for this company," CEO Nicholas Fink said during the company's quarterly earnings call. "Now we've got a toe in the water."

Once merely a punchline, nonalcoholic beer, wine and cocktails have grown more popular in recent years, as consumers shy away from alcohol and seek out healthier ways of living. The biggest brewers are trying to capitalize on the trend.

Nonalcoholic drinks are still tiny compared with the $100 billion-plus U.S. alcoholic-beverage industry writ large. But their sales are increasing, while alcoholic-beverage sales continue to slip.

During the 52-week period that ended on April 25, U.S. sales of nonalcoholic beer, wine and spirits surpassed $1 billion, notching a 16% year-over-year gain over that time, according to Nielsen data provided to MarketWatch.

Those buying nonalcoholic drinks aren't necessarily cutting out booze entirely, as they look for ways to moderate consumption or to keep drinking and socializing without getting too drunk. A report from Nielsen last year noted that more than 92% of people who bought nonalcoholic drinks also bought alcoholic beverages as well.

The report attributed that moderation to broader wellness trends, GLP-1 use, cannabis use and pressures from higher costs of living. "This isn't about quitting; it's about expanding choices," Nielsen said.

Elsewhere, Michel Doukeris, CEO of Anheuser-Busch InBev (BUD), said in May that the company's nonalcoholic-beer business put up a 27% sales gain in its first quarter. Around 60% of volumes - a measure of liquid sold - came from new customers and occasions, he noted.

"We believe nonalcohol beer is a key opportunity to develop the category and drive incremental volume growth," Doukeris said.

Earlier this year, Molson Coors (TAP) said sales of its Blue Moon brand's nonalcoholic beer were growing 25%. Executives also said they had expanded the team that oversees the company's nonalcoholic segment.

"Everybody says the big focus is health and wellness and that is true, right?" Molson Coors CEO Rahul Goyal said at a conference last month. "And so, there you see us - a lot of businesses and companies like us - move towards the 0.0%, nonalcohol focus."

In April, BofA analysts said that Athletic Brewing was the market-share leader in U.S. nonalcoholic beer, controlling around 23% of the industry. The brewer has often tried to market its products at sports and wellness events, BofA noted, and has used athletes to promote the brand.

"This momentum has prompted established brewers to respond with their own nonalcoholic offerings, supported by significant advertising investment," the analysts said - including launches of Michelob Ultra Zero last year, nonalcoholic Corona in 2023 and Budweiser Zero in 2020.

Still, Molson Coors's Goyal noted some of the fastest-growing beers in the Americas region had a higher alcohol content. And Constellation's Fink suggested Wednesday that the company would take a disciplined approach to selling more nonalcoholic drinks as it figures out patterns in demand and consumption.

"Is it an occasion where they don't want alcohol at all?" Fink asked. "Is it an occasion where they're actually combining use of it with some of our alcoholic products and extending the occasion?

"I think having that very strong consumer insight then definitely leads to an ability to execute in a much more targeted way, and grow both the addressable moment as well as our share of that moment," he added.

-Bill Peters

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