For brand managers and innovation leaders in the wine category who like a challenge, the no-alcohol and lower alcohol wine sectors represent, respectively, the Everest and K2 of the industry. Nothing is more exciting – and frustrating – in wine right now. On the one side, there is a clear and growing consumer need, and commercial pressure coming from the supply chain to meet that need effectively. On the other, wine seems to be losing the no and low turf war so far – the beer category has had far more success than wine, especially in the no-alcohol category. No-and low-alcohol beer currently accounts for the vast majority of the total market for no/low alcohol, according to IWSR data.
However, there are some reasons for wine producers to be cheerful. IWSR forecasts show that across 10 key markets, the no-and low-alcohol category as a whole will grow by 8% volume CAGR (2021-2025), and within this, no-and low-sparkling wine has a similar growth trajectory. However, it is in still wine where no-and low-alcohol is expected to see a major inflection point over the next few years, with the category expected to grow by a volume CAGR of over 20% (2021-2025), and with category volumes doubling by 2025.
The stakes for wine are particularly high, because the major future growth of no and lower alcohol in general will be driven by consumers in their 20s and 30s, as these are the consumer segments who have clearly and consistently expressed interest in no alcohol and lower alcohol products in Wine Intelligence and IWSR consumer research in recent years. The younger generation of adults is also where wine in general is currently losing the battle for mindspace.
Lower and no alcohol wine innovators and brand managers will need to consider a number of factors as they evaluate strategies for the no and lower alcohol wine market:
- Why should consumers choose no and lower alcohol wine?
According to Wine Intelligence consumer research, the motivations for buying both lower and no alcohol wine are general health and wellbeing, with the need for control and avoiding the effects of alcohol close behind. This pattern is nearly identical across both lower and no alcohol wine, and across markets. Note also that product quality (which is generally the primary motivation for full strength wine and indeed most consumer goods categories) comes third in the motivation hierarchy for both lower and no alcohol wine. The key point therefore is that motivations for this category are less about getting the best tasting product they can get for the occasion, and more about the broader context – are they following some kind of health regimen? Are they driving later? Do they simply want to sleep well and not have a hangover?
The key issue for innovators is to what extent do these functional motivations make up for any perceived loss of desirability and emotional connection. Our interpretation of the data collected so far is that consumers will make some allowance for a product to be a bit compromised if it is performing another function, but this allowance is actually quite small. So if a product claims to be wine, but with lower or no alcohol, it needs to look like wine, come in a bottle that makes it seem like wine, and taste as close as possible to a wine. This also connects with taste expectations and value perceptions (see below).
- What is the occasion for no and lower alcohol wine?
From both Wine Intelligence research in this area, and broader consumer research in the alcoholic beverage category carried out by IWSR, we find a fairly consistent answer to the question of what occasion works for lower and no alcohol: alongside normal alcohol drinking occasions. What do we mean by “normal”? The primary alcohol occasion is the at home, post working day drink, before, during and after dinner. Closely following this is the social occasion with friends and family, and this of course can be synonymous with the at home evening occasion, albeit it can also include a weekend daytime event.
At such occasions, the most consistent behaviour we have observed at a total beverage alcohol category level is people substituting lower and no-alcohol alternatives some of the time. In other words, consumers will opt out of full-strength alcohol some of the time, possibly because they need to remain sober for functional reasons (driving a car, working) or lifestyle reasons (controlling calories or alcohol intake) and will drink full strength alcohol at other times. We describe these people as Substituters.
The other popular behavioural type, which we’ve dubbed Blenders, are people who will switch between no-alcohol, lower-alcohol and full-strength alcohol in the same occasion. Their motivations are often very similar to Substituters, but lean more towards a lifestyle need to remain in control and limit total alcohol intake. Within the wine category, we have also observed that most trial of new no and lower alcohol wines is currently occurring within the home, suggesting that the entry point for these categories would be an informal occasion and a motivation to substitute (“I’m not going to drink alcohol during the week”) or blend (“I will start my evening with a glass of lower or no-alcohol wine rather than a full strength glass”).
- How do we manage taste expectations?
Taste remains wine’s biggest challenge within the no and lower alcohol space. For years our consumer research has shown that taste, and poor perceived quality, are the biggest barriers to purchase for no alcohol and lower alcohol wine. Our latest research shows exactly the same result, and a consistent picture across all seven markets investigated on this basis. In this respect consumer perception may lag reality – there are much better quality no and lower alcohol wines coming to market compared with even a few years ago. However memories of disappointing experiences tend to linger much longer in consumer minds. And even with the improving quality, wines with some or all alcohol removed consistently struggle to compensate for the lack of alcohol (and the flavour changes brought about by its removal).
Unfair or not, the perception remains. If no alcohol or lower alcohol wine is being deployed in either a substituted way for full strength alcohol and especially in a blended way (lower / no drink, followed by full strength drink, or vice versa), the taste differential needs to be addressed. A “Judgement of Paris” style blind tasting against full strength alcohol might still prove a PR disaster for the no and lower alcohol wine categories, but this is the sort of ambitious exercise that may be required to change consumers’ minds.
- How can we demonstrate value?
The other big challenge for no and lower alcohol wine is to be able to demonstrate value when compared with full strength alternatives. The default assumption of the consuming public across all markets we survey is that they expect to pay either the same or less for wines with lower or no alcohol.
Unfortunately this perception does not always square with the costs of creating that product in the first place, because removing alcohol is time-intensive and requires expensive equipment, whose costs currently has to be borne by relatively low production volumes. For some markets, the alcohol duty element is a significant factor, so no-alcohol wines are better equipped to bring a product to market at a competitive price.
The key to squaring this particular circle would appear to come from classic food and beverage brand knowledge: people form judgements based on the look and feel of a product long before they actually taste it. This suggests committing investment to making packaging and shelf standout work as good as – or better – than existing full strength alcohol product, whilst leaving sufficient rational cues in place to make sure that the product is not mistaken for something it isn’t. One example of this strategy can be found in the beer category currently, with Heineken 0.0 bearing all the hallmarks (bottle colour, logo, red star icon) of its premium full-strength stablemate, but clearly displaying its no-alcohol credentials.
- How can we convert interest into trial?
Perhaps the most upbeat finding in our upcoming Opportunities in Lower and No-alcohol Wine 2022 report is the untapped potential for these categories across multiple markets. The addressable market for no and lower alcohol wine, defined as people who are actively seeking to reduce their alcohol consumption, stands at around half of all regular wine drinkers across the 17 markets surveyed.
Awareness levels for the existence of lower and no alcohol wine range from a high of 2/3 of all regular wine drinkers in the UK down to around a quarter (Japan and Spain). However recalled usage levels are tiny – typically around 5-6% of all regular wine drinkers in these markets. As to why this is, part of the story comes from some of the challenges listed above – perceptions of low quality, difficulty in seeing the value proposition, not part of an occasion habit. However our consumer research shows that one third of aware non-drinkers of lower and no alcohol wine said they hadn’t bought it because they hadn’t seen or couldn’t find the products that appealed to them in the stores where they normally shopped.
Some retailers are starting to address this challenge by placing no-alcohol and lower-alcohol wines within the main wine aisle assortment, rather than segregating them into a special section in the retail store. Whilst this may seem counterintuitive – it makes a mission to buy such products harder because it is not specially signposted – the fact that the majority of consumption of no or lower alcohol wine is taking place at “normal” occasions, by people who also drink full strength wine, suggests that the best way to get trial is to make the product as prominent as possible within “normal” shopping missions.
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