Featured Insights: BCG’s most inspiring thought leadership on issues shaping the future of business and society.

" "

Right now, dry January is nearly over for those who decided to abstain from alcohol for the month. But some people are opting to become teetotal as a more lasting lifestyle choice.

The improved taste and availability of no-or-low-alcoholic beers, wines, and spirits has contributed to a rapid market expansion, with the global market now valued at above $13 billion.

The So What

While still a very small percentage of the overall alcoholic drinks market, non-alcoholic alternatives comprise one of the fastest-growing subsectors, with western Europe leading the charge, says BCG’s managing director and partner Nic Zhou.

Global sales volumes of non-alcoholic drinks are expected to grow at a compound annual growth rate of +7% between 2023 and 2027, and then make up nearly 4% of the overall alcohol market, according to analysis from IWSR.

“Deciding to give up alcohol is now a year-long phenomenon rather than a concept just for January, and the search term ‘sober curious’ trends all year,” explains BCG managing director and partner Elfrun von Koeller.

Research also suggests that many people are not abstaining altogether, but rather alternating between alcoholic and non-alcoholic drinks to limit overall intake.

In the US, research from NielsenIQ shows that 82% of people who buy non-alcoholic drinks also purchase drinks that contain alcohol.

Among key trends to watch:

Taste Testing Non-Alcoholic Drinks at Home. Home is where many people try out and adopt non-alcoholic alternatives, and then develop new habits, explains Zhou.

“People will still want to pair their meal with a drink that isn’t water, and they will still want to drink something while watching sports on television. The question is how those choices will change as people become increasingly conscious of health and wellness,” he says.

The Evolution of Gen Z’s Drinking Habits. Initial research suggests that younger generations are drinking less. In the US, for example, alcoholic beverages e-commerce platform Drizly says that 23% of Gen Z and 24% of millennial respondents reported drinking non-alcoholic beer, wine or spirits often, while only 6% of Gen X and 1% of boomers said the same.

“It is too early to draw firm conclusions. However, the way some Gen Zers are choosing to abstain could reshape the landscape in the long term,” Zhou says.

More Mindful Drinking Across Generations. There are also changing social norms around the acceptability of seeming out of control, expectations of professional behavior at work events, and the need to be inclusive of people who abstain for a range of cultural reasons.

“At some point, peer pressure to have a drink after work could be flipped on its head. There may be a tipping point where the people who do choose alcohol are in the minority,” explains von Koeller.

Now What

These changing dynamics mean brands must double down on portfolio diversification, and businesses must stay ahead of consumer preferences to remain competitive.

  • Make a Great Product: Taste is rapidly improving across non-alcoholic categories. However, making something appealing to consumers still takes considerable R&D effort and capital investment. Winning in this higher intensity category requires significant effort, not a hastily made alternative that consumers will try once and not again, Zhou says. Competition for shelf space is also likely to increase in 2024 after a host of new product launches in 2023.
  • Shift Brand Perceptions: Given the move towards more mindful drinking, alcohol firms can consider shifting their product associations away from party excesses and toward moderate and responsible drinking, with both alcohol and non-alcoholic drinks being offered as part of lifestyle choices. Brands continue to hold great influence in the beverage alcohol category, so firms will need to decide whether to create an entirely new brand, or launch a non-alcoholic version of an existing one.
  • Know Your Consumer: People’s motivations are changing and alternatives are expanding. For example, there is anecdotal evidence that cannabis gummy sweets are increasingly used as an alternative way to manage mood among the younger generations. Brands will need to have deep knowledge of when consumers choose to drink, for example for reasons of social celebration, and when they choose to abstain or space their drinks for reasons of wellness. This, in turn, will inform product choices such as choosing to pursue growth in the ready to drink mocktail segment.