14 Sep 2021
Previous  News

No and low alcohol products are attracting a lot of attention lately. Attitudes towards non-consumption of alcohol are becoming much more positive and accepting, as evidenced by the numerous ‘dry month’-type initiatives, ‘mindful drinking’ and the #sobercurious movement with its accompanying celebrity supporters. And from a retail perspective, a bar opened earlier this year in Melbourne that claimed to be ‘Melbourne’s first permanent non-alcoholic bar’ (although it does serve one alcoholic drink).

Less alcohol = more growth

In the scheme of things, the no and low alcohol segment of the drinks market is small. No and low alcohol wines accounted for just 9.3 million cases globally in 2020 according to IWSR, which is less than half of one per cent of total consumption. However, the growth rate for this category has been well above that of the total wine market. Between 2015–20, the average annual growth rate was 25 per cent. The growth rate forecast by IWSR for the next five years (2021–25) is 15 per cent per annum on average, compared with less than 1 per cent per annum for total wine volume.

Underpinning these figures is a global trend towards alcohol moderation and (more broadly) improved health and wellbeing, particularly among younger demographics. According to Wine Intelligence, 39 per cent of regular wine drinkers globally claim to be reducing their alcohol intake. The figure for Australia is 46 per cent across all ages, and 56 per cent of the 18–34 age group. The same result is found in our key export markets including the United Kingdom (UK) and United States of America (US) – see Figure 1.

Figure 1                Percentage of all wine drinkers and younger drinkers who report moderating their alcohol consumption – by market

Source: Wine Intelligence

Moderating alcohol consumption can mean either not having an alcoholic drink at all, or choosing a no-alcohol or low-alcohol version of an alcoholic drink. Wine Intelligence found that 22 per cent of regular wine drinkers were doing so by not drinking alcohol on some occasions, while the proportions choosing no-alcohol or low-alcohol alternative products were 14 per cent and 13 per cent respectively[1].

Low or no – is there a difference?

While no and low alcohol products are often combined in reports and articles as a single category, there are in fact some significant differences between the two that should be considered when evaluating the opportunity for a particular product.

Globally, according to IWSR low-alcohol wine[2] accounted for 66 per cent of the no/low category in 2020 and had more than double the value growth of the no-alcohol segment. However, for Australian wine (consumed globally), no-alcohol[3] accounted for 86 per cent of consumption and had more than three times the growth of low-alcohol wine[4] (see Figure 2).

Figure 2                                Growth and share of low- vs no-alcohol wine: global vs Australian origin

Source: IWSR

Another important difference, according to IWSR, is the different underlying motivators for consumption. No-alcohol products are a clear choice for those trying to have an ‘alcohol-free night’, or who are required to have zero alcohol in their systems due to driving, health or work requirements. They are also a suitable option for people who never consume any alcohol. IRI MarketEdge reported in September 2020 that 25 per cent of Australian adults did not buy any alcoholic beverages in the previous six months. This group potentially provides a new market for Australian wine producers to market their no-alcohol products to.

Low-alcohol products can also satisfy a consumer requirement to moderate their alcohol consumption, but these products are more often aligned with general health and wellness trends like reduced calories, reduced sugar etc. than specifically with alcohol moderation[5].

In the US, low-alcohol wine takes a much larger market share than no-alcohol, largely because of the strength of the health and wellness trend. However, in most other markets globally, no-alcohol wines are seen as higher in quality and better value. In the UK, for example, lower duty costs give no-alcohol wine a competitive advantage.

Low-alcohol products are potentially harder to market as there are strict requirements around the use of the term and these vary between markets, while consumers may not understand the difference between ‘low-alcohol’ (which is strictly defined) and ‘reduced alcohol’ or ‘lite/light’, which depend on a reference product and on the consumer’s knowledge of what the alcohol content of the equivalent full-strength product would be. It is also harder for a consumer to judge ‘how much is too much’ – e.g. when trying to stay below the legal drink-driving limit – than when sticking with a ‘no-alcohol’ drink. In the case of wine, it is also problematic that the definition of ‘wine’ includes a specific level of alcohol, making ‘low-alcohol wine’, strictly speaking, a contradiction in terms, at least in Australia[6].

Australian performance in the no/low alcohol category

Wine Australia regulates the export of grape products as defined in the Wine Australia Act 2013 and Regulations, which include wine, brandy, grape spirit and products that include wine (such as ‘wine products’, ‘wine-based beverages’, low-alcohol wines and alcohol reduced wines). Non-alcoholic grape products that contain zero alcohol are not captured by the export controls.

Exports of wine identified as ‘reduced alcohol’ amounted to just 624,000 litres (69,000 9-litre cases) in the year ended June 2021. However, this was an increase of 155 per cent compared with the previous year. Sweden was the largest market, accounting for 48 per cent of the category, followed by the UK with 15 per cent (see Figure 3). Fifty-seven per cent of the products had an alcohol content of 0.2 per cent, with 0.5 per cent the next largest category at 18 per cent.

The average value of packaged reduced-alcohol wine exports was $4.30 per litre FOB, compared with $7.13 per litre for all packaged wine exports.

Figure 3                                Exports of Australian ‘reduced alcohol’ wine by destination market

Source Wine Australia

On the domestic market, statistics are limited, and the newness and smallness of the category means that they are likely to have a high margin of error. IRI MarketEdge data indicates that low alcohol wine accounts for 77 per cent of the no/low alcohol category in the retail off-trade, but the growth rate for no-alcohol wine is much higher (192 per cent vs 24 per cent). The average values for each are similar at $10.26 per bottle (low) and $9.97 (no). It is not possible to tell what share of the category is imported wine, but it is likely to be very small (see Figure 4).

Figure 4                                Share of value and growth for no vs low-alcohol wine in the domestic market

Source: IRI MarketEdge

The challenge for Australian wine producers is to make a no or low alcohol wine that tastes as good as a standard wine. According to Wine Intelligence[7], the key motivators for purchasing no or low alcohol options are ‘it’s better for my health’, ‘I enjoy the taste’ and ‘I like to stay in control’, while conversely, the top three barriers are ‘not enough alcohol’, ‘not really wine’ and ‘I dislike the taste’.  When it comes to no/low wine, consumers want to have their cake and eat it too.

 

[1] Wine Intelligence 2020 global statistics. Note that people can choose more than one option.

[2] Defined by IWSR as being less than 7.5% alcohol by volume (ABV) and more than 0.5% ABV. It should be noted that regulations vary between countries and do not necessarily align with the IWSR definition. See Wine Australia’s Low Alcohol Wine Guide for definitions and labelling requirements in different markets.

[3] No-alcohol wine must have been de-alcoholised, as it cannot be called wine if it was never fermented to begin with. Therefore, grape juice cannot be called ‘no-alcohol wine’ (but it can be labelled with its grape variety – eg ‘No-alcohol Chardonnay’).

[4] The Food Standards Code in Australia only allows beverages with less than 1.15% ABV to be called low alcohol. This means that particular products might be classified as low-alcohol by IWSR but not labelled or marketed as such in Australia.

[5] IWSR 2020

[6] It is legal to use this term if the product is less than 1.15 ABV and started out as a wine before having most of its alcohol removed. NB. It cannot be called a wine product unless it contains other components comprising up to 30 per cent of the volume.

[7] Opportunities for low and no alcohol wine March 2021


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This content is restricted to wine exporters and levy-payers. Some reports are available for purchase to non-levy payers/exporters.