Low and no-alcohol may not turn out to be the money spinners assumed

Earlier this year, the Blue Naan restaurant in Felixstowe jettisoned its long-standing alcoholic drinks menu and went all in on an alcohol-free list, with an impressive selection of beers, wines, pre-mixed spirits, mocktails and soft drinks that certainly give it a unique proposition in the market. 

The array of options represents a lot of sourcing effort by the restaurant’s owner, Johnny Hussain, who has been successfully running the high-quality venue for 20 years and wanted the drinks offer still to complement his food menu, despite going alcohol-free. He has built the restaurant into a very busy operation, with customers enjoying his unusual menu that includes unique fusion dishes such as chicken tikka stir fry and tandoori jerk chicken. 

Johnny Hussain outside the Blue Naan

This striking move has not been done to boost revenues. Quite the opposite, in fact, as he admits the primary reason for taking such a route has been to reduce his numbers of diners (while also better aligning with his Muslim faith). “We had a staffing nightmare, and I thought if we took alcohol away then we would see a decline in customers. We did see a fall in numbers, and it’s now manageably busy rather than ridiculously busy,” says Hussain.

One noticeable change among the reduced customer base is the drop in the consumption of the non-alcoholic versions of beer. Whereas many people previously ordered three or four pints over the course of a meal, this has dropped to two, or in some cases, to three for the alcohol-free options. Hussain also says the younger customer base has had less of an issue with his ditching of alcohol compared with the older demographic.

This greater focus on health by younger people is certainly reflected in the findings of various research reports. For the 18 to 24-year-old Generation Z grouping, 65% state they have a desire to drink less alcohol, versus 55% for all adults. This is a jump on the 32% figure in 2021 and 40% in the previous year, according to KAM research. The only surprise to me is that more people did not say they planned to moderate their consumption. Even the most excessive of drinkers is surely likely to express a desire, however unfounded, to reduce their intake.

However, I’m dubious as to the value of the research when it states that one in three pub visits are now alcohol-free. Is this really a surprise today when the reasons we visit pubs have become increasingly broad? It is no longer simply about embarking on a drinking session because pubs are now much more multi-faceted. Often visits involve food, family meals out, quizzes, a mid-morning coffee, and an increasing number of people are using the pub as a place to work when it’s more about downing tea and coffee rather than wine and beer.

What I’m not doubting though in the alcohol-free drinks milieu is the increasing abundance of better-quality products, which has absolutely helped drive demand. Sales of low and no-alcohol beer, for instance, have almost doubled in the last five years, according to IWSR, with big guns like Heineken and Budweiser spending heavily on marketing (and funding plenty of research that says good things about the category).

The low and no-alcohol range is ever-expanding

This growth spurt has taken the category to 3.1% of the UK beer market, which sounds impressive, but is it? Judging by the previous expectations of brewing giant AB InBev, it represents a pretty poor performance. Six years back, the brewer stated its aim was for low and no-alcohol beers to account for 20% of its sales by 2025, but it has since acknowledged that this is not going to happen as the current level stands at a mere 6%. 

While non-alcoholic and low-alcohol drinks undoubtedly represent an interesting and growing part of the market, I can’t help feeling that much of the research and marketing has arguably painted prospects for the category that are much greater than will ultimately be the reality. On the evidence today, I reckon they look unlikely to make much of a dent into the full alcohol market. Consider that alcohol is predicted to enjoy a compound annual growth rate of almost 16% over the next three years, according to Statista, which beats the growth seen in alcohol-free beer over the past five years. 

Rather like Hussain has found at the Blue Naan, the adoption of non-alcoholic and low-alcoholic drinks is not going to help attract customers (quite the opposite could be the case, in fact), nor are they going to be some big money spinner for hospitality businesses. But that’s not to say they don’t have a place in helping companies achieve other aims that might be more focused on health, wellness and faith, rather than just being about hard cash.

Glynn Davis, editor of Beer Insider 

This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Beer Insider would like to thank Propel for allowing the reproduction of this column.