Raising a glass to the new era of alcohol consumption

Published in

Eutopia VC

8 min readSep 11, 2019

From Champagne to Chardonnay to Cognac, the history of alcohol in France is rich. But, as always, consumers are constantly changing. Here’s why we’re lifting our drinks to toast some new concepts in the category.

Across industries, consumers are driven by a few well-documented motivators: an increased focus on health and wellness and a higher curiosity for new experiences and exploration are two of them.

Similar to the rise of the flexitarian diet, where interest in mindful eating and moderate consumption of meat has given way to consumer lifestyle changes, “mindful drinking”, the concept of proactively choosing to moderate or even eliminate alcohol consumption, is also growing in popularity.

In the food industry, consumers are often opting for plant-based meat substitutes, spurring the incredible growth of startups like Beyond Meat and Impossible Foods. They are higher quality, but also higher price, meaning that while consumers may not have the ability to eat meat substitutes 100% of the time, they are now more mindful about their meat consumption, and knowledgeable about where their meat comes from, the process to make it, and its health implications.

In the “mindful drinking movement,” people are giving more consideration to their drinking habits, becoming “sober curious,” or placing themselves “in the gray zone.” These individuals aren’t recovering addicts, nor do they have any particular restriction from drinking. They simply don’t want to drink or want to drink less for their own personal well being.

Fortunately, bartenders, chefs, and entrepreneurs have been rising to the challenge to provide the people with what they want.

So, while the overall alcohol industry is experiencing a slow down in traditional categories, there are alternatives that are growing and ripe for investment.

According to the WHO, the number of alcohol drinkers in the world has decreased by nearly 5% since 2000. In the U.S., alcohol volumes dropped by 0.8% in 2018, with beer hit the worst with volumes down 1.5%. Growth in wine and spirits slowed, with wine growth now at 0.4% (vs. 1.0% the year before) and spirits now at 1.9% (vs. 2.2% the year before).

As competition intensifies and beverage manufacturers must create unique products to cater to a more critical consumer, two sub-categories have emerged that we believe are worth pursuing in France.

1) Craft Alcohols (beer, cider, spirits)

When consumers do drink, they are now seeking new and differentiated tastes, special, unique experiences, and exceptional quality, all of which have given way to the rise in craft alcohols — whether it be beer, cider, or spirits.

In beer, though the overall U.S. market has been declining, craft beer volumes were actually up 4%, and now account for 13% of the category. In France, we believe we are in the early days of a similar growth pattern. After declining for 36 consecutive years, the amount of beer consumed in France has finally grown about 3% per year over the last four years, with the biggest driver being the arrival of the craft beer movement. Now, the number of brewers in France has doubled since 2015, and the country is 8th in volume of beer produced annually.

Craft ciders and craft spirits too have been gaining momentum as the overall craft movement resonates with Millennials and their quest for local and authentic products. Versus traditional ciders, craft ciders are higher quality as they are made in small batches and only from 100% fresh pressed cider apples. For spirits, the number of craft distilleries grew 26% from 2016 to 2017 with a particular shift towards consumers buying craft spirits local to their home.

Overall, we believe the craft alcohol market is in its infancy in France, and there is plenty of room for growth.

2) Low or No-Alcohol (beer, wine, spirits)

As overall alcohol consumption declines and consumers are focused more on health and wellness, they are also looking for non-alcoholic substitutes that more closely replicate the experience of enjoying an alcoholic drink.

While there are lots of options for non-alcoholic beverages including water, sports drinks, and sodas — the fastest growing industry is actually alcohol-free versions of alcoholic drinks, like alcohol-free cocktails and alcohol-free wine.

The market for non-alcoholic wine and beer is growing across the U.S. and Europe, and is set to achieve a 7.6% CAGR by 2024.

And with more than half of our Eutopia team grabbing a non-alcoholic cocktail at our last outing — we have experienced the trend first hand.

The problem is — consumers have historically had limited choice when it came to non-alcoholic beverages. They’ve been constrained to soda or water while they’re out partying with friends, relaxing at happy hour with colleagues, or nervously beginning a first date.

But with those types of substitutes, the key missing feature is sippability — the ability to drink at the same pace and have the same experience as one’s companions who are drinking alcohol. They often are too sugary whereas 66% of pub and bar customers want to have lower sugar drinks options.

In addition, consumers don’t want to (and shouldn’t have to) compromise on taste, atmosphere, or ambiance. They want to enjoy the sense of occasion, and appreciate challenging flavors with complexity of taste and complexity of creation — just like they would if they were drinking alcohol.

Consumers are looking for the same experience that alcohol gives, but without all the negative effects — the loss of control, the hangover, the shame and anxiety. This has given way to a wide spectrum of alcohol consumption — some consumers may choose to not drink at all, but many are just choosing to drink less or to drink lighter.

Posh bars and restaurants across the U.S. including Accomplice in Los Angeles, Cindy’s in Chicago, The Catbird Seat in Nashville, and Quince in San Francisco are now dedicating parts of their menu to non-alcoholic drinks and resetting the standard. These drinks are no longer condescendingly called “mocktails,” they are listed in the same section as alcoholic drinks (not in tiny print at the bottom of the menu), and they even command similar pricing to traditional cocktails (at some high-end bars they can run $15-$20!) The high-end rooftop bar The Shed in Paris not only lists no-alcohol cocktails along with the other drinks on the menu, but even the alcoholic cocktails are ordered by their alcoholic strength, allowing the consumer to choose where on the spectrum of alcohol indulgence he wants to be.

To cater to this growing market demand, several non-alcoholic spirits companies have started to emerge, with Ceder’s Gin and Seedlip capturing most of the attention in the non-alcoholic liquor (gin) grouping. Further validating the growth is the fact that major spirits producers like Diageo and Pernod Ricard are also joining in. Diageo, for example, invested in Seedlip through its venture arm, Distill Ventures, while Pernod Ricard started distributing alcohol-free gin brand Ceder’s in the U.K.

In wine, there are many brands like Grain d’Envie, St. Regis, Le Petit Beret, and Pierre Zero that use different types of techniques to reduce the alcohol content. Most of these products are dealcoholized, a process which only became legal in France in 2009, and typically requires the winemaker to add more sugar later in the process to achieve the wine-like taste. Still, to be classified as wine, they must meet certain rules including remaining above 8.5% (or 9% in some cases) alcohol by volume. Some other winemakers achieve a lower alcohol content without dealcoholization by harvesting the grapes earlier. Customer reception of low-alcohol wine seems to be more mixed — 26% of French wine consumers consider it not really wine, and 60% say they are not interested in buying it.

Still, the trend at large seems promising. Even the major brewers have been diversifying their portfolios to include non-alcoholic options:

· Heineken launched Heineken 0.0, a no-alcohol beer in 2017

· Budweiser launched a no-alcohol Prohibition Brew in 2016

· ABInbev has made seven acquisitions across all non-alcoholic and has a goal to have low-alcohol and non-alcoholic businesses represent 20% of global sales by 2025 (vs. currently at 8%)

In the U.K., no-alcohol and low-alcohol beers have seen more than 380% growth in the last two years but still represent a small portion of the market (3%). In 2018, the Great British Beer Festival served alcohol-free beer for the very first time (since its inception in 1977!) Sainsbury’s even announced its opening the first low/no-alcohol pub, Clean Vic, in London this summer after noticing a sharp increase in low/no-alcohol sales. In Ireland, arguably a culture rooted in alcohol consumption, a non-alcoholic Virgin Mary pub also opened this summer.

The intersection of the low/no-alcohol and craft trends is especially interesting.

Some craft breweries, including Athletic Brewing Co., Big Drop Brewery, Infinite Session, and Small Beer, are focusing specifically on low-alcohol craft beers, while larger independent breweries like Thornbridge have also added low-alcohol options.

There is even an emerging craft category that promises to deliver the same effects as alcohol — think natural blissfulness — like “social elixir” Three Spirits or “sparkling euphoric” Kin. Kin, for example, is a mixture of nootropics, adaptogens, and botanicals that are intended to facilitate human connection — basically to act as a non-alcoholic social lubricant.

Lastly, there are a couple other points of validation for the growth of non-alcoholic beverages in the market as well. New e-commerce retailers that are focused on non-alcoholic drinks like Gueule de Joie have sprung up, making it even easier for consumers to compare options and find what they’re looking for.

In addition, community experiences focused on the no-alcohol trend have emerged, confirming that it is here to stay. Thousands of people regularly gather at 7am to participate in Daybreaker, a sober morning rave series that celebrates partying, dancing, and having fun in a no qualms environment. Trendy bars are emerging that actually serve only non-alcoholic beverages. And communities that promote connection and creativity like Kin House capture the movement while also selling a product.

There is certainly a lot of action in both craft beer and non-alcoholic beverages, and we at Eutopia are excited to support the potential of the category in Europe by backing a French company infused with authenticity to build a new history. Please reach out to us at hello@eutopia.vc if you are doing anything in this space.

*Thank you Rima Reddy for your insights!*

Sources

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