The Category Best Positioned to Deliver the Next Beyond Meat
The non-alcoholic beverage revolution is on the horizon, and it’s only a matter of time before it lands on your shore. Your doorstep.
At 9:30 am on May 2nd, 2019 the opening bell of the New York Stock Exchange rang, and thing’s got wild. May 2nd was the day that Los Angeles’s plant-based meat substitute producer Beyond Meat went public. Shares opened up 84% and by the end of the day, shares of Beyond Meat, now BYND, had traded hands 23,118,966 times.
84 Days Later, one share of Beyond Meat was worth $239.70.
Beyond Meat launched one of the most successful IPOs in history. It went public at a $1.5 billion valuation and less than three months later it was worth more than $13 billion, up 859% from its initial IPO price of $25 per share.
This surprised many people, and the few that took advantage were in the vegan, vegetarian, or in-the-know categories.
I was one of those vegans and vegetarians, though my intolerance for any type of risk stopped me from making the decision to invest.
I’m kicking myself. The same way Adam Grant did once Warby Parker blew up.
In hindsight, I was in the know and didn’t trust myself, the next time I will.
And the next time I’ll start the day off with a drink to celebrate what it will mean: That the non-alcoholic revolution will have arrived.
“Think of sober curiosity as a ‘wellness’ approach to (not) drinking alcohol.” — Ruby Warrington
Nearly a century before the term sober curious became a Wall Street Journal headline, American’s were rejecting alcohol. Through the decades, these decisions came with attached stigmas, but today they’re beginning to reach a mainstream normalization.
On the heels of plant-forward plates, has come equity for alcohol in the conversation of harmful substances, both socially and physically. Companies are even beginning to react to the hypocrisy of banishing one of the three leading causes of preventable death while inviting in another: Alcohol.
These conversations have begun to normalize the decision to drink alcohol-free. As Ruby Warrington, who got sober curious more than 8 years ago says, about the revolution “Think of sober curiosity as a ‘wellness’ approach to (not) drinking alcohol.”
Wellness is a tricky word, often attached to fad diets, which dilute the word, wellness practices are also increasing mindfulness, positive mental health, and providing new lifestyles for humans. Something that alcohol-free Three Spirit leaned into, informing us that “People want to be drinking less! We see all sorts of indications, in addition to the nonalcoholic insights and data, such as CBD and Vegan trends, and the demand for natural alternatives. We decided to put things in our drink that make you feel good.”
Trends aside, to become the next Beyond Meat is going to take a lot more than a few abstainers at your local yoga studio and watering hole.
“Worldwide alcohol consumption has declined 1.6% and nearly 40% of global consumers reported a desire to decrease alcohol consumption for health reasons”
The United States has seen breweries like Athletic Brewing Company begin to dedicate themselves entirely to brewing non-alcoholic beer, and existing brewers of alcohol beer like Brooklyn Brewery reserve tanks for non-alcoholic options. Even the king of beers released Bud 0.0. That’s like a major fast-food company deciding to add an Impossible Whopper to their menu. Oh wait, that happened.
Internationally this movement is a bit ahead of the US, but even alcoholic options like Heineken, Guinness, Peroni Libera, and Corona are beginning to import their non-alcoholic options into the US market as if saying “why not?”
To ask “why not?” implies less commitment, less conviction. These brands are not simply following the leader, but responding to serious signals and fighting for a seat at a table that will soon become a standing room only category.
AB InBev, which owns a deep roster of beers including Budweiser and Corona has pledged to increase no or low-alcohol beer to 20% of its global beer volumes by the end of 2025. Ahead of their schedule is Heineken’s alcohol-free option “Heineken 0.0” which launched in Europe last year and recently launched in the United States. Outside of beer, the spirit category has seen Distill Ventures, the venture-capital arm of Diageo — which owns brands like Johnnie Walker, Smirnoff, Tanqueray, and Guinness — invest in the non-alcoholic “spirit” Seedlip, and about a quarter of Distill’s portfolio is now devoted to non-alcoholic beverages. Soda and Tea have even gotten into the game with Coca-Cola announcing its Bar Nøne line, Boulder, Colorado’s Hoplark releasing a tea brewed with hops, and beer company Molson Coors acquiring Clearly Kombucha in June 2018.
All of this movement is exciting, especially for an abstainer like myself, but more importantly, these movements are clear reactions.
But, what are they reacting to?
A targeted study in the UK found that 29% of 16 to 24-year-olds were non-drinkers in 2015, up from 18% in 2005. With a population slightly of 65 million, surely these results from the UK are exciting, but they represent such a small portion of the world’s drinkers.
Worldwide alcohol consumption has declined 1.6% according to an IWSR report and nearly 40% of global consumers reported a desire to decrease alcohol consumption for health reasons, which would explain several reports returning forecasts that the global market for nonalcoholic drinks will grow by 32% to $30 billion by 2025. This, parallel to reports of off-premise retailer sales outpacing a typical final week in March 2020 increasing 22% compared to the same one-week period in 2019. A data point amplifying excitement is that even Gen Z is drinking at lower rates than adolescents have in generations before. Nielsen even found that 66% of legal-aged drinkers between 21 and 34 are working on cutting down their consumption too.
If that’s not enough, consider why Whole Foods listed Zero-Proof Drinks on their Top 10 Food Trends for 2020 list.
The notorious phrase describing the persuasive power of numbers “Lies, damned lies, and statistics” is often used to bolster weak arguments, but these data signals aren’t compensating.
“It seemed that this mindful consumer was now infiltrating every existing category with the exception of beer. We asked ‘Why was beer not being included?’” — Jeff Hollander
When forecasting winners, one of the first items we evaluate is where a trend came from. Jeff Hollander shared where Hairless Dog’s 0.0 line came from:
“We saw the craft been explosion in which every possibility and style of beer was being brewed. Then we saw how careful the selection process of consumers were. This was all going on parallel to a wellness explosion which increased consumer awareness of what they were putting into their bodies. Consumers started asking if eggs were cage-free, if steaks were grass fed, and if bread was gluten free. As consumers, we really started to care what we put into our body. It seemed that this mindful consumer was now infiltrating every existing category with the exception of beer. We asked ‘Why was beer not being included?’ Then we dediced to brew a great 0.0 beer, and that’s what we’ve done.” — Jeff Hollander
Not only is the non-alcoholic revolution a response to the mindful consumer, but the increase in the availability of non-alcoholic options is also solving a problem that already existed, an important prerequisite for picking a winner during an idea selection process. On top of that, non-alcoholic beverages are practical, make life easier and safer, and ask consumers for a very slight change in behavior.
Often lost in excitement is dissension, so in this process, I wanted to turn over every stone and truly see if the non-alcoholic category has what it will take to chase down Beyond Meat. Sure $30 billion is something to call home over, but it’s still only 3% of the trillion-dollar global alcohol market.
How do we know if the non-alcoholic category will really deliver a winner?
“You can sell and buy non-alcoholic beverages online, and they can be shipped directly to your door.”
The question we need to ask ourselves comes from a 1994 book by Al Reis and Jack Trout, The 22 Immutable Laws of Marketing. The Law of Acceleration says that successful programs are not built on fads, they’re built on trends.
“A fad is but a wave in the ocean and a trend is the tide. The fad is very visible, but it goes up and down in a big hurry. Like the tide, a trend is almost invisible but it’s very powerful.” — Al Reis & Jack Trout
To most, Beyond Meat was invisible. To know if something is a fad or a trend, don’t look to social media, look to stats.
People may have been drinking more during quarantines and the number of places that sell alcoholic beverages in the U.S. grew by more than 100,000 between 2007 and 2017 from 528,594 to 644,647, but a 2017 Nielsen report showed the United States is experiencing a decelerating alcoholic beverage growth.
American adolescents are binge drinking less than they used to, according to a new report. They still might be categorized as a “drinker”, but NA beverages aren’t for only the sober. Someone who has cut back from regularly having two or three glasses of wine with dinner to having only a glass once a week, for example, would still fall into the same statistical category, and that’s the opportunity for the category: inviting this drinker in.
“Most of our customers are actually at home, whilst we are stocked in some of the best bars in the world, we find that it’s that at home moment you want a pick me up, a little mood boost, or a relaxing Nightcap.” — Three Spirit
None know this better than Seedlip, whose ‘messaging’ is really about inclusivity more than anything else. “Our collective intention is to ensure that everyone has a seat at the table/bar, and we do that with an elevated, adult non-alcoholic option, made widely available,” said a Seedlip rep I spoke with.
The way meatless Monday introduced eaters to plant plates, Dry January, drinking less, and the availability of non-alcoholic options advances this category, positioning it for longevity.
The attribute of availability is an advantageous point of difference for the non-alcoholic beverage category too. You can sell and buy non-alcoholic beverages online, and they can be shipped directly to your door. Not only is there zero ask of a behavior change at a bar or restaurant besides replying to your servers’ requests with a new brand, but the non-alcoholic category is also making your life significantly easier with familiar e-commerce experiences.
Another signal to consider is the who behind this movement. In the run-up to the plant-based meat substitutes explosion, we saw the world’s wealthiest financially backing leading brands. Bill Gates and Richard Branson invested in Memphis Meats, Li Ka Shing, one of Asia’ richest men invested in Modern Meadow which at the time specialized in lab-made meat, Twitter co-founder Evan Williams holds a $414 million stake in Beyond Meat, Prince Khaled bin Alwaleed of Saudi Arabia, a loud and proud vegan for the past five years, has invested in Plant Cafe Bahrain and Matthew Kenney to bring plant-based restaurants and cooking-classes to the Middle East. Even the Canadian government invested in Beyond Meat. Outside of individuals, the largest incumbents of the meat industry, Tyson and Cargill, began creating their own plant-based brands.
The investments made over the past decade are too beginning in the non-alcoholic space. In early 2020, Athletic Brewing Company closed a $17.5 million Series-B round with backing from both individuals and Venture Capital firms, including Timothy Barakett, TOMS Shoes founder Blake Mycoskie, Darren Rovell’s Tastemaker Capital Partners, and Wheelhouse Partners. Across the menu, Seedlip, the privately held non-alcoholic spirit, received funding from Diageo, the world’s second-largest distiller. Even alcohol’s Tyson and Cargill equivalents, Budweiser and Heineken, are producing non-alcoholic options.
Some may see all this excitement as pressure, but there is the opportunity to learn from past mistakes and avoid being a bust and ring that bell. We learned with the disappointment of Segway in Adam Grant’s Originals: How Non-Conformists Move The World that the hype we should pay attention to shouldn’t come from investors, but from consumers. The revolution has the endorsement of major backers, but this isn’t Steve Jobs of Jezz Bezos telling Dean Kamen that his product is revolutionary, these are customers waving their hands saying “I fucking love this.”
The failure to listen to customers was a major mistake of Segway’s Kamen. As Grant writes “One of the biggest mistakes was that when building Segway, Kamen’s team generated a wide number of ideas, but didn’t have enough critical input from customers to make the right choices for the final product.” To understand the consumer I joined a Facebook group that has more than 3,000 members and 30+ posts daily reviewing beers. I quickly learned that yes, the consumer is driving this revolution. So much, that Athletic Brewing Company had to open a second brewery to meet demand.
All of these actions and signals are to determine the path forward. In a 2019 piece, Michael Kealy, education coach at TD Ameritrade expressed caution about the non-alcoholic category saying “Fads do come and go.” Kealy is right about fads, a wave in the ocean, but incorrect to call the non-alcoholic revolution a fad. It’s a tide. It’s a trend. There is a clear growth pattern in the category and consumers continue to vote in favor of it.
“It’s a category that has been traditionally so negative and penalty box-ish. Rather an alienate others with outdated language, we have the opportunity to invite them in and try our beer. Beer for the modern adult.” — Bill Shufelt
To best understand this category, I asked several of its leaders to provide me with the street-level experience.
In Stratford, CT, Athletic Brewing Company Founder Bill Shufelt and Head Brewer John Walker developed a proprietary fermentation process to remove alcohol from their brew, which no other producer of non-alcoholic beer has done. Their Run Wild IPA was the gold medalist in the non-alcoholic category at the 2018 International Beer Challenge, and it was named the USA’s best nonalcoholic beer in the World Beer Awards in 2018.
On the ground level is where Athletic experiences this revolution most, sharing in a conversation with Brewhound that “Right now, we’re up over 500% tracking where we were last year, but a lot of last year was dictated by really tight capacity, unfortunately” Shufelt said of sales through the first two months of 2020. An issue solved with their San Diego brewery.
Athletic’s growth is consistent with the entire category which, according to market research firm IRI, saw off-premise dollar sales of non-alcoholic beer offerings having increased 43%, to $21.9 million, year-to-date through February 23. Over the last 52 weeks, dollar sales of those offerings are up 28%, to $138.5 million.
A learning I took from the conversation with Bill was how inviting the category is.
“We’ve always tried to urge people to drink less from the positive side — using motivating, aspirational, and inclusive language. We try to include drinkers and non-drinkers alike. It’s a category that has been traditionally so negative and penalty box-ish. Rather an alienate others with outdated language, we have the opportunity to invite them in and try our beer. Beer for the modern adult.” — Bill Shufelt
People are accepting Athletic’s invitation too. The non-alcoholic beer segment is growing at a 44% clip this year, up from 23% in 2019 and single-digit growth in 2018 when the brand launched.
Another brewery putting a new beverage on occasions that people have known for years is Hairless Dog Brewing Company, confirming the invitations category leaders are sending out. “Our messaging is all about getting more people to the party,” said Hollander, continuing, “A great way of doing that is encouraging conversations. Some of the leading voices will drive this category forward as they normalize the behavior patterns of drinking alcohol-free beverages.”
This is exactly what drove the plant-based revolution forward: conversation.
The emergence of LiveKindly, VegNews, Tenderly, and Vegconomist as online publications dedicated entirely to Vegetarian and Vegan news, normalized the category through conversation.
Does the non-alcohol category have this yet?
Not exactly, but DrinkTec the world’s leading trade fair for the beverage and liquid food industry has a dedicated blog for alcohol-free, Brewhound continues to cover the category, SXSW hosted a featured session on the subject at this year’s digital event, a YouTube show called Off The Rocks releases weekly episodes reviewing new products using humor to make drinking alcohol-free, well, “cool”, and the Without Compromise podcast continues to normalize the alcohol-free life by highlighting those who live it.
There are even Drizly-Esque e-commerce platforms dedicated entirely to NA craft beer, hop tea, sparkling wine, and alcohol-free spirits.
This drum, which I could beat all day long, reverberates a simple question for venues and menus worldwide: What’s the harm of having one mocktail, non-alcoholic wine, or one non-alcoholic beer on your menu?
If we’ve learned anything, the decision to do so is an invitation. In conversation with Plant Pub Founder, Pat McAuley, the bold Boston based restauranteur who actually opened a restaurant during the pandemic said of including non-alcoholic beverages on Plant Pub’s menu:
“Having nonalcoholic options on your menu is the ultimate invitation. The way restaurants now have gluten-free and vegan options, carrying non-alcoholic beverages ensures your place is a destination for all, and those who adopt this early, will win” — Pat McAuley
The same way major importers said why not, restaurants, venues, and festivals are next in line to join this revolution.
“The non-alcoholic beverage revolution is here and the category is exploding.”
As we look forward, NA beers still account for just a small portion about 0.3% — of the overall beer market, says Watson from the Craft Beer Association. But, he notes that NA beers are up 5% (11% by dollar sales) over the last year. The opportunity to invite is larger than ever, and reaching across the aisle is no longer reserved for congress.
The NIAHH reports that 86.3% of people ages 18 or older drank alcohol at some point in their lifetime; 70% reported that they drank in the past year and 55.3% reported that they drank in the past month. Now put on your marketing hat, or investor cap and see the opportunity.
What we should focus on is what’s not in print: 44.7% of people are not casual drinkers and 30% of people rarely drink. As percentages of the 209 million American population over the age of 18, on the low end that’s over 62,000,000 who simply don’t drink, and 93,000,000 that are casual. Compare that to the 5% or 10,000,000 Americans over the age of 18 that identify as vegetarian or vegan, and then quietly get excited knowing that the latter category produced Beyond Meat…
To think even further outside the box, a 2017 study found that in countries with legalized medicinal cannabis, alcohol sales dropped more than 12% when compared with similar countries without weed. Although cannabis is not “legal” federally in the US, it has been normalized, 11 states have passed legislation to legalize it, and more are expected to in 2020.
To conclude an absolute truth here would be unwise, but it’s clear there is a lot of noise in the category. The non-alcoholic beverage revolution is here and the category is exploding. Will it deliver the next BYND? Time will tell, but it might be wise to have your tickets ready for when the bell rings.