Wellness Trends Are Shaking Up the Alcoholic Beverages Category

NATIONAL REPORT — There is perhaps no bigger trend emerging in the alcoholic beverage space than a move to products that fit consumers' increasing demand for health and wellness products.

"Whether it's a 0% ABV beer, a flavored seltzer or another nonalcoholic drink, more consumers than ever are avoiding alcohol," NielsenIQ noted in its November 2022 analysis of beverage alcohol sales. Between August 2021 and August 2022, total dollar sales of nonalcoholic drinks in the United States stood at $395 million — a year-over-year increase of 20.6 percent, the report highlighted.

This trend is having a positive impact at Chicago-based Foxtrot, an upscale convenience store chain that operates 23 locations throughout the Chicago, Dallas and Washington, D.C., metro areas.

"Foxtrot has seen and continues to see eye-popping numbers for nonalcoholic spirit sales," said Dylan Melvin, director of adult beverage for the chain, which offers five-minute pickup and 30-minute delivery of goods from its retail locations, as well as nationwide shipping via Foxtrot Anywhere.

The retailer's "Dry January" campaign this year was up more than 50 percent compared to last year. "The most popular [products] have been Amaro and functional beverages like Kin, but nonalcoholic wine seems to be gaining traction," Melvin observed.

It is important to note that the health and wellness trend extends beyond nonalcoholic options, encompassing products with low ABVs and more environmentally friendly profiles, too.

Overproof, a Miami-based company that helps beverage alcohol brands leverage predictive market intelligence and identify microtrends, advises that companies "will have to find ways to connect with young drinkers who are aging into the market and looking for ecofriendly, low-sugar options." Overproof goes on to predict that this approach will bring "more fresh and light flavor combinations that incorporate herbal, botanical and citrus notes."

It is a savvy strategy since not all consumers who embrace nonalcoholic products are adopting total sobriety: 82 percent of nonalcoholic drink buyers are also still purchasing drinks that contain alcohol, which means retailers "may want to utilize some marketing to promote your low-alcohol options to these consumers who fall somewhere in the middle," NielsenIQ said.

The Outlook for 2023

According to Goldman Sachs' latest Beverage Bytes survey, convenience channel retailers have a slightly more cautious outlook on 2023 due to shifts in consumer buying habits, such as increased purchases of smaller packs and expected manufacturer price increases in the year ahead.

In the good news column, however, c-store retailers say out-of-stock pressures are waning. The fourth-quarter 2022 Beverage Bytes survey found that 13 percent of retailers are seeing no out-of-stocks and 80 percent expect the situation to resolve by the end of the second quarter of 2023. Additionally, 43 percent of convenience channel retailers plan to add incremental shelf/cooler space for alcoholic beverages into their sets this year.

Overproof predicts that a healthy headwind will prevail moving through the year. "The alcoholic beverage industry has experienced significant growth in the last two years and that will continue into 2023," the company stated in its Alcohol Trends 2023 report. "...Overall, the beverage industry trends for 2023 are positive and have created a space for innovation and creativity that can only benefit everyone along the supply chain, including consumers."

Some segments are faring better than others, reflecting the change in consumer preferences.

Beer/flavored malt beverage sales growth in c-stores was up a modest 2 percent in the fourth quarter of 2022, and retailers expect modest future segment growth of roughly 3 percent in 2023, according to Goldman Sachs. Meanwhile, hard seltzer sales growth in c-stores was down 4 percent year over year in the fourth quarter, and retailers expect the segment to be flat in 2023.

Foxtrot is seeing strong sales in wine and spirit-based ready-to-drink (RTD) products, but a leveling-off in the popularity of once-hot flavored malt beverage seltzers.

"We have been very surprised by the performance of orange wine. Last year, orange wine and chardonnay had about the same amount of sales," Melvin said. "Spirit-based, ready-to-drink beverages, including seltzers, are still on the rise as consumers are trading up to premium beverages."

Melvin predicts that tequila-focused RTD products and seltzers will remain popular throughout the warm spring and summer seasons this year, with orange wine also poised to grow.

"Rosé will also likely stay top of mind for consumers," he added.