Business is booming for Per Se’s drinks.
Its nonalcoholic hibiscus margarita can be found on restaurant menus in the Minneapolis and St. Paul area. Eight distribution partners are putting its canned mock negronis and whiskey sours on the shelves of grocery stores and liquor retailers across the Midwest. Its drinks even popped up at the Minnesota State Fair.
It’s not just thanks to Dry January. Consumers have been slowing their intake of chardonnay and pale ale for a while, and the tiny nonalcoholic beverage industry has been on a tear. After the surgeon general’s warning this month about the link between alcohol and certain forms of cancer, it is poised to attract even more customers.
But don’t expect mocktail and near-beer makers to start denouncing alcohol or citing frightening statistics from medical journals to make their case. Sounding preachy is not on brand. Moreover, the industry depends on the investments, marketing expertise and distribution systems of the beer, wine and spirits industry.
“Drinking alcohol is still the default in our culture when you go out, so telling someone to stop feels like a personal attack,” said Hally Turner, who founded Per Se in 2019 with her husband.
“This isn’t an opportunity for us to proclaim, ‘Death to alcohol,’” echoed David Fudge, a co-founder and the chief executive of the nonalcoholic beverage company Aplós. “Quite honestly, there’s quite a bit of distrust around the government and institutions broadly these days, so I’m not sure that kind of tactic would work with most customers.”
The surgeon general’s warning comes at a time when the alcohol industry is struggling. Beer sales have been in a decline since 2008, while wine sales peaked about five years ago and have fallen since, according to the global drinks research firm IWSR. A surge in interest around tequila bolstered sales of spirits, but even sales in that sector fell the last two years, according to the global drinks research firm.
Analysts and industry observers attribute some of the slowdown to inflation, which has led consumers to spend less on discretionary items like wine and tequila in order to pay for milk, bread and gas.
On top of that, analysts say, fewer members of Gen Z drink alcohol compared with previous generations. Those who do drink are consuming less, sometimes adopting “zebra striping” — alternating between alcohol and nonalcoholic drinks — on nights out to moderate their alcohol consumption.
Then there is the increasing number of consumers of all ages who are embracing broader health and wellness trends, particularly after the Covid pandemic, said Marten Lodewijks, president of the Americas division of IWSR.
All those factors create an opportunity for companies like Per Se.
“Between the first half of 2023 and the first half of 2024, the number of alcohol drinkers that consumed nonalcoholic beverages doubled from 6 percent to 13 percent,” Mr. Lodewijks said. He added, “We have consumers trying to be healthier and trying to drink less, and all of that is coming together and creating fertile ground for the nonalcoholic beverage industry.”
Revenues for nonalcoholic drinks remain a tiny fraction of alcohol sales. Last year, retail sales of nonalcoholic beer, wine and spirits totaled about $818 million, less than 1 percent of the $112 billion in sales of beer, wine and spirits, according to the research firm NielsenIQ. But they are growing fast; sales of nonalcoholic drinks have risen 67 percent since 2022.
Still, the double-digit growth has grabbed the attention of alcohol giants, some of which have jumped into the game. The spirits company Diageo is selling nonalcoholic versions of its Tanqueray gin, Captain Morgan rum and Guinness beer. It also acquired Ritual, a nonalcoholic spirits brand, last fall. Molson Coors and Anheuser-Busch InBev offer nonalcoholic versions of their popular beers and beverages.
As the nonalcoholic beverage industry grows, consumers are finding more — and better — choices, argued Emily Heintz, the founder of Sèchey, a low- and no-alcohol retailer in Charleston, S.C., which also sells its own line of nonalcoholic wines.
Sèchey’s strategy includes connecting its goods to healthier living. Last year it formed a partnership with Target to put nonalcoholic wines on store shelves as part of Target’s bigger wellness push. But, Ms. Heintz said, growth for the industry depends on grabbing drinkers where they are.
“The best way to get to people who drink alcohol and get them to try our products is to go through alcohol distributors,” she said. “We should follow the alcohol industry’s playbook.”
Aplós, which started in 2020 and markets its nonalcoholic and spirits as “functional” because they contain ingredients like hemp and lion’s mane mushroom extract, struggled for several months to get its beverages into New York City bars and restaurants.
Even two years ago, Mr. Fudge said, “getting Aplós onto a cocktail menu at a great restaurant in New York City was a massive challenge,” Mr. Fudge said. “There are gatekeepers to the world of bars, restaurants and hotels.”
But Mr. Fudge said that thanks to insights from individuals on Aplós’s board of directors — including Vanessa Kay, a former managing director of LVMH’s Moët Hennessy, and Matt Bruhn, a former president and general manager of Pabst Brewing — Aplós is now on the menu at more than 200 restaurants and bars around the country and is distributed nationwide through retailers like Sprouts Farmers Market and Fresh Direct.
“Even though we’re a nonalcoholic brand, we play in the system. The buyers in our category work with alcohol distributors and call on those buyers for the restaurants and bars,” Mr. Fudge said. “We needed to understand how the alcohol industry operates, and for that reason, we made a concerted effort to surround ourselves with experts from that field.”
