When Phillip Brandes started the first non-alcoholic brewery in North America in 2015, little did he know that this tiny segment would soon become the fastest growing category in beer. Phillip, who uses a proprietary method to make beer with less than 0.05% abv, is now discovering the advantages – and the challenges, of selling non-alc beer.
Bravus Brewing of Anaheim, Calif., was started for all the right reasons. Brandes had a friend who loved craft beer, but due to health reasons had to give up alcohol. Brandes took up homebrewing to experiment with the idea of making a non-alcoholic beer for his friend and soon discovered a unique method which uses neither reverse osmosis or distilling to remove the alcohol.
The result has led to a diverse portfolio of creative styles including a Peanut Butter Dark, Raspberry Gose and Blood Orange IPA, in addition to more familiar styles like West Coast IPA, Golden Light and others. Bravus has also expanded into other non-alcoholic beverages such as wine and a sparkling hop water with plans to further develop additional beverages.
The brewery, housed in a 25,000 square foot facility utilizes a 30 bbl system and has an annual capacity of 250,000 cases. “We can also add flexibility by using local breweries and then bring (the product) in-house to finish,” said Brandes.
Prior to the pandemic, non-alcoholic beer, wine and spirits were slow to gain acceptance, due in part to new and better methods that produced more flavor, allowing non-alc beer to taste more like traditional beer. At the same time, consumers were beginning to tilt towards a heathier mindset, which included drinking less alcohol. When the pandemic struck, it accelerated these already evolving trends.
“The pandemic was a primary driver to growth,” said Brandes.
At about the same time, Athletic Brewing Company, which was founded in 2017, began a national marketing campaign along with an aggressive reach through major retail placements and distribution. “The category needed awareness and Athletic was helpful in that regard,” Brandes said referring to the awareness and visibility that Athletic brought to distributors, retailers, and consumers.
At a time when beer in general, and particularly craft beer, is seeing a decline in growth, brewers of all sizes are looking at ways to diversify. Many brewing companies are evolving into beverage companies. Boston Beer was perhaps the first significant specialty brewer to realize this, and now even the most ardent traditional craft brewers such as Sierra Nevada have entered the non-alcoholic beer space. “Diversify to thrive” is the mantra of the times in the industry.
There are some interesting advantages to selling non-alcoholic beer. In most states it is not regulated by the state alcohol beverage regulatory agency. That opens a whole set of new options such as price and volume discounting, incentives and inducements for retailers and consumers, the ability to ship direct-to-consumer (DTC), avoiding franchise agreements with wholesalers and the ability to sell into non-licensed retailers.
The Tobacco Tax and Trade Bureau (TTB) does not normally regulate the production of non-alc beer, but they do regulate non-alc beer labeling requiring brewers to file for a certificate of label approval (COLA).
Not having to conform to state regulations that prohibit or strongly regulate shipping beer directly to consumers, Bravus does a huge business in DTC. About 40% of total sales for the brewery are DTC.
Along with those enticing benefits are some interesting challenges. For one, it is difficult to find distributors that will service retailers that don’t sell alcohol. Brandes uses a mix of MillerCoors, Anheuser-Busch and independent distributors, looking for wholesalers who carry other non-alc beverages and have an existing relationship with non-licensed retailers.
Non-alcoholic beer is also often a hard sell at smaller retailers and tends to be very chain-driven. Chain stores are often slow to add shelf space for growth categories. “Retail shelf space is not growing fast enough,” said Brandes. But large retailers such as Target and Walmart are “being more progressive” by adding in stand-alone sets for non-alcoholic beer.
Looking ahead, Brandes sees good potential in on-premise draft sales. Very few non-alc beers are available on draft and Bravus has had good results in a few local test accounts. The company plans to expand the draft program in 2024. Draft sales have never recovered since the pandemic, and non-alcohol draft beer will likely see significant growth in the near future.
The new year will also see an expansion in the non-beer categories for Bravus Brewing. “We can’t ignore the growth we’ve seen in those categories,” Brandes said. One such product launch in 2024 may be a dry hopped iced tea with caffeine.
For brewers thinking of diversifying into new categories, non-alcoholic may be one of the most challenging from a production standpoint. It’s not something that a brewpub operation would likely find profitable, but for packaging breweries it can open new doors.
According to some accounts, non-alcoholic beer grew 20% in the U.S. in retail dollars in the past year. Like any fast-growing segment in the industry, it is impossible to predict the future. From ‘ice beers’ to hard seltzers, the industry is strewn with faddish casualties. But other categories that were thought to be only a passing fad have enjoyed a long term and lasting legacy such as light, low-calorie beer.
For the same reason that low calorie beers continue to thrive, my crystal ball says that non-alcoholic beers will have staying power with sustained growth for many years to come.