Drinks market innovation rises to meet new consumer demand

25 August 2021

As if the turmoil of Covid and Brexit weren’t enough, our drinks industry is facing a new challenge. How to innovate faster than it’s ever done before.

New product development has always been crucial, but the last 18 months have altered our consumption preferences at lightning speed, across many areas, not just food and drink. Circumstances have driven us to make decisions that we wouldn’t have made before, and even though the old ways may be coming back, we’re not too sure that we want to give up our new habits. The reasons for this is a debate for another day, but there’s no doubt that the pandemic has made consumers more aware of the factors that increase their risks of obesity and diabetes, for example. We want to be healthier and to help the planet be healthier.

A great example of the shift towards healthy consumption is alcoholic drinks. With more and more of us opting for ‘low and no’ alcohol drinks than we did a year or two ago, the market is growing rapidly. No alcohol is 0.05 per cent ABV or less, and low alcohol is up to 1.2 per cent ABV. The challenge for manufacturers is to develop products that can mimic the taste and mouthfeel of the alcohol that’s been reduced or omitted altogether, and at a price point that, while premium, is still palatable to the market.

Non-alcoholic beer was arguably the first to hit the market with any real traction. In Scotland, we’ve seen Brewdog market a successful product for some time, and Tennents has recently joined the segment too. Our Scottish craft brewers aren’t missing a trick either, for example, Broughton Ales and Innis & Gunn. Panoramic Growth Equity’s recent investment in Big Drop Brewing is yet another endorsement, demonstrating the belief in the significant growth potential of the segment.

Spirit producers have been innovating too, with recent examples being Pernod Ricard introducing a 20% ABV Beefeater Gin, and Martini & Rossi having released a non-alcoholic vermouth under its Martini brand. We’re also seeing an increase in craft operators in this area, as the elevated price point allows them to produce in smaller batches and compete on quality.

Smaller operators can’t compete with larger brands’ marketing spend of course, so the mission has to be different - bringing us back round to the need to innovate and keep ahead of what’s new. A challenger brand can make a march on a new market segment if it does and says something different. For example, Sparkingly Sober and Slanj Var, cocktail and wine alternatives respectively, and Spirits of Virtue, with Halal spirits. These are all Scottish producers, so it’s great to see we are not only holding our own but leading the way. Long may it continue. 

For further information, or if you have any questions, please contact Lyn Calder or your usual AAB contact.

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