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Three cheers for near beer: a long-neglected category is booming.

The alcohol-free brew niche was once the preserve of a handful of low-volume brands. Today, non-alcohol brew is the fastest growing malt beverage category in the U.S. market, and the category overflows with brands from here and abroad.

The most influential entrants have been those from the largest domestic brewers. When Anheuser-Busch's O'Doul's and Miller's Sharp's entered the market last year, the associated marketing push helped produce a 90-percent non-alcohol sales surge in 1990.

This growth has been fed by an increasing consumer thirst for the long-derided "near beer."

"Consumers are very interested in the benefits of non-alcoholic brews," says Ron Richards, director of public relations for Sharp's. "They like the low calorie aspect and they also like the taste. We view non-alcoholic brews as a 'beer alternative'--a product that expands the beer drinker's menu."

Long history

Although consumer interest may be new, non-alcoholic brew is no latecomer to the brewing scene. As beer authority Allan Eames points out, non-alcoholic beer has a long, if not particularly illustrious, history. "In Shakespeare's time," Eames says, "socalled 'small beer' was made from water added to barrel dregs. This process was used into the late 18th century, making small beer probably the first NAB to be brewed in America."

Eames observes that "near beer" was brwed by many American regional breweries i nthe 1800s. "You can get a clue to the quality of those brews from a humorist of that era named Philander Johnson," Eames says. "Johnson once remarked, 'the man who called it 'near beer' was a poor judge of distance."

Eames notes that many American brewers turned to non-alcoholic malt beverages as a source of income during Prohibition. "Such brands as Pabst's Goetz and Heileman's Kingsbury trace their initial success to this dark period for American beer drinkers," he says.

After repeal, demand for the "near beers" dropped precipitously. Although production of non-alcoholic malt beverages did continue, there was little interest in the category, and very low volume.

In the late 1970s and early 1980s, however, a few pioneering entrepreneurs began to market non-alcoholic brands in earnest. Jacques Bobbe of Interfloridana Imports was among the first to see the potential of the category. "We began to import Lowenbrau Zurich Libero in 1977," he says, "because I saw that people were becoming more health conscious. They were looking for the taste and sensation of beer without the alcohol."

By the late 1980s, with a continued upswing of consuemr concern about health and alcohol abuse, the time was right for the category to take off. This confluence of societal factors has made the non-alcoholic category attractive to domestic brewers and importers alike.

The Stroh Brewery Co. is one recent entrant, with a non-alcoholic line extension of the popular-priced Old Milwaukee. "The growth of the category attracted us," says brand director Mark Steinberg, "because we didn't see it as a passing fad. People are much more cautious about drinking alcohol today," he notes, "and DWI laws are getting stricter. As a result, the NAB category is attracting drinkers in the 21-30 age group who have become conscious about drinking and driving."

Inevitable Segmentation

Although the large national brewers are garnering much of the growing market, a flood of imported NABs has followed in their wake. Today, there more than 30 non-alcoholic malt beverages on the market.

"To me, the growth of the non-alcoholic category shows the inevitability of segmentation," says John Barnett, president of Molson Breweries U.S.A. "We've had ales and lagers, then we had lights and drys. For people who like the taste of beer, but don't want the alcohol, non-alcoholic brew is a natural progression."

Although import executives report sales damage from the weighty presence of the large domestics, many importers belive the benefits outweight the costs. "Domestic entries have had a negative effect on import NABs," states Leo Begleiter, president of Associated Importers, "but the domestic entries are very important for the long-term strength of the category."

Rich Vassos, marketing director for Labatt's U.S.A., is not as sanguine. "The domestics have the power to lock up feature activity at chain and package stores," Vassos notes, " and on-premise locations might be content to carry one domestic NAB. That presents a challenge for importers."

Passing fad?

The question of market share could prove a moot point if the non-alcohol category is simply benefiting from a passing fad. Most agree, however, that a larger NAB category is here to stay. "Non-alcoholics have been popular for Europe for many years," says Jacques Bobbe, "and while non-alcoholic coolers may have been a fad, so was the whole cooler category. Beer is not a fad, and non-alcoholic brew has a long history, both here and in Europe."

Leo Begleiter echoes Bobbe. "The European market illustrates the possibilities for non-alcohlics," he says. "They have been marketed strongly there, and they are accepted by consumers."

Market niche

The new American accpetance of the NABs may signal a growing niche, but to volume-oriented national brewers, the market remains miniscule. "We belive the non-alcoholic market will grow," says MIller's Ron Richards, "but it's important to keep it in perspective. At this point," he notes, "non-alcoholics make up less than one percent of the entire malt beverage market."

Despite the small size of the category, Stroh's Mark Steinberg points out the value of any niche in today's beer market. "Although non-alcoholic brew will probably never be an enormous factor in the market," he remarks, "you can't afford to ignore it. It should become as large a category as malt liquor, and like malt liquor, it should prove a small, profitable niche indefinitely."

While ultimate size of the NAB category is impossible to predict, there seems to be consensus on one point--near beer is here to stay.
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Title Annotation:U.S. market growth of non-alcohol beer
Author:Reid, Peter V.K.
Publication:Modern Brewery Age
Date:Jul 15, 1991
Words:959
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