Pernod Ricard's CVC unit focuses on investing in non-alcoholic beverage startups that address the generational shift in drinking habits.
The non-alcoholic drinks market is innovating with alternative tastes and ingredients which offer a new range of investment opportunities for French wine and spirits company Pernod Ricard.
“This is a fast-growing sector. We’re seeing more and more brands including ‘better for you’ and functional ingredients like probiotics and prebiotics in their drinks, as well as psychedelics and other active ingredients,” says Brandon Yahn, partner and cofounder of Pernod Ricard’s investment arm, Convivialité Ventures.
“Beyond having a good time responsibly, consumers also want their drinks to actively support their functional needs for energy, concentration, digestion.”
Though a small part of the global alcoholic drinks industry, the non-alcoholic drinks sector is the fastest growing category in both volume and value over the past five years. Recent data show its volume is expected to increase at a compound annual growth rate of more than 7% between 2024 and 2028.
Generational shift in drinking habits
While 12% of consumers drink non-alcoholic products today, an additional 53% could join them in the next few years. The trend of reduced alcohol consumption also extends towards Gen Z and millennials, which has led to a number of startups innovating in the low and no-alcohol sector. As a result, this market is expected to see greater growth, with a forecasted increase of 37% in value between 2024 and 2028, to $479m.
Convivialite Ventures’ investments include brands such as AF Drinks and Ghia, which are developing cocktail alternatives that parallel the taste experience for consumers. For example, AF Drinks has developed “Afterglow” which is a secret ingredient that mimics the burn of alcohol. “This makes the drink feel more like an adult experience, thereby opening more consumers to non-alcoholic beverages by expanding the products beyond mere sodas and overly sweet mocktails,” says Yahn.
Ghia, on the other hand, develops products with its own flavours that aren’t comparable to existing alcohols, and can be enjoyed either directly from the can or mixed in a cocktail like a spirit would be, says Yahn.
Another portfolio company, Liquid Death, a canned water drink, has an approach to marketing and packaging that made drinking water cool, says Yahn. Consumers don’t feel singled out in a gathering whilst drinking Liquid Death as they might have been with a classic plastic bottle of water, he says.
While Pernod Ricard entered the zero-alcohol market as early as 1982 with its launch of Pacific non-alcoholic anis, the portfolio has evolved extensively since then.
“Our role as a CVC is to help Pernod Ricard explore new opportunities in conviviality, understand how different markets will evolve and predict upcoming changes that will affect our traditional wine and spirits offerings,” says Yahn.
The unit’s portfolio of more than 50 investments includes companies in entertainment, experiences, hospitality, and non-alcoholic products such as Fever, Avantstay, Outdoorsy and Sanzo.
Focus on ‘mindful drinking’
Consumers today are looking for guilt-free and purposeful indulgence that takes their desire for wellbeing into account. As a result, they tend to reconsider and scrutinise the impact of their daily choices, says Yahn. “We noted 46% of EU consumers saying they were limiting their alcohol consumption to eat and drink healthily back in 2021.”
Additionally, the rise of the ‘sober curious’ movement has caused people, specifically Gen Z and millennials, to critically examine their relationship with alcohol and focus more on mindful drinking. “This has helped make non-alcoholic beverages more socially acceptable and desirable,” says Yahn.
“It also helps that the alcohol industry has developed better products over time, led by the beer producers and then followed by the spirit and wine producers.”
The global non-alcoholic beer market was valued at approximately $20bn in 2023 and is estimated to reach between $37bn and $40bn by 2033. Similarly, the global non-alcoholic wine market is projected to grow from $2.6bn in 2024 to $7bn by 2034, while the global non-alcoholic spirits market is projected to grow from $532m in 2023 to $1.2bn by 2034.
Large drinks brands are also launching their zero alcohol drinks, driving more innovation in the sector.
Pernod Ricard launched Beefeater 0.0% last year for consumers who choose not to drink alcohol. “It’s inspired by the iconic Beefeater London Dry Gin and has the same distinctive citric and juniper-forward profile – but without the alcohol – offering a perfectly balanced, refreshing drinking experience,” says Yahn.
