Tapping Into the Rise of No- and Low-Alcohol: Opportunities and Risks for Beer, Wine, and Spirits Companies

Key Insights:

• Rising ESG-related risks, including increased attention to the link between alcohol and cancer, growing regulatory pressure to curb alcohol intake, and shifting consumer preferences, could make selling alcohol more challenging and costly.

• The market for non-alcoholic beer, wine, and spirits (BWS) is expected to increase at a 7% compound annual growth rate (CAGR) between 2024 and 2028.¹ This growth could present an opportunity to alcohol companies to meet the rise in consumer demand for healthier alternatives and manage a potential decline in alcohol sales.

• Fifty percent of BWS companies in Morningstar Sustainalytics’ ESG Risk Ratings research universe have introduced non-alcoholic alternatives (e.g., 0.0-0.5% alcohol by volume into their product portfolios), signaling that these companies view the no- and low-alcohol space as a valuable opportunity.

• Brewers Asahi, AB InBev, and Carlsberg, which are integrating no- and low-alcohol products into their longer-term ESG strategies, stand out as potential top choices for investors interested in tapping into the growth of this market. AB InBev, for instance, aims to nearly triple its no- and low- alcohol beer volume from 6.8% to 20% of its global beer production volume by 2025. 

In January 2025, the United States Surgeon General released an advisory that directly links alcohol consumption and cancer risk, emphasizing that alcohol is the third leading preventable cause of cancer in the US, after tobacco and obesity.² Other health authorities, such as the World Health Organization (WHO), Japan’s Health Ministry, and United Kingdom public health officials, have cautioned that even small amounts of alcohol can raise the risk of cancer.^3,4,5 In 2023, Ireland announced it would require alcohol products to display cancer warning labels by 2026 to curb alcohol-related disease, and there are similar proposals underway in the US, Canada and Norway.⁶

These warnings could encourage more consumers to avoid alcohol – a trend that is already having an impact on alcohol sales. In the US, total volume sales of alcohol declined in 2024 by 1% compared to the previous year, with beer volumes falling by almost 3%, the first time in three years that the market has seen a dip.⁷ Germany, the leading beer producer in Europe, saw similar drops. Beer volume sales there were down 1.4% from 2023, according to the Federal Statistical Office, 13.7% lower than what they were in 2014.⁸

Meanwhile, the no- and low-alcohol content beverage category has grown considerably over the past several years, driven largely by the movement toward healthier lifestyles. Global sales of non-alcoholic beer, wine, and spirits (BWS) reached nearly USD 20 billion in 2023, double the amount reported in 2019.⁹ The IWSR, a data provider on beverages, estimates that the market for non-alcoholic beer, wine, and spirits will deliver incremental growth of USD 4 billion by 2028.¹⁰

The rise of the non-alcoholic beverage market presents the alcohol industry with an opportunity to mitigate ESG-related risks, such as shifting consumer preferences, growing health concerns, and rising regulatory pressure. Investors can use Sustainalytics’ ESG Risk Ratings to identify alcohol companies that are focusing on non-alcoholic products and are well positioned to tap into the growing market and offset a potential decline in sales.

No- and Low-Alcohol Products Offer an Opportunity to Mitigate Risks

While the popularity of some health trends can be short-lived, growth projections from the IWSR suggest that the sober movement is likely to continue over the next few years. The no- and low-alcohol beer, wine, and spirits market is expected to increase at a 4% compound annual growth rate (CAGR) between 2024 and 2028, with the non-alcoholic market increasing even more at a 7% CAGR between 2024 and 2028.¹¹ Ten markets (i.e., Canada, the US, France, Germany, Spain, the UK, Japan, South Africa, Australia and Brazil) are driving this growth, making up 70% of the no- and low-alcohol volumes worldwide.

Non-alcoholic drinks typically contain less than 0.5% alcohol by volume (ABV) and include a variety of labels, such as “alcohol-free,” “non-alcoholic,” and “zero-alcohol.” Low-alcohol beverages contain about 1.2% ABV or less; however, there is currently no universal standard. 

No- and low-alcohol alternatives have become an integral part of many companies’ ESG strategies to align with public health goals, while meeting evolving consumer demand. Non-alcoholic variations do not pose the same cancer-related risks as alcohol, and they tend to have fewer calories.¹² Many non-alcoholic drinks are also low in sugar, considering they still undergo the fermentation process, with the alcohol being removed later. 

Aside from their lack of serious health risks compared to alcohol, no- and low-alcohol drinks can help companies achieve higher profit margins, offsetting potential sales declines from the risks highlighted above. Beverage products under 1.2% ABV are not subject to excise taxes in most jurisdictions, and are exempt from some of the proposed tax increases the alcohol sector faces. By diversifying product portfolios to include more alcohol-free variations, companies can also avoid some of the added cost burden that could come with the proposed cancer warning labels. 

Assessing Companies’ Strategies for No- and Low-Alcohol Alternatives 

Using data from Sustainalytics’ ESG Risk Rating, we can gauge which companies are investing in the non-alcoholic space for the long term. We can also identify those that may be best positioned to benefit from the market’s growth, while also mitigating relevant ESG risks. Within the material ESG issue covering the environmental and social impact of products and services, we assess companies within certain industries on the strength of their nutrition and health programs. We do this by evaluating their efforts to introduce options that have fewer negative impacts on consumers’ health.

For BWS companies, our assessment of their nutrition and health program focuses on initiatives to develop products that contain less alcohol. We look for evidence that companies have introduced healthier alternatives (e.g., 0.0-0.5% ABV beer) to their product portfolios and use labeling that goes beyond legal requirements. Very strong programs include quantitative targets and deadlines to expand no- and low-alcohol beverage portfolios, and evidence that the companies acknowledge the negative health impacts of alcohol consumption.

Figure 1 below shows that 50% of BWS companies in Sustainalytics’ research universe have activities or programs to develop non-alcoholic alternatives (e.g., 0.0-0.5% ABV), signaling that companies view the non-alcoholic space as a valuable opportunity. Most companies focus on creating non-alcoholic brand extensions, while others enter the space through acquisitions.

While companies have started adding non-alcoholic varieties to their product lines, only some have shown evidence of integrating no- and low-alcohol products into their longer-term strategy. As shown in the chart below, only 18% of companies have set targets and deadlines related to expanding their no- and low-alcohol alternatives, and 13% are monitoring and reporting on their progress. Moreover, only 18% of companies clearly acknowledge in their reporting the harmful health impact of alcohol.

Figure 1. BWS Companies’ Performance on Select Criteria of Nutrition and Health Programs

_{Source: Morningstar Sustainalytics.
Note: Data as of February 10, 2025.}

Regional Differences in the No- and Low-Alcohol Trend

The reporting gaps highlighted in Figure 1 help explain why the majority (73%) of BWS companies have either weak or no evidence of a nutrition and health program (see Figure 2). While several companies in the US, Canada and Latin America report on their activities or programs to introduce non-alcoholic alternatives, these programs are weak overall, lacking elements such as identifying the harmful impacts of alcohol and setting targets to expand no- and low-alcohol offerings. As the US and Brazil are expected to be top markets for growth in the no-alcohol segment in the near term, we may eventually see companies in these countries place more focus on their alcohol-free strategies.¹³

Companies in Europe perform the strongest on their nutrition and health programs, with 70% demonstrating at least an adequate program and 40% strong or very strong programs that include targets and monitoring aimed at expanding no- and low-alcohol alternatives (see Figure 2). This could reflect the strong demand in many European countries, including France, Germany and Spain, for no- and low-alcohol alternatives. Companies in this region are acknowledging that the EU’s regulatory action to reduce alcohol use, such as proposals to increase excise taxes on alcoholic beverages over 1.2% ABV and tighten restrictions on the sale of alcohol in public settings, is a business risk.¹⁴ An increased focus on lower-alcohol products could help companies mitigate this potential added cost and widen their market. 

For over half (52%) of firms in Asia-Pacific, there is no evidence that they have introduced non-alcoholic alternatives to their product portfolios. Most of these companies are distillers in China engaged in selling high-end spirits that are traditional to the regions in which they are produced. While the demand for low-alcohol alternatives has been on the rise in China, this is most pronounced in the beer sector.¹⁵ This trend can also be seen across global markets. There has been a slower uptake in the development of non-alcoholic spirits and wine compared to beer.¹⁶

Figure 2. Strength of BWS Companies’ Nutrition and Health Program by Region

_{Source: Morningstar Sustainalytics.
Note: Data as of February 10, 2025.}

Belgian brewer, AB InBev, meanwhile, does not clearly acknowledge the negative health impacts of alcohol in its reporting, but it has a strong program. It aims to ensure no- or low-alcohol beer products represent at least 20% of its global beer volume by the end of 2025.¹⁹ In FY2023, AB InBev reported that 6.8% of its global beer volume was less than 3.5% alcohol by volume; however, the company does not report on figures relating explicitly to non-alcoholic alternatives. 

Japanese brewer Asahi is a standout, as it is the only company in the Asia-Pacific region assessed as having a very strong program. Asahi aims to achieve a 20% sales composition ratio of no- and low-alcohol beverages for its major beverage products by 2030. For FY2023, it reported meeting 50% of its goal, achieving a 10% sales ratio.²⁰ To meet its target, it is developing de-alcoholization technologies and investing in alcohol-free aligned business ventures, such as The Zero Proof, an online retailer of non-alcoholic beer, wine and spirits.²¹

Key Considerations for the Future of the No- and Low-Alcohol Market

As the market for no- and low-alcohol products continues to grow, additional ESG-related risks could arise that companies and investors may need to navigate.

Fragmented Labeling and Advertising Guidelines Could Pose Marketing and Regulatory Risks

Companies often market their no- and low-alcohol products using the same branding as their alcoholic counterparts, allowing them to promote brands in spaces they would otherwise not be permitted, such as close to schools or through sports sponsorship. The WHO warns that a lack of consistent governance around the labeling and marketing of no- and low-alcohol products could mislead minors, raising potential risks for companies, such as deceitful marketing practices.²²

The WHO also highlights that products sold as low alcohol could contain between 0.5% and 3.7% ABV, and it calls for increased regulation of the no- and low-alcohol market to standardize labeling and restrict advertisements in certain spaces. To mitigate these risks, companies should extend their responsible marketing policies to their no- and low-alcohol products, ensuring all products, regardless of alcohol content, are not advertised to minors and clearly indicate alcohol volumes. Heineken, Asahi, Carlsberg, and AB InBev have all done so, indicating strong management of these risks. 

There Are Still Health-Related Risks with Some No- and Low-Alcohol Alternatives 

While no- and low-alcohol alternatives do not carry the same health risks as traditional alcoholic drinks, some alternatives (e.g., ready-to-drink mocktails) may contain high levels of sugar, which could contribute to other health risks, such as weight gain and type 2 diabetes, if consumed in excess.²³ The EU requires beverages under 1.2% ABV to display nutritional information, while the US currently only requires it for beverages under 0.5% ABV. As consumer demand for no- and low-alcohol products grows, companies will need to ensure they are transparent about the ingredients and nutritional content of these alternatives, in order to meet consumer demand for health and quality. 

Looking Ahead

By introducing no- and low-alcohol product alternatives, companies are not off the hook for the potential negative health impact of their product portfolios. Most BWS companies’ products continue to contain alcohol, and this is unlikely to change. Non-alcoholic beer, wine and spirits are still only expected to make up 3% of the total alcohol market by 2028. While we are far from an alcohol-free future, companies making sustained commitments to expand no- and low-alcohol options could benefit from the market’s growth while mitigating relevant ESG-related risks that could make selling alcohol more difficult and expensive.