Drinks Industry ‘Cutting Corners’ On Low Abv Products
Although low-ABV and alcohol-free ‘spirit’ launches are on the rise, businesses that are “cutting corners” on production could harm the category’s growth, according to the founder of drinks investor Distill Ventures.
Patel, who co-founded DV in 2013 and now serves as the company’s non-alcoholic lead, told the drinks business the spirits industry faces “significant challenges in liquid development.”
“Lots of people are cutting corners on this,” he said.
According to Nielsen, like-for-like sales of low- and non-alcoholic alternatives in the UK rose 25 per cent to £116.6m in the year to June 15, as consumers have started to drink less alcohol and look for healthier options. There are now more than 50 non-alcoholic spirits on the market in the UK, but their mark-ups vary depending on the brand and retailer, from under £10 to close to over £35 per 70cl bottle.
Seedlip, which launched in 2015, is widely credited with driving the recent trend for low and no-alcohol spirits launches. There are three zero-poof spirits’ in the range, retailing between £22 and £27 in the UK. DV, which is funded by Diageo, took a stake in Seedlip in 2016, and the company was bought by Diageo last year.
In the UK, there is no duty paid on beverages with an ABV of 1.2% or lower, so brands like these could be very lucrative for drinks companies and retailers as they do not need to pay tax on them in the same way as a full-strength spirit.
When the deal was announced in August, Javier Gonzalez Lastra, an analyst at Berenberg, said the price of Seedlip could become “unsustainable” if similar products came to market at a fraction of the cost.
And now, cheaper products are gaining listings alongside the original alcohol-free ‘spirit’. Challenger grocer Lidl has launched its own ‘craft spirit’ last October, priced at £9.99.
However, Patel said it is unhelpful to talk about these products as if they’re part of the same category, adding that he is “not a believer in copycat solutions.”
“It’s still a nascent category,” he said, “so to treat these products as homogenous is lazy.”
Asked whether DV’s low alcohol brands are under pressure to lower the RRP of their products, Patel said he thinks the long-term sustainability of the category is “dependent on world class liquids delivered in world class experiences, and we encourage our founders not to compromise.”
Read More at source: The Drinks Business
Image Source: The Drinks Business
