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What’s driving the boom in the nonalcoholic drink industry?

David Brancaccio and Jarrett Dang Oct 24, 2022
Heard on:
The industry is growing thanks to new trends in health and better options for consumers, says Megan Klein, founder of Little Saints. Courtesy Megan Klein

What’s driving the boom in the nonalcoholic drink industry?

David Brancaccio and Jarrett Dang Oct 24, 2022
Heard on:
The industry is growing thanks to new trends in health and better options for consumers, says Megan Klein, founder of Little Saints. Courtesy Megan Klein

For some people, “Sober October” is in full swing, meaning not a drop of alcohol will pass their lips this month. Luckily for them, consumers looking to avoid alcohol have far more options than they might have just a few years ago, as an increasingly robust selection of booze-free beverages from nonalcoholic beers to mocktails flood onto the market.

Demand for these drinks, which set out to emulate their boozy counterparts as closely as possible, has expanded rapidly in recent years due to a rise in product quality as well as a broader public interest in decreasing alcohol intake. According to research by Nielsen, the growing “sober curious” movement is driven in large part by younger people seeking healthier alternatives to traditional drinks. Megan Klein, founder of the nonalcoholic mocktail company Little Saints says that new trends among Gen Z consumers are helping drive the shift.

“About 42% of millennials drink on a regular basis, and only 21% of Gen Z drinks on a regular basis,” Klein told “Marketplace Morning Report” host David Brancaccio. “And so as generations drink less and less, kind of at a rapid rate, we’re seeing a shift in culture because they’re much more health conscious.”

The following is an edited transcript of their conversation:

David Brancaccio: Megan, what is the problem with alcohol these days, I’m seeing some actually pretty decent no-alcohol IPA ales, you got into mocktails. What is driving this?

Megan Klein: What’s driving it is the anxiety economy. The anxiety economy was already there pre-pandemic, we were all using our meditation apps, we were using squeeze balls. And we were trying different ways to address our anxiety. But it wasn’t until the pandemic that our drinking habits really became clear. You know, everyone knew that they were drinking too much but I don’t think that everyone made the connection between, “Oh, I am drinking too much and that is actually causing me more anxiety.” And so I was in the Kellogg Executive MBA Program and I kind of watched all of us have a similar experience. And then I personally did “Dry January” for the first time and 2021 and really saw how that completely changed my emotional wellness, which is the ability to handle anxiety and stress. And then really started thinking about, you know, what was out there that we could replace alcohol with because a lot of us saw that it was not sustainable.

Brancaccio: Yeah. So in a sense, a reaction to the high pandemic times when people may have been drinking too much. I’ll also note maybe demographics as part of this?

Klein: Yeah, absolutely. Yes. So I am the youngest of Gen X. But about 42% of millennials drink on a regular basis, and only 21% of Gen Z drinks on a regular basis. And that is the statistic and then anecdotally, you probably know some Gen Z too, they think drinking is like gross. You know, I’ve heard a Gen Z describe drinking as Boomer technology. And so as generations drink less and less, kind of at a rapid rate, we’re seeing a shift in culture, because they’re much more health conscious.

Brancaccio: So Megan, entrepreneur that you are, you saw the problem that you thought needed to be solved. But how did you go about doing this? I mean, you don’t want these mocktails to taste lousy.

Klein: Absolutely. So I’ve been an entrepreneur in the plant-based wellness space since 2014. And so I’m always looking at what’s out there in the culture and what people want and the hole that’s not being filled. And after I did dry January personally, in 2021, what I saw was that there was really no Beyond Meat of the nonalcoholic beverage market. I wanted something that tasted, smelled and felt like a cocktail. And I didn’t find that. So I really set out to create what I wanted to see which was kind of the Beyond Meat of the nonalcoholic drinks, but without the chemicals. And so what we created was a mocktail that has smell compounds. So it’s going to give you the same experience as when you’re smelling your wine or your cocktail. And then it has adaptogens that take us directly into our parasympathetic nervous system and make us feel relaxed in the same way that a cocktail does. And then it also has, you know, things that make you feel alert and give you a little bit of serotonin and dopamine boost. Specifically, we’re using a reishi mushroom and CBD blend to give that mood lifter.

Brancaccio: And adaptogens are herbal?

Klein: Yes, adaptogens are all herbal. “Adaptogens” is a blanket term. Basically, adaptogens are plant-based compounds that help us adapt to stress. So we’re using a reishi and CBD blend, but it also includes things we’ve heard about, like ashwagandha.

Brancaccio: Give me a sense of what I might be in for. I mean, I did have an alcohol-free chardonnay once when traveling in an alcohol-free country in the Middle East. And it wasn’t to my taste.

Klein: So the taste, so there’s two differences. First, the alcohol-free wine probably didn’t have any adaptogens added to it. We put [in] the reishi and the CBD. So first you’re gonna get that like feeling, that relaxing feeling of alcohol, but then to answer your question in the taste, I mean, we got them as close to traditional cocktail flavors as we could. So my favorite of our line is our Paloma. I love a Paloma, which for those of you who don’t know, it’s like a grapefruit margarita. And so we used a blend of, you know, plant-based flavors to get as close to that as we can.

Brancaccio: And just so people are also clear, you know, I think most people would know at this point in history. But CBD, although a cannabis derivative, doesn’t have the core psychoactive effects of actual cannabis.

Klein: Thank you for that. Yes, the CBD does not get you high. THC is that what has the intoxicating effects in it. Any reputable company using CBD, including Little Saints, we have lab tests showing that there’s no THC in the drinks.

Brancaccio: And what about distribution for you? What was your thought: direct to consumers or through other kinds of partners?

Klein: You know, Kellogg marketer that I am I actually spent the first summer getting to know my customer in the Midwest. I have a mint green vending trailer that I took all around the Midwest, and I got feedback on what people other than myself really wanted in a nonalcoholic drink. And that’s how I created the flavors. So it was beginning in-person strategy today. It is a mix of [e-commerce] and wholesale. We’re in great retailers. I’m in LA right now, we’re in all of the Erewhon stores in LA. And then we’re also in the growing number of nonalcoholic bottle shops that are popping up all over in New York, LA, South Carolina, Illinois.

Brancaccio: Yeah, I mean that’s a trend in itself. I just stumbled across one in lower Manhattan that stopped me in my tracks. So that’s another outlet for you. So wait, it was like a food truck van but for mocktails, what did it look like?

Klein: It was a used corn vending trailer. It’s this really cute little rounded trailer with a side hatch and I towed her behind my mint green Little Saints Jeep, I went all in. And I towed it around the Midwest and I wanted to make sure that the brand resonated with my people, which are Midwesterners, before I took it to the coast because as an entrepreneur, I see a lot of brands starting on the coast and then saying like, how are we going to market to, and I have my quotes up here, to them in the middle of the country once we kind of nail it on the coast and I had the opposite strategy. I wanted to make sure that it was really accessible to everyone from the get-go.

Brancaccio: A corn van! Doesn’t get more Midwestern that.

Klein: For the record, she got a glam-up. She’s mint green and peach and she looks really cute. You would not know that she was a corn vending trailer unless I told you.

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