The 0.0% Opportunity - The New Investors in a Post-Alcohol World
Alcohol consumption is hitting 90-year lows. Here are the unexpected companies turning a "dry" world into a massive investment opportunity.
It’s no secret that drinking rates have significantly declined over the past several years. This is especially true among younger consumers, who will become the next big spenders in our future economy.
But just because they’re not drinking traditional alcoholic beverages doesn’t mean they aren’t drinking something. There’s a whole new category of drinks that are rapidly becoming more mainstream, and there’s big money being spent.
These new categories are already starting to disrupt the $2 trillion global alcohol market, which is expected to double by the mid-2030’s. With new RTD (ready-to-drink) formulations and a growing global consumer class fueling this growth, there are enormous opportunities for those who can bring the right products to market.
The Pandemic Hangover
Pouring a glass during the pandemic, for many people, was an easy way to deal with staying at home all day with your relatives. Nearly 30% of people in the US reported increased alcohol use during this time.
Now, that trend is reversing course.
American’s alcohol consumption rate is currently at the lowest it’s been in 90 years, and 2026’s data could prove even more shocking (yet to come out).
Source: Gallup
If you search “alcohol” on nearly every social app, you’re much more likely to find posts about people complaining about the bad effects, or celebrating their sobriety (try it - search ‘alcohol’ on Substack and see what you find).
Alcohol companies are feeling the heat from this change in consumer behavior. Even the best investor in the world - Warren Buffet - has started to trim his Constellation Brands ( STZ 0.00%↑ ) position after his -30% return (so far).
The company’s share price has been hammered over the past couple of years:
And it’s not just Constellation.
It’s Diageo ( DEO 0.00%↑ ) too:
And Pernod Ricard ( $PDRDF ):
And Brown Forman ( $BF.B ):
And pretty much every major alcohol company you can think of. These are not recent trends, these are trends that have been unfolding since the peak of pandemic debauchery.
Note: As I was writing this, Pernod Ricard (maker of Absolut vodka) and Brown Forman (make of Jack Daniels) announced that they were considering a merger, highlighting the need to consolidate in the struggling market.
So what the heck are people drinking instead?
The New Drinking Class - Near Beer
We don’t need to look any further than what’s been happening in the beer world, as it’s the most popular alcoholic drink in the world by a long shot (about 40% of the total global volume).
The giant in this industry is ABInBev ( BUD 0.00%↑ ), which owns famous brands like Budweiser, Corona, Michelob, Modelo, Stella Artois, and many more. (*Constellation Brands distributes Corona and Modelo in the US.)
ABInBev’s most recent reporting highlights the growth of their non-alcoholic beer revenue, which is over 8 times the growth of their traditional brands.
Source: ABInBev Investor Presentation
The company’s projected growth of their non-alcoholic beer line-up is projected to triple in the next several years.
Source: ABInBev Investor Presentation
The focus on their non-alcoholic category has appeared to somewhat stabilize their stock price.
Meanwhile, the other beer giant - Molson Coors ( TAP 0.00%↑ ) - seems to be failing with no signs of stopping.
Interestingly, ABInBev’s most recent company presentation is the only major alcohol company to make an emphasis on this growing part of the market. There are several pages detailing their strategy and even major advertising campaigns, like Corona Cero’s recent sponsorship of the Milan Cortina Olympics.
Molson Coors, which owns Peroni’s non-alcoholic brand, doesn’t even have the words “non-alcoholic” in their annual presentation.
If you review Constellation’s recent report, they barely mention anything about this category, and the same goes with the presentation from Boston Beer Company ( SAM 0.00%↑ ). Both of these company’s share prices have been crushed.
Are these major brewers completely missing the non-alcoholic boat?
It seems so, especially when you look at the growth of smaller startup brands, like Athletic Brewing.
As Doug Veliky recently shared, “Athletic represents 52% of the non-alcoholic craft beer market, which alone isn’t surprising, until [you] put it in the context that they are outselling all 150+ other non-alcoholic craft beers, combined.”
It’s only a matter of time until brands like Athletic Brewing get acquired by major beverage distributors.
And that may happen soon…
The Next Player in Non-Alcoholic Beer - Soda Companies?
Athletic Brewing, which has outsold both Heineken’s and Bud’s non-alcoholic beer, has been on an incredible growth path, and it seems that they aren’t stopping.
Having raised $50 million two years ago, the company now produces over 500,000 barrels a year (that’s well over 80 million cans of beer!).
The company has invested heavily in their operations to continue to scale up their production and they are consistently ranked as one of the fastest growing companies in America.
But there was another fund raising round back in 2022 that investors should take note of. Prior to the $50 million raised in 2024, Athletic Brewing raised a previous $50 million round back in 2022. And guess who that round was led by?
A drink company that doesn’t own any kind of beer brand at all - Keurig Dr Pepper ( KDP 0.00%↑ ).
Among KDP’s numerous brands, there are only a couple related to alcohol - margarita and bloody mary mixes. They mostly own brands like Dr. Pepper, 7Up, Snapple, Canada Dry, Krispy Kreme Donuts, and numerous other sugary drinks.
The company’s share price has struggled over the past couple years, and has drastically underperformed competitors Coca-Cola ( KO 0.00%↑ ) and Pepsi ( PEP 0.00%↑ ) over the last five years:
KDP 0.00%↑ in red, PEP 0.00%↑ in green, and KO 0.00%↑ in blue.
Could Keurig Dr. Pepper have its eyes set on the non-alcoholic beer market to change their direction?
Although KDP did invest in Athletic Brewing back in 2022, there were no public announcements about any acquisition rights or intent.
If KDP doesn’t act soon to reverse their trajectory, maybe Coca-Cola or Pepsi will enter the non-alcoholic category? Coca-Cola already has several brands of RTD alcoholic drinks and Pepsi just announced their entrance into the same category.
Whatever happens here, it’s clear that legacy alcohol companies need to change their product offerings for an evolving consumer base.
While we wait, it’s almost certain that we’ll see a wave of non-alcoholic beverage acquisitions over the next couple of years. I wouldn’t be surprised at all to see these traditional soda companies enter the game.
I’ll be highlighting another interesting development in the beverage world soon… One that involves Coca-Cola’s monopoly on a secret ingredient that another, soon to IPO company, has cracked.