Issue No. 114: The Impact of Dry January

Dry January

This sobriety challenge is actually a public health campaign started in 2014 by British charity Alcohol Change UK.

The premise, eliminating alcohol for 31 days, is simple enough. And participants have seen promising results. In fact, multiple studies have shown that a month-long prohibition delivers short- and long-term benefits — from improved sleep and increased energy levels to lasting behavior change, like eliminating alcohol altogether.

In 2021, as many as 15% of Americans plan to partake in Dry January, up from 10% last year. Another 7.5% plan to drink less but not totally abstain.

Zooming out, these findings are indicative of broader developments — mainly, a decline in alcohol consumption and the rise of alcohol alternatives.

By The Numbers

In 2019, alcoholic beverage sales in the US surpassed $250B.

But there’s a catch: 43% of drinking-age Americans don’t consume alcohol. And 40% say they’re drinking less than they did five years ago.

Driving this trend, 66% of US millennials said they’re making efforts to reduce their alcohol consumption, citing motivating factors like well-being and weight loss. A sign of what’s to come, Gen Z is consuming less alcohol than previous generations.

Globally, the World Health Organization expects the proportion of drinkers to fall by 1.4 percentage points to 40.3% between 2020 to 2025.

Highs and Lows

Early in the pandemic, alcohol sales soared.

Last year, in the week ending March 21, retail alcohol sales were up 55%. At its peak, online alcohol sales increased by nearly 500%.

But those highs weren’t enough to offset the lows. With bars and restaurants closed, global alcohol sales dropped 9.4% in 2020. Worse, industry analytics group IWSR doesn’t see alcohol consumption returning to pre-COVID levels until 2024.

On the flipside, no- or low-alcohol beverages are expected to gain ground.

By 2025, the global market for nonalcoholic wine and beer is estimated to reach $30B. And alcohol-free beer is expected to grow its share of the beer category from 2% in 2019 to 4.45% by 2024.

Targeting these increasingly lucrative markets, incumbent brands and beverage upstarts are plotting their next move.

Rebranding Beer

Athletic Brewing has given nonalcoholic beer a much-needed makeover.

Founded in 2017, the concept was slow to gain acceptance. On the Fitt Insider podcast, Athletic Brewing CEO Bill Shufelt said he saw an untapped demand among consumers but received pushback from industry insiders:

“No one would work with us, no one believed in nonalcoholic beer… people wouldn’t even sell us equipment. They thought we were a credit risk.” 

Early on, armed with nothing more than an idea, Shufelt pitched 120 investors to no avail. Eventually, he raised seed funding from 60 angel investors. More recently, Athletic Brewing secured a $17.5M investment. The company counts athlete VCs JJ Watt, Justin Tuck, and Lance Armstrong among its many backers.

Of note, beer sales have been declining for five straight years. A trend that’s expected to continue, beer consumption is projected to fall another 6.1% by 2023. Meanwhile, last year, the nonalcoholic beer market grew almost 39% to roughly $187M.

For its part, Athletic Brewing has seen revenue grow from $2.5M in 2019 to $15M last year. In 2021, Shufelt expects the company to bring in “three times” its 2020 earnings.

But competition in the space is heating up.

• Sales of Heineken 0.0 are growing 40% YoY.
• AB InBev expects low-ABV or NA beer to account for 20% of its beer sales by 2025.
• Budweiser teamed with Dwayne Wade to launch Budweiser Zero, its first-ever zero-alcohol, zero-sugar offering.

Seizing the opportunity, WellBeing Brewing, Bravus Brewing Company, Dogfish Head, Sam Adams, and Brooklyn Brewery have all released low-alcohol or nonalcoholic beers.

Beyond Beer

From wine and spirits to wellness elixirs, low-calorie and alcohol-free options are the future.

In 2019, Diageo, the world’s largest distiller, acquired nonalcoholic spirit maker Seedlip. Pushing further into the space Diageo invested in nonalcoholic brands Ritual Zero Proof and Rheinland Distillers in 2020.

With interest growing, beverage upstarts are racking up investments. Low-alcohol spirit maker CleanCo recently added $8.4M, Australian nonalcoholic spirit brand Lyre’s landed $11.5M, and Haus, a low-sugar, low-alcohol aperitif, raised $4.5M.

Seeking to diversify its alcohol assortment, Molson Coors acquired Clearly Kombucha in 2018. In the time since, “hard” kombucha has emerged as a healthier alcohol alternative, with brands like JuneShine, Flying Embers, and Kombrewcha attracting investments.

The next alcohol-free frontier? With the functional beverage market set to reach $208B by 2024, nonalcoholic alternatives, CBD-infused drinks, and brain-boosting elixirs like Kin Euphorics, GHIA, Curious No. 1, Som, Recess, and Cann are set to cash in.

Be on the lookout: Startups aiming to help people kick or limit their alcohol consumption are gaining steam. Companies like Cutback Coach, Less (from Big Sky Health), and One Year No Beer are promoting mindful drinking. And Monument recently raised $10.3M for its online alcohol treatment and recovery platform.

Punchline: Big Alcohol isn’t going anywhere. And for now, nonalcoholic options still make up a tiny portion of the overall industry. But, with room to grow, alcohol alternatives will become the billion-dollar beverage brands of the future.

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🎙 On the Podcast

This week, on the Fitt Insider podcast, we’re joined by Jimmy DeCicco, CEO of Super Coffee — makers of health-focused coffees and creamers enhanced with protein, MCT oil, vitamins, and antioxidants.

In this episode, we discuss:

• The journey from college dorm room to Shark Tank
• Landing investors like Alex Rodriguez and Jennifer Lopez
• Being action-oriented and building a strong company culture
• The evolution of the better-for-you food and beverage category

Listen to the full episode here.

⏱ Playing Catch-up

A hot commodity, Peloton can’t keep up with demand for its connected equipment. And some consumers are at their wits’ end.

In an article over the weekend, the NYT detailed the growing list of complaints.

• Some orders placed in October have yet to be filled.
• Deliveries are missed or rescheduled without notice or explanation.
• Consumers must begin making payments on products that haven’t arrived.

The result has seen consumers take to social media to air their grievances. One Facebook group, in particular, has attracted 9K+ members discussing delivery issues.

More surprising? Peloton’s customer rating with the Better Business Bureau is 1.4/5 stars.

The big picture: In one year’s time, Peloton saw its valuation quadruple, from less than $10B to more than $40B. Now, the company is playing catch-up.

Peloton’s $420M acquisition of fitness manufacturer Precor will help shore up its supply chain, but bikes won’t be built stateside until later this year. Until then, Peloton is flying some bikes into the country, eating the expense in an effort to avoid congested ports.

🎵 The Next Battleground

Equinox Media signed a deal with Universal Music Group to license the world’s largest music catalog for its Variis app.

Background: After a series of delays, Equinox Media launched the Variis app and SoulCycle at-home bike last March. As competition heats up, and rival brands try to stand out, music has become a key component of the connected fitness experience.

• With this deal, Variis gains access to tracks from artists like Taylor Swift, Lady Gaga, Billie Eilish, Drake, The Weeknd, and many others.
• After paying an estimated $49M to settle a copyright suit filed by song publishers, Peloton has prioritized music, signing an exclusive partnership with Beyoncé and hosting themed rides set to music from The Beatles, Grateful Dead, and other artists.
• In December, iFit teamed with Feed.fm to improve its music offering.
• Echelon recently announced a fully licensed music offering via MediaNet.

In pursuit of a competitive advantage, music has become the next battleground. As well-capitalized companies spend millions on high-profile partnerships, mid-tier brands will struggle to keep up. Meanwhile, frontrunners like Peloton will transform fitness classes into concert-like experiences, complete with original music from top-tier artists.

Go deeper. Listen to our interview with Equinox Media CEO Jason LaRose on the Fitt Insider podcast.

📰 News & Notes

• Can Nike keep its cool?
• The hyperquantified athlete.
• Alo Yoga expands into skincare.
• Google completes Fitbit acquisition.
• US consumers spent $826M on melatonin in ’20.
• ICON Health & Fitness hires CFO amid rumored IPO.

💰 Money Moves

• At-home health testing company Everlywell added $75M in funding weeks after closing its $175M Series D.
• K Health, a telehealth provider, raised $132M at a $1.5B valuation.
• Personalized supplement maker Gainful raised $7.5M in Series A funding co-led by BrandProject and Courtside Ventures.
  More from Fitt Insider: Our conversation with Courtside Ventures partner Deepen Parikh.
• Online therapy provider Talkspace will go public in a $1.4B SPAC deal.
  More From Fitt Insider: SPACs Come to Health and Fitness
• Bryte, a smart bed and sleep tech company, raised $24M in Series A funding.
  More from Fitt Insider: The Big Business of Sleep
• Nick’s, a Swedish food-tech brand offering sugar-free snacks and ice cream, closed a $30M investment round.
• Pace, a virtual group therapy app, launched out of beta with $1.9M in seed funding.
  More from Fitt Insider: Confronting the Mental Health Crisis 
• NeuroFlow, a technology-enabled behavioral health company, closed a $20M Series B. 
• Spill, a startup using Slack to provide remote mental health support for companies, raised €2.2M ($2.67M) in Series A funding.
  More from Fitt Insider: Peak Burnout 
• ShotTracker, a sensor-based technology that automatically captures basketball statistics in real time, raised $11M in funding.
• CookUnity, a chef-to-consumer meal subscription service, closed a $15.5M investment.
• CleanCo, a low-alcohol alternative, added €7.8M ($9.4M) in new funding.
• Coca-Cola sold ZICO to the PE firm started by the coconut water brand’s founder.