These Beer Stocks Can Gain From the No-Alcohol Buzz

“Dry January” may be over, but the sober movement is set to continue. The IWSR projects that the market for no-alcohol beer, wine, and spirits (0.0-0.5% alcohol by volume) will deliver a 7% compound annual growth rate between 2024 and 2028. In the US alone, sales of no-alcohol beer, wine, and spirits reached USD 823 million in 2024, 27.2% higher than in 2023. No-alcohol beer made up 84% of those sales.

The rise of the no-alcohol market presents an opportunity for the alcohol industry overall to address shifting consumer preferences; growing health concerns; rising regulatory pressure; and other environmental, social, and governance risks. At the same time, as the market for no- and low-alcohol products continues to grow, investors will need to read up on the complexities around the labeling, marketing, and nutritional content of no-and low-alcohol products.

By leveraging insights from Morningstar Sustainalytics ESG Risk Rating and Morningstar Equity Research, we show how investors can screen through alcohol companies to identify strong players that are focusing on the no-alcohol space and mitigating related ESG risks. In Exhibit 1, we show that Heineken, Asahi, AB InBev, and Carlsberg are integrating no-alcohol and low-alcohol alternatives into their product lineups, standing out as potential top choices for investors interested in tapping into the growth of this market.

Alcohol Industry Faces Growing Risks

Amid an already challenging environment for the alcohol industry overall, growing ESG-related risks could make selling alcohol more difficult and expensive.

Consumers are Drinking Less, Especially Younger People

In the US, total alcohol volume sales declined in 2024 by 1% compared to the previous year, with beer volumes falling by almost 3%, the first time the market has seen a dip in three years. Germany, the leading beer producer in Europe, saw similar drops; beer volume sales were down 1.4% from 2023 according to the Federal Statistical Office, 13.7% lower than volumes in 2014. Japan has also seen a downward trend in beer consumption over the past few years. Economic challenges, such as the rising cost of living and inflation, have led consumers to cut back on alcohol purchases. Additionally, the increased popularity of abstinence and moderate drinking has contributed to declines in consumption. These trends are likely to continue. According to a recent survey, almost half of Americans say they plan to drink less alcohol in 2025, a 10-percentage-point increase since 2023. This trend is even more pronounced among younger generations. While just 30% of surveyed baby boomers plan to lower their alcohol consumption, over 65% of Gen Z plan to cut back in 2025.

Concerns Over Alcohol’s Health Impact Are Increasing

Recent attention paid to the harmful impacts of alcohol consumption could encourage even more consumers to avoid alcohol. In January 2025, the US 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 The advisory calls for reassessing the recommended limits for alcohol consumption to account for the growing evidence linking even moderate alcohol use to cancer risk. In January 2023, the World Health Organization released a statement in The Lancet Public Health that there is no safe level of alcohol consumption without health risks. Other health authorities, such as Japan’s Health Ministry and UK public health officials, have also cautioned that even small amounts of alcohol can raise the risk of cancer.

Regulation to Reduce Alcohol Consumption Is on the Rise

To address harmful alcohol consumption and its societal costs, regulatory pressure is increasing. In 2023, Ireland announced it would require alcoholic beverages to carry cancer warning labels by 2026 to increase consumer awareness and curb alcohol-related disease. The US Surgeon General’s advisory calls for a similar measure, and other countries, including Canada and Norway, have proposals in the works. On top of the added burden that could come from new labeling requirements, selling alcohol may become more expensive. The EU legislation on excise duties for alcohol is currently under review, with the European Commission calling for increased minimum rates to protect public health. The UK recently increased taxes on alcoholic products further, in line with inflation, a move aligned with its new duty system to tax alcohol products based on their alcohol content. On top of this, alcohol products made in the EU and other countries have become targets in the recent trade war.

The Rise in No- and Low-Alcohol: A Way to Address Risks

The no- and low-alcohol beer, wine, and spirits market is expected to increase at a 4% compound annual growth rate between 2024 and 2028, with the nonalcoholic market increasing even more (at a 7% CAGR between 2024 and 2028). Ten markets—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.

No- and low-alcohol alternatives have become an integral part of many companies’ strategies to align with public health goals while meeting evolving consumer demand. No-alcohol variations pose fewer cancer-related risks, and some variants tend to have less sugar and fewer calories. However, some alternatives (for example, ready-to-drink mocktails), may contain high sugar levels, potentially leading to health risks if consumed excessively, so companies must prioritize transparency regarding ingredients and nutritional content to meet consumer demand for health and quality.

No- and low-alcohol drinks can also help companies achieve higher profit margins, offsetting potential sales declines as consumers drink less alcohol. Moreover, beverage products under 1.2% ABV in most jurisdictions are not subject to excise taxes and are exempt from some of the proposed tax increases the alcohol sector faces. Given these opportunities and the growth of the market, it’s no wonder many companies are entering the no-alcohol space through brand extension, product innovation, and mergers and acquisitions.

Screening Companies in the No-Alcohol Space

Which companies are focusing on the no-alcohol space over the long term? And which of these may be best positioned to benefit from the growth of the market while mitigating risks? Morningstar Sustainalytics offers insights into companies’ exposure to material ESG issues and evaluates their strategies to address such risks. This information can be combined with Morningstar Equity Research’s fair value estimate, which compares a company’s current market price against its estimated intrinsic value to help investors identify opportunities aligned with both financial and ESG objectives.

In this case, investors can look at the material ESG issue Environmental and Social Impact of Products and Services. Within this material ESG issue, alcohol companies are assessed on the strength of their nutrition and health program, partly based on their efforts to introduce products that contain less alcohol. Very strong programs include quantitative targets and deadlines to expand no- and low-alcohol beverage portfolios, labeling that goes beyond legal requirements, and evidence that the companies acknowledge the negative health impacts of alcohol consumption.

Despite the difficulties the alcohol sector is facing, Morningstar Equity Research sees the space as undervalued, with many companies shown in Exhibit 1 as having either 4- or 5-star ratings.

Combining insights from the ESG Risk Rating and Morningstar Equity Research, we find that brewers Asahi, Heineken, AB InBev, and Carlsberg stand out as potential top choices among the companies in the no-alcohol space. They show strong management of E&S Impact of Products and Services issues, including by demonstrating either strong or very strong nutrition and health programs.

While distillers Pernod Ricard and Diageo DGE exhibit low ESG Risk Rating scores, their nutrition and health programs are less strong. Both distillers have introduced no-alcohol products. Pernod Ricard introduced the nonalcoholic gin brand Cedar’s, which it acquired in 2021; Diageo sells Tanqueray 0.0 and no-alcohol beer brand Guinness 0.0. However, they have not yet established targets to expand their no- and low-alcohol products. The nonalcoholic spirits category is considerably smaller than beer. In the US alone, though, this is projected to grow at an 18% sales volume CAGR between 2024 and 2028, making this a space to watch.

4-Star Stock Picks

Asahi Group Holdings

In addition to launching numerous alcohol-free brews, such as Asahi Super Dry 0.0 and Peroni Nastro Azzurro 0.0, Asahi aims to achieve a 20% sales composition ratio of no- and low-alcohol beverages for its major beverage products by 2030. To meet its target, it’s developing de-alcoholization technologies and investing in alcohol-free aligned business ventures such as The Zero Proof, an online retailer of nonalcoholic beer, wine, and spirits. The firm reported 23.9% year-over-year revenue growth in its nonalcoholic beer/ready-to-drink segment in Japan in the third quarter of 2024.

Heineken NV

As part of its Brew a Better World strategy, Heineken continues to focus on expanding its leading alcohol-free beer Heineken 0.0. In 2023, it introduced the brand in four new countries, including China and Morocco, and reported double-digit growth in the brand. Beyond Heineken 0.0, it has also launched several local alcohol-free brands and aims to offer a zero-alcohol option for one strategic brand in 90% of its markets by the end of 2025. The company is also focused on transparency; it displays nutritional information, ingredients, alcohol warning symbols, and QR codes on its products linking consumers to additional health information on all its products.

Fairly Valued Companies to Watch

AB InBev SA/NV

Belgian brewer AB InBev, which earns a Morningstar Economic Moat Rating of wide, aims to ensure that no- or low-alcohol beer products represent at least 20% of its global beer volume by the end of 2025. It reports that, in 2023, 6.8% of its global beer sales volume was less than 3.5% alcohol by volume. Despite being off-track to meet its target, the company is establishing partnerships to accelerate growth in its alcohol-free beer products. For example, its alcohol-free brand Corona Cero became the first global beer sponsor of the Olympic Games, a partnership that will last through 2028.

Carlsberg A/S

Carlsberg has a selection of 88 alcohol-free beers and aims to offer alcohol-free alternatives in all operating markets by 2030. It reports that in 2024, alcohol-free beers were available in 90% of its markets, a 32-percentage point increase from 2021. It also aims to achieve a 35% global portfolio share from low-alcohol and alcohol-free beer by 2030. In 2024, it saw 6% volume growth of its alcohol-free beers. Carlsberg recently launched Somersby Zero, what it calls the first alcohol-free cider on the market containing no alcohol, sugar, or calories.

These four brewers, which disclose strong nutrition and health programs, have already extended their responsible marketing policies to their no- and low-alcohol products. This indicates proactive management of some of the risks that could arise from the growth of no- and low-alcohol products, such as deceitful marketing practices.

Looking Ahead

Companies that commit to expanding no- and low-alcohol beverage options are well-positioned to benefit from the market’s growth and can also mitigate some ESG-related risks. Their success will depend on their ability to fend off increasing competition, diversify their sales channels, and adapt to younger generations' demand for even more innovative nonalcoholic products. Investors can encourage companies to increase their transparency on the revenue they derive from no-alcohol alternatives. That could help provide additional insights into companies’ diversification efforts and responsiveness to shifting consumer preferences.