Lagunitas Brewing joins sober segment with new no-alcohol craft brew

Lagunitas Brewing Co. of Petaluma made its mark in the craft beer industry with hoppy beers that pack a punch.

Its flagship India pale ale has an alcohol content of 6.2%, while its Little Sumpin' Sumpin ale weighs in at 7.5%. Its recent popular IPA, Super Cluster, pushed the alcohol content to 8%. And there’s the annual specialty release of Waldos' Special Ale, with a whopping 11.7%, near the level of many local wines.

With its latest brew Lagunitas has gone in the opposite direction for the slightly irreverent brewery known for its stoner-friendly vibe. Released on Dec. 1, IPNA beer contains no alcohol while retaining a full-bodied flavor of Mosaic and Citra hops.

Lagunitas head brewmaster Jeremy Marshall called the less potent craft brew “all pleasure, no guilt” by placing the focus on a detailed hop selection that came out of Washington's Yakima Valley. The project has been under development for a year and was initially taste tested by customers at the Petaluma taproom and they gave it mostly positive reviews.

The goal for Lagunitas, owned by Heineken International, the world’s second-largest beer producer, was to make a nonalcoholic beer that people would actually want to drink rather than mock like Anheuser-Busch’s O’Douls that one critic labeled “liquid sadness.”

Marshall said when his wife was pregnant he picked up a recognizable no-alcohol brand and she replied after a few sips that “this tastes like a carbonated piece of cardboard.” He then took a swill. “I said, ‘Wow. That’s really bad,’ ” Marshall recounted.

In the past, such drinks would be for designated drivers or pregnant women and were bought based on the occasion as opposed to the taste. But the move to less potent beer and wine has taken off with the growing wellness movement and younger drinkers who embrace such a lifestyle.

The nationwide launch of IPNA — just in time for the dry January trend of ditching booze during the first month of the year — is not surprising given recent beer trends and Heineken’s experience. The Netherlands-based brewing giant has had rapid success with its 0.0 nonalcoholic malt beverage introduced almost two years ago.

The 0.0 Heineken beer had retail sales of $52 million over the past 12 months as of Nov. 1. That was a 185% increase over its first year based on U.S. sales in supermarkets, drugstores, convenience stores and other retail establishments by IRI, a Chicago-based market research firm.

The no-alcohol segment is a bright spot in a rather turbulent U.S. beer industry in which craft beer revenue in 2020 is projected to decline by 7% to 8%, said Bart Watson, chief economist of the Brewers Association, which represents independent breweries.

“All the signs on the consumer side we see suggest that it is growing,” Watson said of the nonalcoholic trend. “It’s going to be a market where you see a ton of players entering.”

Indeed, Nielsen has found that no-alcohol beer sales have grown 40% over the last 12 months to $208 million in the retail markets the company tracks even though the product still represents 0.5% of the overall U.S. beer market.

The trend also has spread to wine, though not on a scale experienced so far in the beer industry. The nonalcoholic wine business, which does not count sparkling grape juice, is still emerging at about $30 million in annual sales, representing much less than 1% of total wine sales.

For instance, Santa Rosa-based ConeTech, a leader in adjusting alcohol levels in beer and wine, did little processing of wine into no- or low-alcohol versions as recently as 2018. Next year, however, the company is on track to do up to 25% of its overall business with such less boozy wines, said Debbie Novograd, president of Advanced Beverage Technologies, owner of Conetech.

“Beer is leading the charge as it has in Europe and everywhere else, but we are absolutely seeing the trend, both in no- and low-alcohol wine,“ Novograd said. Low-alcohol wines typically range from 8% to 11% per bottle.

“Today — with the rise of sober curious consumers and the millennial moderation movement — we’re seeing a shift in younger consumers selecting nonalcoholic wines as their preferred wine,” said Brie Wohld, vice president of marketing of Trinchero Family Estates in Napa. “The most common reason for this shift in wine preference is to achieve a more balanced lifestyle.”

Trinchero, the fourth-largest wine company in the United States, has had success with its FRE low-alcohol brand that has an annual sales growth rate of 36%, Wohld said. It is now the company’s sixth-biggest brand.

But a recent national entrant has gotten the attention of almost everyone in the alcohol beverage sector.

The recent game-changer has been Stratford, Connecticut-based Athletic Brewing Co., which only started production in 2018 and now is already No. 13 with U.S. non-alcohol beer sales of $1.6 million over the past 12 months, according to IRI. It has a growth rate of 949% and recently acquired the old Ballast Point Brewing Co. plant in San Diego to expand to annual production of 100,000 barrels.

Athletic treated the less potent brew subsector as if it were just like a David craft brewery 20 years ago going against the Goliath large brewing companies that dominated beer marketplace. It focused on getting a flavor similar to boozy versions with an India pale ale, as well as a golden ale. It has recently launched a new beer called AfterShift, which features a blend of lemon verbena and bay leaves along with Cascade hops.

“We wanted something that you would feel proud of or want to bring to a party, or have at a restaurant and not feel like you're going to be judged by your peers and the restaurateurs,” said John Walker, co-founder and head brewer for Athletic Brewing.

Meanwhile, Lagunitas saw the potential and wanted to hop into the market with its own IPA sober version before more rivals entered. The space will be more competitive, as Guinness just rolled out its no-alcohol stout in the United Kingdom though it had to recall the product over some contamination issues.

Lagunitas has been in the forefront of creative beer-related products in recent years going back to its Hoppy Refresher drink, a hop-flavored tonic water with zero calories. That originally grew out of the base that was used in HiFi Hops, a cannabis-infused drink that was made with CannaCraft of Santa Rosa.

However, the brewing process for IPNA took some time to master as Marshall’s team wanted to avoid the no-alcohol beers in the marketplace that were too sweet and he didn’t want to rely on synthetic materials in producing an all-natural product. And since it is Lagunitas, even though it’s alcohol free it still had to be a hoppy brew.

“We're Lagunitas. You cut us and hops come right out,” the brewmaster quipped.

Some craft beer trends have more staying power than others, such as the continuing popularity of hazy IPAs as opposed to the fad of the milkshake IPAs made with lactose and fruit. Marshall thinks alcohol-free beers will stick and become more socially acceptable.

“I think that the non-alcohol thing is all about millennials. I think the pandemic has done even more in the department of health consciousness,” he said. “I think it’s here to stay and we will see a lot more of it.”

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.