Illustrations by Edmon DeHaro

“Cheers!” As her father’s wedding toast comes to a close, Vanessa Royle (MBA 2022) raises her champagne flute into the evening air to clink glasses with the groom, Andy. She tilts her glass to take a sip and, with the flavors of the drink swirling in her mouth, she looks out over the sea of guests gathered on the California coast. From across the room she locks eyes with Mariah Wood (MBA 2022). Together, Royle and Wood cofounded Tilden Cocktails, which is sharing the spotlight for a moment. Everyone has just taken a synchronized sip of Eden, one of Tilden’s signature cocktails, and what happens next is just what Royle and Wood had hoped for: Around the tables, people start to talk about what exactly they were tasting, just like you might talk about a wine or any other cocktail. Those who guessed correctly might have picked up on the forward notes of black currant and lime. It leaves behind a feisty little bite of a finish, produced by a touch of capsaicin. Like all of Tilden’s cocktails, Eden is non-alcoholic.

The founders’ goal for Tilden is to solve for a very sugary pain point: the Shirley Temple. Like its cousins, the Diet Coke or the virgin piña colada, the standard offerings for non-drinkers—even at special occasions—can feel like real kids’ table fare. Royle and Wood saw a demand for adult beverages as interesting and complex as a satisfying cocktail, just without the alcohol. It’s a tall order yes, but not impossible. The pair tinkered for a year, first with commercial formulators, and ultimately finalized the recipes in Woods’s Cambridge kitchen. Each of their launch products—the Eden, Lacewing, and Tandem—satisfies one of three major flavor profiles (fruity, herbal, and oaky) and feels like a proper drink, which is to say it has a beginning, a middle, and a finish. Their ready-to-drink cocktails are naturally low in sugar and calories (less than 2 grams and 35 calories). They are bottled and labeled with a sense of sophistication that would feel right at home on any elegant bar cart.

With its official product launch in January 2022, Tilden stepped into an increasingly popular party. The rise of non-alcoholic (NA) beverages has been one of the big headlines in the industry, where sales of beer grew almost 70 percent from 2016 to 2021, according to Euromonitor, and spirits shot up 113 percent from the first pandemic year to the second. The segment now has a dedicated trade association and big expectations to meet: Global Market Insights predicts the sector will reach $30 billion by 2025.

Mariah Wood (left) and Vanessa Royle
(Courtesy Tilden Cocktails)

Mariah Wood (left) and Vanessa Royle
(Courtesy Tilden Cocktails)

The main forces behind that surge have to do with changing attitudes around drinking. Perhaps unsurprisingly, the pandemic opened up a fault line, with a 21 percent spike in excessive drinking on one side, according to a study from Massachusetts General Hospital—and on the other side, a growing number of people who used the pandemic as a time to scale back.

In doing so, the latter category has given rise to entire movements of more flexible drinking styles, from the sober-curious or “flexi-drinkers,” who take a part-time view of drinking, to those who dip into an ever-expanding list of social-media challenges like Sober October, One Year No Beer, or Dry January. (A damp version is also an option.) In large part, it’s Generation Z that is leading the rebellion and embracing sobriety as a wellness choice more than their predecessors, according to Gallup. But they are in good company, as approximately 40 percent of Americans don’t drink at all.

With so many flexi-drinkers crowding the bar these days, the stigma is starting to fade. “Not drinking has become a more visible choice since the pandemic,” says Royle, who previously worked in communications at Cloudflare. And it’s a tastier choice, now that startups like Tilden and the titans of the beverage industry are taking a fresh look at what a NA beverage can be and making use of new innovations in brewing technology.

Low-alcohol beer has been around as long as humans have enjoyed beer, which is to say for thousands of years. (In medieval Europe, it was consumed daily because the presence of alcohol made it a safer alternative to water.) And the recipe has remained largely unchanged. To make either low- or no-alcohol beer, one begins with a batch of full-test brew. An evaporative process of either heating or filtering reduces the ethanol until the preferred level of alcohol remains, and finally that product is reconditioned with carbonation. These techniques were repopularized during Prohibition, when 0.5 percent alcohol by volume (ABV) became the legal limit, and again in the 1980s, with that era’s interest in light beers. It’s similar to the process that Anheuser-Busch has been using at several of its breweries since 1990, when it introduced O’Doul’s, the original NA beer. “O’Doul’s really created the category when it arrived and became synonymous with NA beer,” says Brendan Whitworth (MBA 2008), CEO and Zone President North America of Anheuser-Busch.

And that’s where the category stayed, largely untouched, until new techniques started to come on line around 2017. That’s the year Bill Shufelt and John Walker launched Athletic Brewing Company, the first craft brewery in the United States devoted to NA beers. Shufelt, a former hedge fund trader, had decided that all the boozy weeknight work dinners were incompatible with his life and fitness goals. He quit drinking and found sobriety to be a brilliant “life hack,” but he also missed the ritual of having a beer at a bar with friends and couldn’t find an alternative that he loved as much as the real deal. In Walker, he found an award-winning brewer who recognized the opportunity in the marketplace and was up for the challenge—against the advice of everyone in the industry, as the founders often say in interviews.

Together, Shufelt and Walker brought two innovations to the segment. First they tossed out the textbook recipe to bring beer below the 0.5 percent ABV threshold for NA. Believing that those traditional techniques can also wipe out the aromatics and heady characteristics that the craft beer community gets so excited about, the pair reinvented the process. Athletic’s proprietary system prevents the fermentation process from generating ethanol in the first place, an innovation that opened up a new range of NA opportunities. Where, previously, only lagers had been possible, suddenly Athletic could produce almost anything: dark, hoppy, sour, golden, and traditional and hazy IPA. Athletic also offers a rotating selection of seasonal releases and limited editions, which are sold online, on the shelves of supermarkets and in liquor stores and non-alcoholic bottle shops.

Athletic’s brightly colored packaging and attention-begging designs give away its second disruptive innovation, which is to fully embrace its NA-ness, according to Annie Wilson (PhDBA 2020). A behavioral scientist and lecturer of marketing at the Wharton School who wrote a case about the company with HBS professor Ayelet Israeli, Wilson points out that other products had taken a more stealth approach.

“Up until that point, NA beers looked a lot like beer, and a person might turn the label into their hand to avoid drawing attention to it,” Wilson notes. Athletic instead went with a highly visible strategy, boosted by high-profile backers like chef David Chang. “Athletic’s play was to say, ‘You should be proud to be drinking this because you’re not compromising your personal or athletic performance.’ That was really different for the category,” Wilson observes.

Athletic went from selling 12,000 cases in 2018 to 1.4 million by 2021. Keurig Dr Pepper invested $50 million in the company, part of a $75 million round announced in 2022, and the company has racked up industry awards in competition against beers with and without alcohol—the larger effect of which has been to carve out a space on the shelf for others to broaden the category, Wilson says.

On the craft-brewery side, entire ecosystems are cropping up around NA beers. In St. Paul, Minnesota, for example, a company called ABV Technology developed a device in 2019 that removes ethanol from a finished beer. Once extracted, that alcohol can be poured back into other revenue streams, such as hard seltzer. A third of the breweries in Minnesota are reportedly using this service, either having purchased their own device, called the Equalizer, or by bringing their product to one of several service centers around the country. NA options are now standard fare at Minneapolis-area taprooms.

There’s real momentum among the world’s biggest brewers, too. Anheuser-Busch’s list of offerings includes Busch NA, a new version of Stella Artois called Stella Liberté, as well as a host of global brands—Hoegaarden, in Japan; Quilmes, in Argentina, and Corona Ligera, in Mexico—under its international company. Many of the craft companies in its Brewer Collective, including Goose Island, Golden Road Brewing, and Omission, also offer low or no-alcohol beers. But the company’s flagship is Bud Zero, which arrived on the scene in 2020, in a splashy partnership with the retired NBA player Dwayne Wade.

“We saw that as an interesting way to bring the brand to life and a good place to start in the world of sports. Because, in baseball they stop selling alcohol at the seventh inning, but you can still buy a Bud Zero,” CEO Whitworth said in a Zoom interview last fall. A few weeks later, just days before the start of the tournament, FIFA announced that Bud Zero would be the only beer available in Qatar’s World Cup stadiums.

Whitworth asserts that all the new energy in the segment is great for the industry and creates novel opportunities to bring consumers in—even sometimes under his own roof. “My wife might drink a beer every now and again—but she’ll enjoy a Liberté every week. So here’s a consumer, and probably 70 to 80 percent of the beer that she drinks is NA at this point.”

The growth in the segment is encouraging, and Anheuser-Busch will remain a big player, but it’s still a small base of business, Whitworth explains. NA beer sales in the United States amounted to $670 million in 2021, according to Euromonitor, a drop in the bucket of the $100 billion American beer market. The picture is quite different in Europe, where low- and no-alcohol beers and wines are already a multibillion-dollar industry. Countries like Spain and Germany have long traditions and greater acceptance of these products. “In Germany, lunch is a reasonably popular occasion to enjoy NA beers. I don’t think that idea has been developed at all in the United States, but it’s interesting to think about where NA beers could expand the category,” he says.

From the scrappiest startups to the multinationals, everyone seems to agree that it’s too early in this story to predict how big the segment could get or how long consumers will angle for these products. Professor Israeli, who wrote the case on Athletic Brewing, points to a panoply of wellness trends over the years, like the fat-free craze of the 1980s that gave way to the low-carb era. Will NA go the way of the passing health fad? “It’s hard to say, but these younger generations seem to care about a healthy lifestyle with an urgency that’s very different from previous generations,” Israeli points out. “This might be a trend that we’ll see stick around for a while.”

For the present moment, everyone is rushing to get product onto shelves to see how various pilots perform. At Anheuser-Busch, that means a foray into the direct-to-consumer channel, which is an entirely new world for the company, notes Whitworth. Traditional beer is a tightly regulated industry, for all the right reasons, with a tangle of laws that limit where it can be sold and when, all of which varies by state. By contrast, a consumer can have NA beer shipped straight to their front door. “That gives you another way to reach the end consumer, which might be very different from where traditional beers are carried,” Whitworth says. He also has big plans in the coming year for Liberté, and would like to see it made available on draft. “That’s not really been done,” he says, but it would be an ideal way to get it in front of new customers. “We’ve seen some people start with a Liberté, never having had a Stella before. It’s a good example of what can happen when you offer consumers new options.”

For Tilden’s cofounders, the year ahead will be a big one. They took a break one afternoon at HBS last fall to share their story, along with a tasting of the product. Sitting at a long table in the Spangler dining room, Wood pulled open the lid of a cooler she’d brought along and presented a bottle of Tilden’s final formulations, which she poured over ice.

Courtesy Tilden Cocktails

Courtesy Tilden Cocktails

Taking their time over a midday cocktail, the founders talked about how their journey began during Startup Bootcamp, the short, intensive program for first-year students. They’d honed the vision and concept over Summer Rock Fellowships, so by their second year, Royle and Wood were stealing every spare moment to focus on go-to-market strategy, raising almost $600,000 in seed funding and finalizing product development.

Wood and Royle get animated when they talk about the demand for these products. Wood, Tilden’s COO, is a lifelong teetotaler who grew up in Las Vegas, in a family where drinking was not part of the custom. Later, as a management consultant, she found that many work events centered around alcohol, and people often asked why she wasn’t partaking. “There’s a lot of drama wrapped up in that question,” Wood acknowledges. “People feel judgment running in both directions: I might think you’re judging me a prude, and you might think I’m judging you as less virtuous.” If you’re a young woman in the workplace, moreover, “the default assumption is that you’re pregnant—unless you explain yourself, and that explanation is never the first conversation you want to have with a colleague or client.”

For her part, Royle, who is CEO, quit drinking during the pandemic and, once the world opened back up, found she was less interested in lingering at the bar with friends. A person can only get so excited about another round of seltzers with lime. But as obvious as it is that non-drinkers thirst for more interesting options, bar and restaurant owners have been slow to see the opportunity. “They told us that nobody ever asks for this stuff,” she says, describing the interviews she and Wood conducted as part of their market research. “I asked them, ‘Well, how many waters are you serving? How many seltzers with lime?’” The bartenders had no answers for that. “They weren’t understanding the opportunity—they couldn’t see that they could turn all those waters into profit,” Royle explains.

It’s another item for Tilden’s to-do list: educate the market. In the short-term, Royle was packing up her home in Cambridge and preparing to move back to California, where she would manage the company’s West Coast retail partners. Wood was focusing on their Boston and New York outlets. Meanwhile, their first run of product was at the copacker, the Shopify site was awaiting its final bells and whistles, and launch parties needed to be finalized. Dry January was just around the corner, and all the evidence suggests that more and more Americans would observe the month without alcohol. Tilden wants to be there, in the good company of the NA shelf, ready to subvert expectations about what a non-alcoholic drink can be.

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