Aimee Shaw for Stuff | June 13 2023
Global liquor giant Pernod Ricard has taken a stake in Auckland non-alcoholic drinks firm AF Drinks.
The company, which makes drinks that mimic the taste of gin and vodka but without the alcohol, has experienced huge growth in recent years, particularly in the last six months, after its launch in the US.
Founded by Eat My Lunch founder Lisa King, AF expects the US to be its largest market by the end of the year and its business there to be about four times larger than its domestic market.
Pernod Ricard has acquired a 14.2% equity stake in the business. The value of that investment is undisclosed, but will allow AF to leverage the beer and spirits giant’s global networks.
The French drinks company made the investment through its investment arm Convivialité Ventures, which it established to invest in ventures outside its core business.
It has invested in a number of non-alcoholic drinks brands, including US canned water brand Liquid Death.
“It was a great confidence-booster for a little New Zealand brand to get the big guys going ‘We love your drinks’ and for the alcohol industry to say how good our products are,” King said of the partnership with Pernod Ricard.
“All of the big alcoholic drinks companies are realising what a huge category this is going to be.”
Sales of non-alcohol and low-alcohol beverages increased by 7% last year and have now grown to be worth more than a US $11 billion annually, according to IWSR Drinks Market Analysis.
Pernod Ricard Convivialité Ventures partner Brandon Yahn said the company recognised the scale of opportunity within the “rapidly growing” category.
“AF Drinks has an exciting value proposition and great line of products in the emerging ready-to-drink non-alcoholic beverage category. We are excited to partner with the company as they build their brand in the US market and beyond.”
AF had been fundraising to launch in the US since August last year.
King plans to take AF, which first launched in 2020, to Britain next year.
AF launched in the US through Amazon in February and nationwide through the health food supermarket chain Sprouts’ 390 stores.
“The US is such a massive market and what we’ve forecasted for this new financial year is that US sales will be four-and-a-half times what we’re doing in New Zealand,” said King.
King said AF holds a 35% share of the country’s non-alcoholic market.
“What has played in our favour is timing, growth of this category and being slightly ahead of the curve.”
King said the US’s non-alcoholic drinks category was not as mature as New Zealand’s, with AF one of the first products of its kind stocked in major retail chains.
“There’s not many products like us in the US. You’d think in that kind of market it would be flooded with competitors but what we’re finding is that there aren’t many products that are talking to alcohol alternatives.”
She said AF had to educate major retailers there on how to sell its alcohol-inspired drinks.
“When we went there last year retailers hadn’t really gotten non-alc options into the stores but they now are starting to as its own category.
“It feels like where New Zealand was a couple of years ago.”
AF had been sharing its experience retailing these drinks in New Zealand with US counterparts. It has dealt with questions like whether customers should be required to give ID and where the drinks should be placed in shops.
“We have gone through all of that here with the Countdowns and New Worlds so we’re able to go ‘This is best practice’ and what we find works well in a retail environment.”