- Australia-based Lyre’s Non-Alcoholic Spirit Co. secured $11.5 million in seed funding in a round led by RD Investment, Doehler Ventures, DLF Venture, and Maropost Ventures, according to a release from the company. The company said this is the largest investment on record for the alcohol-free category.
- Funds will be put toward portfolio growth, market expansion and product innovation. On the product innovation front, the company will debut a ready-to-drink range that is expected to arrive to the market in the fourth quarter of 2020, according to Food Business News.
- This infusion of capital comes for the Australian company at a time when U.S. tariffs for a variety of European food and beverage imports from the United Kingdom, Germany, France and Spain are expanding to a staggering 100% in some cases.
The nonalcoholic startup is just over a year old and already has a portfolio with 13 products across 30 markets. Even though the company has had to contend with a pandemic for half of its existence, the company said it posted 400% monthly recurring revenue growth since January by shifting to focus on the direct-to-consumer segment.
Overall growth in the non-alcoholic space has been picking up steam in recent years as booze-free libation makers deliver better-for-you options for health-conscious consumers. The health trend has picked up further momentum during the coronavirus pandemic. This summer, Euromonitor predicted food and non-alcoholic beverages were the only sectors of the economy projected to post positive growth in 2020.
Still, nonalcoholic beverages remain a small slice of the overall market. According to IRI data cited by Goodbeerhunting, just 0.37% of dollar sales for beer in grocery, convenience, liquor and other chain stores went to nonalcoholic versions in 2019.
Despite its tiny size, interest in the space is anything but small. The continued growth of nonalcoholic options and an increase in normalization of alcohol-free beverages in social situations makes the space attractive. Accordingly, investors and manufacturers have piled into the category. U.S. bottled low- and no-alcohol beverages were projected to grow about 32% between 2018 and 2022 — three times their growth in the previous five years — according to IWSR data cited in The Wall Street Journal.
Until now, a large portion of the investment has been through established alcohol titans taking stakes in nascent startup brands, or by these legacy companies rolling out their own alcohol-free options.
As the zero-proof segment is no longer a niche category, there is plenty of competition in the space. Smaller boutique brands like Partake Brewing are making a play for market share, but so too are industry giants like Boston Beer, which is planning to launch a craft nonalcoholic brew in early 2021. Earlier this year, Anheuser-Busch released its first zero-proof beer under the Budweiser brand called Budweiser Zero. But nonalcoholic spirits like Lyre's also have well-funded competitors. Diageo took a majority investment in Seedlip last year.
Lyre's stands apart from other large nonalcoholic spirit brands including U.K.-based Seedlip, Borrago and Three Spirit in that is it fully removed from the European tariffs. This distance from the trade wars puts Lyre in an advantageous position to make further inroads into the U.S. market. Its prices will not be inflated because of import dutues, making Lyre's an appealing choice to put on shelves and bar cabinets.