Whether it’s a boozy cocktail or a delicious, zero-proof mocktail, many social drink options aren’t exactly known for their health benefits. Most people enjoy these for the taste, the buzz, or the social vibes.
But what if you can have a delicious nonalcoholic (NA) drink that also kickstarts your health? What if you can get a buzz without the hangover?
This is exactly what functional spirits claim to do, providing people with high-quality NA drink options infused with extra ingredients to boost their health and mood.
But are functional spirits really buzzworthy, or are they just another fad? More importantly, is it worth stocking them at your liquor store?
In this article, we’ll tell you everything you need to know about functional spirits, starting with what they are and ending with practical tips for selling them at your business.
Let’s jump in.
Functional spirits are low or no-alcohol liquor alternatives or tonics that strive to give customers a buzz without the booze or infuse drinks with health benefits.
Some examples of functional spirits include mushroom-infused aperitifs, hemp-infused spirit alternatives, adaptogenic tonics, and metabolic tonics.
If these terms sound like a foreign language to you, you might be surprised at how widespread they are among younger and health-conscious shoppers.
(Examples of NA botanical elixirs from Three Spirit)
The functional beverage market as a whole has been growing for years. These drinks include supplements or nutrients that aim to do everything from improving gut health and supporting the immune system to reducing stress and giving a caffeine-free energy boost.
The expansion of functional products into the NA market, however, is relatively new. The marketing of these functional spirits leans heavily into the moods they create or the elements put into the drinks, instead of what’s been taken out.
Note: Many health claims of functional beverages are unproven, and the FDA doesn’t have a strict legal definition of a functional food or drink.
Related Read: Nonalcoholic Drinks: Profit Opportunity or Waste of Shelf Space?
A frequently-cited liquor industry trend is that Gen Z and younger millennials drink less than previous generations. Notably, many of these younger customers bring up health concerns, not cost or social stigma, as the primary driver for drinking less.
And they aren’t necessarily against drinking altogether — they just want to cut back, are “sober curious,” or want to explore healthier alternatives. In fact, the majority of people who buy nonalcoholic or low-alcohol alternatives also buy alcohol.
Put another way, customers interested in functional spirits are probably already shopping at your liquor store. Functional spirits and NA drinks aren’t a replacement for your liquor selection, but an addition. If you live in an area with a younger or health-conscious demographic, expanding your selection of functional spirits may be your ticket to more traffic and higher profit margins.
(Image source: Dry Atlas)
Functional spirits are relatively new to the market, so there isn’t a ton of information about how they sell as a standalone category. That said, as part of the broader NA and low-alcohol market, they could be big business for small liquor stores.
Sales of NA beer, wine, and spirits account for almost a billion dollars in annual sales — and the industry continues to grow year over year by about 22%. Liquor stores and restaurants that adopt NA or healthier beverage options see up to a 20% boost in sales.
One important thing to note is that, as nonalcoholic and healthier alternatives get better, they aren’t getting cheaper. In fact, many functional spirits cost the same (or more) than their full-strength counterparts.
This means if there’s a demand for functional spirits in your area, you won’t sacrifice profits by selling them.
Yes, the functional spirit business is growing nationwide — but that doesn’t necessarily mean it’s a good fit for your store. Whether these types of drinks sell or not depends a lot on your business, your customers, and the general demographics in your area.
You probably can’t get an idea of how popular they are until you try selling them.
Either way, if you’re considering offering functional spirit options on your shelves, here are some tips to do it the smart way.
Some functional spirits ride a fuzzy legal line between drink and supplement. This line blurs even more when you add in CBD and hemp-based options, which are restricted in some states, but not others.
Start by talking to your suppliers, who are likely highly knowledgeable about what they can and can’t ship to you. At the very least, they can provide a list of their stock and bestselling functional spirits so you can do research.
It’s worth noting, too, that some drinks labeled NA are not completely free of alcohol. To be “alcohol free” a drink must contain less than 0.5% alcohol by volume. Anything higher is subject to higher tax rates and labeling standards.
Related Read: How To Overcome Liquor Supply Chain Issues: 3 Critical Steps
You wouldn’t start collecting whiskey without trying a few bottles first. Similarly, you should opt for a smaller rollout of functional spirit sales instead of setting aside a large, dedicated section.
Research the most popular brands, either online or by talking with your suppliers. Use standing displays on endcaps or place a few options near the front of the store.
A smaller selection isn’t the same as a hidden selection. Giving functional spirits some prime real estate (albeit a smaller footprint) serves as a good test of whether your customers are interested or not.
(Image source: Bevnet)
If you aren’t sure what varieties to stock, look at your sales numbers. See what your bestselling product categories are, then buy functional spirits in those same varieties.
Or try riding along with other industry trends. For example, tequila and mezcal sales are high, so stock a functional spirit that makes a great NA margarita. Remember to highlight choices like these using in-store signage or on your social media.
A limited release of already-popular options lets you gauge customer interest without a huge investment. Ask your suppliers if they offer a trial rate to see if their supply of functional spirits is a good fit for your store.
If sales and customer interest remain steady, then you can think about expanding your selection.
Don’t put a brand-new product on your shelves and expect your customers to automatically know what they’re looking at. Complement your new functional spirit selection with promotional pricing and marketing announcements.
If you already sell NA drinks at your liquor store, this is a great place to start. Use your point of sale (POS) system to filter your customers to those who’ve bought NA items in the last few weeks to send a targeted promotion. You should invest in signage to promote your new selections, too.
Then, it’s time to monitor your sales using the reports and analytics on your POS system. You’ll probably drum up some interest through your marketing — the key is to see if those sales are sustained in the long term or whether interest peters out over time. You also want to keep a close eye on your costs and profit margins in your NA selection, specifically.
At the end of the day, the sales numbers in your store — not a national trend — should determine whether or not you continue selling functional spirits.
At first glance, the exploding popularity of NA drinks and functional spirits might seem like a bad thing for liquor stores — but that’s not the case. As people explore new ways to drink, liquor stores have the opportunity to adapt to meet customers where they are.
Industry-specific solutions like Bottle POS make it easier for liquor store owners to roll out new products, monitor sales, and, ultimately, keep customers happy. Our specialty system connects directly with regional suppliers, so you can see updated selections, costs, and potential profit margins.
Once you start selling, features like automated ranking and sales reports give you a clear idea of whether your new items are worth keeping, expanding, or phasing out.
Try out our suggested pricing tool to see what kind of profit margins you can achieve at your store.