Choosing to cut back on alcohol this summer? Australians looking for something that imitates the real thing might be taken aback by the price.
“Nolo” drinks with little to no alcohol content are often comparable in cost to their alcoholic counterparts – or even more expensive.
At Dan Murphy’s, a case of 24 zero-alcohol Heineken bottles will set you back $49.99. A case of 24 Heineken lager bottles is $51.95.
At Liquorland, a bottle of Jacob’s Creek riesling with no alcohol costs $15; the traditional product, with an 11.7% alcohol content, is cheaper at $10.
These are big brands, sold at big retailers; drinks from speciality winemakers and brewers dedicated to low or no-alcohol options tend to be more expensive.
Tax makes up a large portion of the price of alcoholic drinks. But non-alcoholic beer, wine or spirits don’t attract an alcohol excise. So why do they cost so much?
It’s complicated. Manufacturers and retail advisers say production costs are high and smaller businesses can’t afford to absorb the expense, but some experts say companies are charging more for nolo simply because they can.
How are alcoholic drinks taxed?
Manufacturers of beer and spirits pay an excise based on the amount of alcohol in the product. The tax is indexed, meaning it changes with inflation.
As of August, beer in individual containers that has an alcoholic volume in excess of 3.5% attracts an excise rate of $62.56 per litre. All other “excisable beverages” attract a rate of $105.98 per litre of alcohol, apart from brandy, whose rate is $98.97. Under pressure from the industry to reduce taxes, the federal government has frozen the excise for two years.
Wine manufacturers, on the other hand, pay a flat 29% tax on the wholesale value of their products.
Producers of non-alcoholic beer, wine or spirits pay no excise or wine tax.
So what justifies the retail price for nolo?
Some non-alcoholic retailers and manufacturers acknowledge customers have questions about the price of their products.
The FAQ page on the website of the popular non-alcoholic beer company Heaps Normal includes the question: “Why is your beer so expensive?” Its chief product officer, Ben Holdstock, says questions about price have declined since the beers went on the market in 2020 (and their production rate has grown 700%) but they still get asked: “It’s not taxed, so why does it cost what it costs?”
Holdstock says it depends what drinks are compared. He says Heaps Normal beers are more expensive than those made by a “mainstream multinational alcohol producer” because Heaps Normal operates on a smaller scale, uses high-quality ingredients and has a different manufacturing process.
“We’re not removing alcohol, we’re not diluting the alcohol down, we’re actually just producing a product designed from scratch to be non-alcoholic,” he says.
Holdstock says Heaps Normal is “actually cheaper” than independent local craft beer, and that is likely to be because there is no excise.
A case of 24 cans of pale ale from the craft beer company Brick Lane – which shares its Melbourne brewery with Heaps Normal – costs $72.99 at Dan Murphy’s, while a slab of Heaps Normal costs $67.99. Other craft beers available in cases of 24 range in price from $63.99 to $107.99.
Holdstock says Heaps Normal’s wholesale price for a carton of 24 cans is $50. He won’t disclose the company’s profit margin, other than to say it is “in line with the industry standard for beer”.
In 2023, the economist Cameron Shackell argued in the Conversation that “price anchoring” had been “used to reinvent and elevate the virgin drinks category by exploiting the fact we are used to paying high prices for alcohol in bottles”.
Shackell, an adjunct research fellow at the University of Queensland’s Centre for Policy Futures, still believes anchoring – where consumers are influenced to accept the price of an item based on an earlier price – is at play.
However, he now believes “grassroots” companies (he cites Heaps Normal as an example) are different to larger manufacturers, who he believes are charging higher prices for “lookalike” non-alcoholic drinks than they should.
“Their prices always seem to cluster around, let’s say, 5% or 10% lower than the alcohol prices … even though there are all these different [production] methods with different costs,” he says. “Who knows what companies are using what methods?
“They’re using the taxation structure in Australia to use this price anchoring to get higher prices for the nolo lookalike drinks … that have no tax on them. That’s fairly obvious by the force with which they’re marketing them.”
Kym Anderson, an economist and the executive director of the University of Adelaide’s wine economics research centre, says alcohol companies are “obviously” discerning between different types of consumers.
“People who drink the low and no-alcohol [products] apparently they’ve found are less price-responsive than those who drink regular strength beer, so they get more of a margin selling at a higher price,” he says. “But it’s true the costs of production might be higher for lower alcohol product.”
An expanding market
The global non-alcoholic beverage market is expected to reach US$43bn by 2027, with forecast growth of almost 8% a year, according to research by ANZ. Non-alcoholic beer is Australia’s fastest-growing beverage in the alcohol sector, accounting for 45% of non-alcohol drinks sales in 2024 and about 10% of beer sales.
Almost half (47%) of 200 Australians surveyed earlier this year by retail advisories Shop! ANZ and Vypr said they were drinking less or had stopped altogether. Carla Bridge, the general manager at Shop! ANZ, says “it would be remiss of [businesses] not to cash in on that opportunity when the research indicates that’s what people are asking for”.
Nevertheless, Vypr’s Sam Gilding says while a lot of the brands he works with have nolo options, most Australians who skip alcohol on a night out are still choosing soft drink instead.
“When people are out at a bar or a pub, 64% of people who want an alternative choose a carbonated soft drink, whereas 7% opt for low or no alcohol,” he says.
Sara McCluskey, the general manager of diversified industries at ANZ, says large brewers and wine companies among her customers want to stay relevant to consumers who are drinking less by offering non-alcoholic options.
“The customers that we deal with are very much seeing these products as a strategic hedge in an environment where there is definitely a trend towards moderation or abstinence,” she says.
“If consumers don’t want to pay, they will choose a cheaper product like a soft drink.”
