The rise of Dry January 🍹🍺🍷

Welcome to Alternate Universe!

In today’s edition:

• Is Dry January an investable trend? 🍷

• Job opportunities at recently funded European startups 👇

• EURO x LinkedIn crossover ⚽

The Crux 🔴

Christmas: a time when indulging in too much food, guzzling mulled wine, and tolerating awkward family members is normalized.

At the beginning of this year, I decided to take a break and kick off 2024 with a good habit — Dry January.

Although I had previously taken breaks from drinking alcohol socially throughout the year, I felt that nothing compared to the reset offered by Dry January.

Fueled by this new enthusiasm, I delved into a new rabbit hole.

🐰🕳️⌚

Trends 📈

As it turns out, search volumes for non-alcoholic beverages (NAB), have been growing steadily over the last few years, especially within Millennial and Gen Z populations.

• The No-alcohol share of the overall alcohol market is expected to grow to nearly 4% by 2027.

• Annual consumption of non-alcoholic beverages worldwide grew from 580 to 803 billion liters over 10 years.

• There is even a term for this trend - Sober curious (and a subreddit of course). This refers to people who aren’t necessarily addicted to alcohol or feel the need to abstain for the rest of their lives, but rather experimenting with living without alcohol.

Health 👩‍⚕️

Younger generations are becoming more mindful of their drinking habits for two key reasons:

1. Sugar - Liquid calories can hinder health goals, leading to the rise of lower-calorie alternatives like hard seltzer.

2. Alcohol - Alcohol's detrimental effects on health are extensive, including liver disease, heart issues, cancer, increased violence, and accidents.

As a science grad, I was aware of the dangers of binge drinking. More surprising was the hidden effect of low but continuous alcohol consumption. This subtle pattern of drinking proved to be a Trojan horse to my health, causing grogginess, irritability, and persistent brain fog.

For a long time, moderate alcohol consumption (1-2 drinks/day) was touted as beneficial. However, studies failed to clarify if moderate drinking directly improved health or was simply a reflection of the affluence and better health of those who could afford to drink moderately.

Two separate studies in Israel and New Zealand challenged this notion. The first study observed participants consuming one standard drink daily for two years and found no significant health benefits, with potential risks, including cancer, possibly taking years to manifest. After accounting for socio-economic status, the second study revealed that the perceived health benefits of moderate drinking vanished entirely.

Market 💹

The no/low alcohol drinks market is estimated to be worth $13 billion and is forecast to grow at a 6% CAGR until 2027. The market is broadly divided into three categories, with non-alcoholic beers leading in both the US and Europe, followed by non-alcoholic variants of wine and spirits.

Wine is better suited to the low-alcohol segment rather than the no-alcohol segment. Removing alcohol from wine significantly impacts its sensory quality due to its higher ABV compared to beer.

Non-alcoholic spirits occupy a unique niche. Unlike beer and wine, their production usually involves adding aromas to a non-alcoholic base liquid, enhancing mocktail selections.

While the market outlook is promising, it faces a few challenges. One is the limited beverage selection available to patrons while dining out, coupled with taste issues. Despite being pricier, customers are willing to pay more for these drinks, as evidenced by trends in the beer category.

Tech ⚙️

Two key technologies are used in the dealcoholization of spirits:

1. Reverse Osmosis: Commonly used for beer, this technique utilizes a specialized membrane to selectively filter alcohol molecules by size. By adjusting pressure, alcohol is separated while preserving water and flavor compounds.

2. Vacuum Distillation: This method applies reduced pressure to lower the alcohol's boiling point. The wine is heated under a vacuum, causing the alcohol to evaporate at a reduced temperature. The evaporated alcohol is then condensed, leaving behind non-alcoholic wine with its flavor components intact.

In addition to these two technologies, other solutions include nanofiltration and interrupted fermentation. Companies in this space are constantly innovating. One leading US brand of non-alcoholic beer, Athletic Brewing, has developed a proprietary process. The founders returned to basics, recreating a brewing process that retains esters and other chemical compounds produced during fermentation without generating alcohol.

Judging by reviews, it’s working!

Investment Implications 🤑

To my knowledge, there are no publicly traded non-alcoholic beverage companies yet.

The usual suspects would be the alcohol market incumbents with non-alcoholic options such as Diageo and AbInBev. However, the NAB segment, although growing, still represents a small revenue line for these behemoths.

This will be offset in the coming years as companies continue expanding NAB production. For example, Diageo invested 25 million euros last year to grow the production of their Guinness 0.0 brand by 300%.

On the private side, various non-alcoholic brands are popping up yearly.

Click here to access a larger list of these brands.

An indirect play in the public markets would be to invest in flavor companies. A booming NAB market will also require new and improved flavors, especially since taste is currently one of the biggest challenges to this category.

This bet will require the NAB market to mature and represent a decent chunk of flavor companies’ revenues. From scouring annual reports, it’s unclear what revenue percentage the NAB market currently represents (let me know if you have more details).

The final way to get exposure to this trend is through private flavor companies. Coincidentally, a Danish startup, Evodia Bio, focuses on producing higher-quality hop flavors for the NAB market using precision fermentation.

Or else just go with Reddit’s advice - drink normal beer and invest in AbInBev 😅

Dig Deeper ⛏️

• Processes for alcohol-free beer production: a review

• Effects of Initiating Moderate Alcohol Intake on Cardiometabolic Risk in Adults With Type 2 Diabetes: A 2-Year Randomized, Controlled Trial

• The “Health Benefits” of Moderate Drinking in Older Adults may be Better Explained by Socioeconomic Status

👋👋 P.S. If you’ve enjoyed this week’s issue refer to a friend. If you’re that smart friend, subscribe here.

Headhunted 🦅

Recently funded private companies need talent! Scout jobs at recently funded European startups, ahead of your competition. 💪

1. Hive 🇩🇪 - An operations platform for independent brands in Europe has raised a €28.2m Series A (link)

2. LiveEO 🇩🇪 - Spacetech startup closes a €25m Series B (link)

3. Otamiser 🇧🇪 - Hotel ranking management solution raises $3m Seed. Hiring across sales, marketing and more (link)

4. Climate X 🇬🇧 - Raised an $18m A round to help businesses assess climate risk data (link)

5. Neustark 🇨🇭 - Swiss carbon capture company closes $69m in funding. A ton of job openings across Europe 👉 (link)

6. FirstVet 🇸🇪 - Digital vet provider closes €20M Series C (link)

7. Chargy 🇬🇧 - UK-based EV infrastructure company secures £100m in funding (link)

8. Dust 🇫🇷 - Custom AI assistant platform announced a $16m Series A led by Sequoia. Hiring multiple engineers (link)

Interestingness📔 

• UBS has recently published an updated report on the ‘Roaring 20s’ in the US. With pandemic disruptions over, persistent growth in the decade depends largely on AI and capex investments (link).

• Jan Voss published a great intro to venture capital (link).

• BlackRock has agreed to buy UK private markets data provider, Preqin in a $3.2 billion cash deal (link).

  👉 The acquisition gives BlackRock, coverage of 190,000 funds, 60,000 fund managers, and 30,000 private market investors.
  👉 This strategic move underscores BlackRock's commitment to capitalize on the rapidly growing private markets sector.
  👉 Founder Mark O'Hare set to receive $2B post-acquisition, solidifying his status among the UK's wealthiest, and richer than BlackRock founder, Larry Fink.

• Gen Z changes jobs more quickly than X or Y (link). Gen Z's fresh graduates held twice as many different jobs in the first four years after college as Gen X did.

• ⚽ The EURO-LinkedIn crossover we didn’t know we needed. 😅 There seems to be a trend of making similar unrelated connections.

📚 New to investing? Grab a PDF copy of my ebook here.

As always, the financial disclaimer!

This is not investment advice. I am not a financial advisor. Make sure to conduct your thorough research before purchasing or selling financial products.Wee