Denver and its craft breweries embrace non-alcoholic beers and spirits

This story is part of CNBC's new quarterly Cities of Success series, which explores cities that have transformed into business centers with an entrepreneurial spirit that has attracted capital, companies and workers.

Non-alcoholic beverage options have exploded in recent years, and that trend has especially intensified in the form of non-alcoholic beer in Denver, an epicenter of craft breweries.

The city, located in the Rocky Mountains, has embraced the alcohol-free trend as breweries increasingly lean toward incorporating more inclusive beverages into their offerings.

Non-alcoholic options on menus increased more than 55% from the fourth quarter of 2022 to the same period in 2023, according to data from Technomic, a foodservice research and consulting firm.

Although non-alcoholic beers have been around for Anheuser-Busch launched O'Doul's in 1990, recent surges in interest driven primarily by younger, more health-conscious consumers have led to an explosion in the sector, Technomic found.

And analysts predict that interest will continue to grow. Between 2022 and 2026, non-alcoholic beer volumes are expected to grow by around 25%, according to data from IWSR, an alcoholic beverage information company.

And according to data from NielsenIQ, a database of consumer purchasing behavior, Colorado was the second-highest state to spend on non-alcoholic beverages in 2023.

“People are becoming more curious, and since Denver is a city with a lot of people who exercise outdoors and stay in shape, there are a lot of people interested in reducing their alcohol consumption and staying healthy,” Keith Villa The co-founder and brewmaster of Ceria Brewing Company in Colorado told CNBC. “In our case, we are starting to see more and more people becoming educated about non-alcoholic and non-alcoholic beer and starting to turn to our products.”

Ceria, launched by Villa and his wife, Jodi, in 2018, is focused entirely on the non-alcoholic beer market, which Villa says is “growing every day.” The beer has been especially attractive to younger consumers, he added.

Non-alcoholic and non-alcoholic beer can be made in four ways, Villa said: removing the alcohol with vacuum distillation, passing the alcohol through a series of filters, using special yeast or making a low-alcohol beer and diluting it. with water. Because those processes are expensive and time-consuming, Villa said it's difficult for breweries to create non-alcoholic spirits.

But as beer consumption across the board continues to decline, Villa said more breweries in Denver are jumping on the trend.

“The market is becoming increasingly difficult for craft brewers, so to make some money in their business, they are starting to sell non-alcoholic beers,” he said. “There is a demand, but beers have to be brewed the right way. As long as we monitor and help each other, we can make sure people have a good selection of products that are safe to consume.”

Food trends expert Kara Nielsen said that because Denver is such a beer-centric city, the rise of beer and non-alcoholic spirits fits with the city's narrative.

“People [in Denver] “I like to play hard and then celebrate,” said Nielsen, who previously lived in Denver. “Over the last three or four years, there have been more and more very well-made non-alcoholic beers, including breweries in Colorado. It's become a choice.”

Denver-based brewery Grüvi has capitalized on that choice, offering a wide range of non-alcoholic offerings since its founding five years ago. Co-founder Niki Sawni said the company chose Colorado as its base because of its residents' preferences for a healthier lifestyle and the resulting potential for growth in the alcohol-free market.

Sawni said that at first his customers were mostly health-conscious consumers. But then, he said, non-alcoholic and non-alcoholic beer became trendy, attracting more mainstream customers. Almost every bar or restaurant in the area soon added zero-testing options in response, he said.

“It was just realizing that there was a gap in the market for when you didn't want to drink: you had to choose between sparkling water or soda or something that wasn't a middle ground to enjoy and that didn't have alcohol in it but still allows you to have that sociability,” Sawni said. “That's why we chose 'Grüvi': it means fun and playful, and five years ago, non-alcoholic products were the opposite of that. So we thought, 'Okay, how can we try to make something popular that wasn't so cool?' “

And as his company has seen success, Sawni said he's also seeing an encouraging trend with larger traditional spirits breweries now offering support and collaboration in a “symbiotic relationship” that hasn't led to any competition.

One of those larger breweries is Denver Beer Co., founded 13 years ago with a single taproom. Now, the company has several taprooms throughout the area and has begun incorporating sparkling hop water, a non-alcoholic alternative, into its menus.

“At the end of the day, we are a beer company, but we also understand that there is a consumer desire for an alcohol-free product,” said CEO Robert MacEachern. “In our ethos of being inclusive, we want as many people to enjoy our spaces as possible, so this was a natural extension for us to have people enjoy our space.”

For Denver Beer Co., the non-alcoholic trend has allowed the brewery to stay true to its core identity while adapting to its customers' tastes. MacEachern said he has seen particular interest in non-alcoholic beverages from running or cycling clubs that gather in the summer and are looking for something refreshing while still enjoying the taproom experience.

And while alcoholic beer will always remain the company's core identity, MacEachern said hop water has become “part of who we are.”

“Denver is the epicenter of craft beer. We are rooted in that industry. People in Denver embrace change and innovation, and that has allowed us to be successful as we deal with this wave of non-alcoholic behavior,” he said. “We will continue to build brand and brand value, not just us, but all craft beer companies. Non-alcoholic beer becomes an addition to who we are and not a subtraction.”