Want to know where each generation spends its money? Start by understanding the values they share. With economic pressures and changing lifestyles reshaping where and how Americans spend their money, one notable market shift has emerged across Millennials and Gen Z’s spending habits. It is not just about where the youngest consumers are willing to part with their disposable income, but what they are choosing to spend it on — enter the world of nonalcoholic, or NA, beverages.
What the Data Shows
According to the latest analysis from the International Wine and Spirits Record (IWSR) Global Database, global sales of no- and low-alcohol beverages rose more than 7% in volume in 2022, pushing the segment’s market value above $11 billion—up from $8 billion in 2018. Analysts project that what was once considered a novelty menu item will continue to surge through 2026 and beyond projected to reach $1.6 trillion globally by 2026—driven in part by younger consumers’ growing appetite for mindful drinking and more sober social experiences.
As more beverage entrepreneurs and industry stakeholders enter the space, financial and operational planning have become increasingly critical. From compliance and tax implications to inventory management and capital expenditures, the complexity of launching a nonalcoholic product line is often underestimated.
Whether you’re a startup entering the market for the first time or an established brand expanding your product line, understanding how local, state, and federal regulations apply to nonalcoholic beverages can mean the difference between a successful launch and a costly setback.
Here are four financial and accounting areas businesses should address before entering the nonalcoholic beverage market.
Forecasting and Budgeting: Modeling for an Evolving Market
One of the most critical first steps in entering the nonalcoholic beverage space is creating detailed financial forecasts and scenario-based budgets. The cost structure varies significantly depending on production methods, distribution models, and sales channels.
Startup brands often test concepts through small-batch co-packing, while established companies may invest in their own facilities. Either way, the budgeting process should account for ingredient costs, packaging, labor, regulatory fees, marketing, and supply chain expenses—all of which can fluctuate based on geography, seasonality, and consumer demand cycles.
Capital Expenditures and Equipment Decisions
Manufacturers entering the space will likely face decisions about whether to purchase, lease, or outsource equipment for bottling, canning, pasteurization, or carbonation. A capital expenditures analysis can help determine which option is most financially viable over the long term.
The analysis should weigh depreciation schedules, potential tax advantages, upfront capital requirements, and the projected useful life of equipment. For example, if product demand remains uncertain, leasing may provide short-term flexibility without a large upfront investment.
Navigating Sales Tax Complexities
Sales tax compliance in the nonalcoholic beverage industry is less straightforward than many assume. Depending on the state or locality, a nonalcoholic beer could be taxed differently than soda or other beverages.
Tax professionals caution businesses to pay close attention to classification—especially when operating across multiple states or e-commerce channels. Inaccurate categorization can result in under- or over-collection of taxes, triggering audits or penalties.
Understanding state-specific tax codes and exemptions is essential—particularly as some jurisdictions reevaluate how they treat beverages that closely mimic alcoholic products.
Managing Cash Flow in a High-Growth Environment
Cash flow analysis is particularly important in early-stage beverage ventures, where sales may be irregular and upfront investment requirements are high. In addition to covering production costs, businesses often need to spend heavily on brand awareness, packaging design, and distribution partnerships.
Experts recommend scenario-based cash flow planning that considers different sales ramp-up timelines, seasonal demand fluctuations, and delayed payments from wholesale buyers.
Looking Ahead
The nonalcoholic beverage category has matured beyond novelty and is increasingly recognized as a serious, standalone market segment. As with any emerging industry, financial discipline, strategic planning, and regulatory awareness will likely separate long-term players from short-lived experiments.
____________________________________
We highly recommend you confer with your Miller Kaplan advisor to understand your specific situation and how this may impact you.
