SABMiller's likely new owners push weak but healthy beer

Anheuser-busch InBev, which will soon make almost 30% of the world's beer, wants to sell more low- and alcohol-free brews to drinkers trying to live a healthier lifestyle.

The Belgium-based brewer, on the verge of buying its largest rival, SABMiller, has forecast that lower- and zero-strength beer will grow from a small base to make up 20% of its sales by the end of 2025.

That is a bold target.

Industry monitor Plato Logic says beer of up to 2.8% alcohol by volume had only a modest 2.5% share in 2014, although annual growth was 4% to 6% versus just 1% for beer as a whole.

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Brewers pioneered nonalcoholic beer in the '80s and '90s, with limited success. Now they believe they have two game-changers - sustainable demand and a product that tastes like regular beer.

AB InBev, best known for its Budweiser, Stella Artois and Corona brands, has committed $1-billion (about R14-billion) to reducing alcohol abuse, with pilot projects to start in six cities later this year. It will spend far more than that on developing new low-alcohol products of up to 3.5%, or "no-alcohol" products of 0.5% and lower.

Its latest, 0.0% Budweiser Prohibition Beer, launched in Canada in May as a possible prelude to its sale in larger markets.

Faced with the rising challenge from smaller craft brewers and limited growth of mature markets, major brewers hope weak beer is a sector where they can rapidly expand.

"The higher-alcohol segment is largely covered by craft," said Euromonitor analyst Spiros Malandrakis. "The mainstream boys have decided to go to a segment that is less saturated." The attraction is clear, with potentially stronger growth and fatter margins as brewers sell nonalcoholic products at the same price or more than a regular beer, but pay far lower or no excise tax.

CEO Carlos Brito told shareholders in April that ABInBev was following consumer trends, with appealing drinks that were also low in calories and made from natural ingredients.

"You have an ocean of opportunity, all these soft drinks, water, juices, energy drinks that today we don't tackle," he said.

Brito is not alone. Carlsberg chief Cees 't Hart said in March that the Danish company wanted to be a leader in nonalcoholic beverages, noting more rapid growth in that niche.

Charles Nouwen, ABInBev's global director for product development, said the new Prohibition Beer was the result of radical changes to the production process.

block_quotes_start Consumers have evolved, saying they want to have something that is lighter or nonalcoholic for enjoyment block_quotes_end

Previously, brewers had tended to stop fermentation at an early stage, resulting in a sweet, malty brew. Or they would take a regular beer and heat it up to evaporate the alcohol, effectively cooking it and risking an oxidised or stale taste.

Nouwen said his company had made a base beer that was rounder and richer than a normal Budweiser, knowing it would undergo a change when the alcohol was drawn out.

Then, by sharply reducing the pressure, it removed the alcohol at a far lower temperature, while also capturing compounds such as esters and other flavourings that might have escaped.

"For lots of consumers we tested with, and even colleagues not involved in tasting panels, we fooled many by mixing some Bud and Bud Prohibition, trying to get them to find which was which. It was not necessarily easy for them," said Nouwen.

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ABInBev and fellow brewers believe consumers have also changed since the '80s when nonalcoholic beer was targeted at drivers and pregnant women. They are not looking to woo teetotallers, but responding to health-conscious consumers seeking lower-calorie, more natural alternatives to standard soft drinks.

"Consumers have evolved, saying they want to have something that is lighter or nonalcoholic for enjoyment ... They want to look cool drinking that as part of everyday life with friends," said Nouwen.

Counting calories is also a factor. Nanny State, the 0.5% beer of British craft brewer Brewdog, has 26 calories per 330ml, against 150 for its top-selling Punk Ale or 139 for the same sized can of Coca-Cola.

Brito has said ABInBev will launch variations on current products and totally new brands and seek to learn from pilot projects in Argentina, Belgium, Brazil, China, Mexico and the US how to make "smart drinking" cool.

Andrew Holland, analyst at Societe Generale, said ABInBev needed to win over consumers in the Americas, which account for some 70% of its volumes. "ABInBev does have a solid record of hitting targets ... but it's a big ask," he said.