Could alcohol-free beer give the industry a much-needed buzz?

Food DIVE

By Christopher Doering

August 10, 2017

Dive Brief:

• Large beer manufacturers are turning to no- or low-alcohol brews to attract new consumers and increase sales as revenue from its traditional beverages struggle, according to The Wall Street Journal.

• The paper said these beers make sense for the companies because they sell for about the same price as regular beer and carry less of a tax, helping boost their margins. They’re also popular with government regulators.

• It’s hard to determine if low-alcohol beer is growing in popularity, The Wall Street Journal noted. It reported that sales of an alcohol-free beer from Heineken surged this year, but that was likely the result of falling sales of malt—a kind of unfermented beer—in economically struggling Nigeria and Egypt. The beer also is popular in countries such as China, but that likely reflects the weak alcohol levels rather than consumers looking for the product.

Dive Insight:

Beer remains a popular beverage that has hit a rough patch after decades of global dominance. A growing number of drinkers are turning to spirits and mixed drinks in place of beer, which saw volumes drop 1.8% around the world in 2016, according to IWSR.

Another problem appears to be that younger drinkers are shunning alcohol. Fortune cited Bernstein analyst Trevor Sterling, who noted a 2015 National Survey on Drug Use and Health found more than 40% of 18 to 25 year-olds reported they have not had an alcoholic beverage in the past month. Sterling also noted that brewers are being targeted by anti-drinking campaigns focusing on combating obesity.

For beer makers, it’s uncertain whether no- or low-alcohol brews will grow into a dominant business, but it’s clear they have to find ways to stem the decline by introducing new beers of their own, purchasing craft makers and merging are some other widely used measures. So far, non-alcoholic beers and those with low levels of alcohol command a small slice of the overall market. Beverage Daily estimates non-alcoholic beer has about 0.6% of global beer consumption, while low alcohol commands a 2.2% share.

“As the latest statistics indicate that younger generations are ever more health conscious, the trend for moderation is likely to continue, opening up a range of new categories and occasions where we can connect with our consumers,” Heineken said recently in a statement. “Now, with the launch of 0.0% MAXX, we have gone one step further, creating an all-natural alcohol free beer which still delivers our full flavour.”

AB InBev announced last year that by the end of 2025, the company plans to have at least 20% of its global beer volume to be no- or low-alcohol — a figure that currently is in the mid-single digits. The company touted the initiative as a way to reduce harmful drinking, including underage, binge and drunk driving.

With changing consumer tastes and interests, beer manufacturers have little choice but to increase their production of these specialty brews. Still, just like their traditional beers, if these new drinks don’t taste good, health-conscious consumers and those worried about the other effects of alcohol won’t drink it anyway — or they’ll turn to a competitor’s product.