AB InBev CEO Carlos Brito wants to target no- and low-alcohol beer

AB InBev CEO Carlos Brito wants to target no- and low-alcohol beer

Anheuser-Busch InBev had its general shareholders meeting this week, during what must be one of the busiest times in the company's history. With management flying all over the world - be it picking through the details of the SABMiller takeover or snapping up more craft brewers - it's a wonder they had a moment to spare for shareholders.

But CEO Carlos Brito made it to the Brussel's Diamant Center on Wednesday and, according to a Reuters report, placed AB InBev's future firmly in the beer category. The chief executive appeared to suggest that when it comes to new acquisitions, he only has eyes for beer.

"We've always done it within beer," Brito reportedly said. "We don't believe in going too much outside beer. That makes the likelihood of success in integration higher."

If true, then it adds further weight to Brito's remarks elsewhere at the meeting that AB InBev will increasingly target the no- and low-alcohol beer category. After all, if the company won't expand into new categories, the only logical growth path is to expand existing portfolios.

According to Brito, no- and low-alcohol is one of the fastest growing trends in the drinks world, something borne out by the increasing numbers of new products in the category. These new launches chime with research that shows lower-levels of alcohol consumption in developed markets, especially among younger people as demographics change and cultural winds swing round to a more temperate direction.

But the clincher for brewers was summed up by another of Brito's remarks. As he points out, no- and low-alcohol beverages, if positioned correctly, can offer attractive margins because the excise tax is far lower than for alcoholic beers. Brito even said that producers can charge more for alcohol-free beers "depending on how you position the product".

Take, for example, one of the most recent low- and no-alcohol beers to feature on just-drinks' new product pages. 

Lion's 0.9% abv Hahn Ultra was launched in Australia in February priced AUD3 below the core Hahn brand for a six-pack. As it's below 1.15% abv, Lion does not have to pay the AUD33.70 per litre of alcohol that it pays on the 4.6% Hahn Super Dry or the AUD23.73 per litre of alcohol it pays on the 3.5% Super Dry. All for a AUD0.50 mark-down per unit.

There are hurdles to cross before brewers can convince consumers to ditch beer and switch to tax-friendly alternatives. Consumers drink alcohol because they like the taste. And, as Heineken's master brewer, Willem van Waesberghe, explained to me last month, currently the only credible alternatives to alcohol in terms of taste profile are harmful compounds such as ethanol. A tough sell. 

As far as van Waesberghe is concerned, the best no- and low-alcohol beers on the market are either the wheat beers or radlers, but that's because the extraneous taste of either the wheat or added sugars disguises the lack of alcohol. When it comes to making a non-alcoholic beer that actually tastes like beer, brewers have so far come up short, which is why van Waesberghe says that making a good alcohol-free beer remains the "ultimate challenge" for the industry.

But if brewers such as AB InBev do want to go down the radler route and move no-alcohol beers closer to a soft drinks taste and away from the beer profile, they can find a warning in Japan.

In the mid-1990s, brewers in the country - led by Suntory - started producing low-malt "happoshu" beers that could take advantage of tax rules that favoured lower-malt beverages. A few years ago, however, demand in the happoshu category fell and brewers turned to so-called 'third-category beers', which taste similar to beer but do not contain any malt and so costs even less than happoshu.

Unfortunately, for Japan's brewers, taste appears to have won out. Consumers are now ditching both third-category and happoshu for chuhai, a spirit-and-soda drink. 

The lesson is, then: If Brito wants to take no- and low-alcohol beer seriously, then he must first pass the taste test.