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  HOME | Business & Economy (Click here for more)

Beer Unlikely Winner from Teetotal Trend

LONDON – Global brewers are unlikely winners from the trend toward temperance. That is bad news for soda companies like Coca-Cola and PepsiCo.

Heineken, the world’s second-largest beer maker after Budweiser-owner AB InBev, said that its flagship brand had its best performance in more than a decade in 2018. It sold 7.7 percent more beer, partly thanks to demand for its booze-free Heineken 0.0 range. First launched in the summer of 2017, sales of the no-alcohol beer are growing at a double-digit clip. Counter-intuitively, the product is helping rather than eating into sales of the core Heineken brand. The shares were up 7 percent in early afternoon trading.

Heineken and AB InBev have had to hunt out new sources of growth in a flat global beer market. Craft brews have been one bright spot. So too have no-and-low alcohol products, which are selling well as consumers become more mindful of their alcohol intake. Although these tipples are still a small part of the market, just 5 percent of beer volumes world-wide, the category has grown at 3.9 percent on average for the past five years compared with a stagnant beer sector. That explains AB InBev’s ambition to generate at least one-fifth of its global beer sales from low-or-no booze brands by the end of 2025.

The taste for moderation could also help brewers’ profitability. Although alcohol-free beers are more costly to make, an extra step is needed to take the booze out, consumers are prepared to pay the same price, or even a premium, for drinks that have less alcohol. Because excise taxes are calculated based on a beverage’s alcohol content, more of the purchase price ends up in the company’s pocket.

Early generations of booze-free beers, bitter and badly marketed, have left an unpleasant taste in consumers’ mouths. It will take time for improved recipes to really take off. But low-alcohol beers help brewers win back drinking occasions that they have lost to soft drinks in recent years, soda companies have benefited from stricter drink driving rules and taboos around lunchtime drinking, for example. Today, one in five low-or-no-alcohol products sold is replacing a soft drink, according to a survey by brokerage UBS.

That should be worrying news for soda giants. Coca-Cola’s recent purchase of the British cafe chain Costa suggests it is more worried about coffee consumption. But big beer is also encroaching on its turf.

 

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