The King Of Beers Is Becoming A Non-Beer Company

Jul. 26, 2016 4:18 PM ETAnheuser-Busch InBev SA/NV (BUD)
Quinn Foley profile picture
Quinn Foley
1.33K Followers

Summary

  • Anheuser-Busch is expanding into alcohol-free beers.
  • BUD aims to make alcohol-free beers 20% of the portfolio by 2025.
  • Alcohol-free beers would benefit BUD in a few ways, but there are challenges that limit the market potential.

Anheuser-Busch Inbev (BUD) has pledged to expand its portfolio of low-alcohol and alcohol-free beer to 20% of its global beer volumes by 2025, up from 9% in 2014. The company is trying to keep pace with changing customer preferences and find new sources of growth as global beer volumes stagnate. The low/alcohol-free beer market is an interesting opportunity for BUD, and a push into this burgeoning market could benefit BUD in a number of ways. But there are also some challenges that we think limit the market potential of alternative beers for BUD.

The low/alcohol-free beer market is still in its early stages, but it's expanding rapidly. Rising consumer demand for healthier and more natural products, increased awareness about the dangers of alcoholism, and technological advancements that have allowed brewers to better replicate the taste of regular beers are key factors driving the growing popularity of no/low alcohol beverages.

The global market for no/low alcohol beer stood at $9.96 billion last year (2.8% of the total beer market), up 19% from 2010 levels. Analysts are optimistic (Figure 1) that growth will continue, thanks to efforts on behalf of Western governments to promote health, and increased religiosity in the Middle East where alcohol is banned in many places for religious reasons.

Figure 1: Global No/Low Alcohol Beer Market Forecast

Source: Euromonitor International

A larger no/low alcohol beer portfolio could benefit BUD in a few ways. Most importantly, it would help the company offset beer volume declines in developed markets. Alcohol consumption fell 18% in the UK between 2004 and 2014, and while beer consumption in the US did grow 3.6% over this period, it fell 0.9% between 2012 and 2014. BUD's North America and Europe segments accounted for 35% of company revenues in 2015.

Access to new consumer groups such as

This article was written by

Quinn Foley profile picture
1.33K Followers
equity analyst / macro. passed cfa level ii exam

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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