There’s been a flat global beer market in recent years and brewers as well as other leisure drinks makers have had to hunt out new sources of growth. Heineken, the world’s second largest beer maker (after Budweiser/AB InBev) has recently announced that its premium brand had its best performance in more than a decade during 2018.
The company sold 7.7% more beer, in part due to the growing demand for the alcohol-free Heineken 0.0. Sales of this booze-free beer have been growing at a double-digit rate since the product was launched in 2017. And, unexpectedly. the growth in the product’s sales is also assisting in sales increases in the core Heineken brand. In the search for other drinks to satisfy modern tastes, the companies that manufacture the largest amount of beer, globally, have turned to craft brews as well as a variety of no-and-low alcohol products. Customers in recent years, perhaps driven by the Millennial generation, have become more mindful of their alcohol intake. (In an earlier post, we talked about a global movement to institute alcohol-free months, evidence of an awareness of the need to imbibe less of the alcoholic products.) Because of these recent moves toward less alcohol consumption, AB InBev’s goal currently is to generate at least one-fifth of its global beer sales from low-or-no booze brands by the end of 2025. The trend toward moderation could also contribute to brewers’ profitability. Alcohol-free beers are more costly to make – an extra step is needed to take the booze out – but consumers appear willing to pay the same price, or even a bit more, for the alcohol-free products. And, because excise taxes are calculated on the amount of alcohol content in the product, then, with the sale of booze-free drinks, more of the purchase price ends up in the brewers’ pockets. In recent years, stricter drunk-driving regulations have been enacted as well as taboos against lunch-time drinking (a realization and a reaction that came from the Mad Men series, perhaps). And, soft drink companies benefited from those actions. Now, however, the brewers seem to be regaining the trade lost to the soft drink makers by producing low-alcohol beers – today, one-in-five low-or-no-alcohol products sold is replacing a soft drink. Something that soda makers might want to begin worrying about – but recent headlines have chronicled the move by Coca-Cola to engage in coffee sales (re. recent purchase of British cafe chain Costa). So, perhaps, soda companies will just move into new territory. And, the coffee brewers – ? What new territory will they move into – ? Well, Starbucks had made a determination, under Swartz’s leadership, that they were going into the business of providing bars serving alcohol in the same locations as its coffee bars. So, perhaps the movement will now go full circle, and the coffee business will wrap around into the brewers’ business operation. There is a certain amount of jest included in my comments; but, who knows, humor often mimics reality. Success with ALL THE MOVING PARTS requires that all areas of any business operation are given due scrutiny and due emphasis.