New opportunities: AB InBev’s ‘beyond beer’ business generated over $1bn in 2020
Known primarily as the world’s largest brewer - with big global brands such as Budweiser, Bud Light and Stella Artois - AB InBev now identifies the emergence of a ‘fourth key category’ between beer, wine and spirits: the ‘beyond beer’ category which includes RTD alcohol, canned cocktails, hard seltzers and flavored malt beverages.
“The lines between the established segments within alcohol - beer, wine, and spirits - continue to blur. A fourth category, defined as the intersection between these segments, has emerged as a relevant player with significant growth potential,” said Carlos Brito, CEO, speaking in last week's Q1 2021 earnings call.
From fun to functionality
This fourth category is expected to grow by 45% between 2019 and 2024, and is estimated to grow to $58bn in global sales by 2024, according to figures from Euromonitor.
While the category was still a small slice of AB InBev's overall $47bn revenues in 2020, it delivered $1.2bn and continued to accelerate in Q1, 2021.
So why expand beyond beer? AB InBev is not the only company to eye up the potential – Molson Coors is also following a similar strategy, going as far as to change its name from a ‘brewing company’ to a ‘beverage company’.
Like other beer giants, AB InBev is seeking to offer more options in a market where beer volumes are sluggish: turning to popular and fast-growing categories such as hard seltzers and RTDs. And there’s also the opportunity to explore beverages that are perceived to be healthier.
“As markets mature, consumer needs and occasions evolve. It is critical to offer a portfolio of options to our consumers to drive growth,” said Brito. “Beyond Beer products can offer functional benefits or attributes that are not offered by traditional beer, wine or spirits.”
Also important is the margin on such products: Brito says that the company’s Beyond Beer products have, on average, a 20% higher gross profit per hectolitre than the traditional beer portfolio.
New launches
For AB InBev, exploring the beyond beer space is about correctly interpreting long term consumer trends and identifying products that will resonate with drinkers.
“When exploring this space, it's key for us to understand and map the specific opportunities where we have the capabilities and the right to win,” said Brito. “Our teams stay close to emerging trends in the Beyond Beer space and are empowered to invest in both organic and inorganic growth opportunities.
“Each of these opportunities goes through a seed-and-launch phase designed to test and learn, and then either growth and scale or pivot fast. Successful organic ventures include Beats in Brazil, Brutal Fruit in South Africa. On the inorganic side, we have added brands such as Cutwater, Babe, and Nutrl to our portfolio as well. We're building a strong and diverse portfolio Beyond Beer products globally.”
Beyond beer products
Brutal Fruit: An 8% ABV fruit-infused ale available in South Africa
Babe Wine: AB InBev acquired the US canned wine in 2019
Cutwater Spirits: The distillery started life in 2007 as Ballast Point Spirits – an off-shoot of Ballast Point Brewing – but became a separate company in 2016 and was acquired by AB InBev in 2019. Its portfolio includes a number of canned cocktails.
Nutrl: AB InBev’s Canadian arm Labatt Breweries acquired distillery Goodridge & Williams in 2020, which makes the Nutrl vodka soda drinks along with other spirits and mixed drinks.
Skol Beats Secret: an 8% ABV canned drink made with alcohol from cereals and natural aromas of lemon and cranberry.
Flying Fish: initially a flavored beer brand in South Africa; now expanding with hard seltzers internationally
Hard seltzers: US and beyond
Hard seltzers are a key part of the beyond beer category: including Michelob Ultra hard seltzer and Bud Light Hard Seltzer. And AB InBev is now looking to expand the sector’s success beyond the US.
“We're launching Mike's Hard, a brand we own everywhere outside of the US across our footprint. It will be available in more than 20 countries by the end of this year in both the Mike's Hard Lemonade and Mike's Hard Seltzer variants.
“In the US, our largest Beyond Beer market that represents approximately half of our global Beyond Beer volume, we have significantly enhanced our presence in the hard seltzer segment with Bud Light Seltzer and the more recent launches of Michelob ULTRA Organic Seltzer and Cacti.
“We're expanding products like hard seltzer to new geographies. A great example is the launch of Michelob ULTRA Hard Seltzer in Mexico, where it has already captured approximately 45% market share of the developing seltzer segment, more than the next three brands combined.”
Overall, Brito says that AB InBev’s global might will help it leverage and scale the opportunities beyond beer around the world.
“Our Beyond Beer portfolio is growing fast. Our portfolio is already global, with around 90 brands in approximately 40 countries.
“We believe we have the right strategy and capabilities to win in this space by leveraging our agile innovation process, diverse geographic footprint, global supply chain, and extensive route to market.”
