BUD Anheuser Busch Inbev SA NV

By Saabira Chaudhuri 

After years of trying and failing to jump-start sales of alcohol-free beer, the world's largest brewers are expanding their nonalcoholic offerings with renewed zeal.

Each of the new global Big Three in brewing -- Anheuser-Busch InBev NV, Heineken NV and Carlsberg A/S -- is investing in new technology, marketing and distribution for nonalcoholic beers like Budweiser Prohibition Brew, 0.0% MAXX and Nordic. They are betting stricter alcohol regulations and a shift toward healthier consumption will lift sales.

None of the companies breaks out its investments on alcohol-free beer. But Carlsberg recently outlined plans to, at minimum, double craft and nonalcoholic beer volumes from 6% to 12% by 2022. And AB InBev has said at least a fifth of its beer volume world-wide will be no or low alcohol by the end of 2025, up from 6% currently.

"Nonalcoholic beer is growing three times faster than the overall beer market and offers some excellent margin opportunities," says Carlsberg Chief Executive Cees 't Hart earlier this year.

Brewers earn fatter profit margins from nonalcoholic beer given the absence of excise tax and the fact that such beers often sell at a premium to regular beer. Carlsberg figures show an average gross profit per 100 liters of nonalcoholic beer in Western Europe that is close to double that of regular beer.

But despite brewers' efforts, the volume of nonalcoholic brews as a proportion of global beer has stayed roughly flat at around 0.7% for the past decade, according to beverage-industry research firm Canadean.

Nonalcoholic beer, which is 0.5% alcohol or less, has a fan following in Muslim-majority markets such as Iran and Indonesia. It has also gained ground in Spain, where it is commonly drunk with tapas, and Germany, where it is often consumed after sports activities, according to market researcher Euromonitor. But in many large beer markets, including North America and the U.K., nonalcoholic beer has failed to gain traction.

Part of the problem is that many everyday drinkers aren't convinced nonalcoholic beer makes sense.

"It's kind of like nonbeneficial exercise -- why would people use this if the main benefit doesn't exist?" says Matt Voda, a New York-based virtual-reality developer who in 2013 did market research on nonalcoholic beer for Heineken as part of an internship with the brewer.

Mr. Voda's research during his three months at Heineken showed nonalcoholic beer was primarily drunk by older people whose doctors had advised them to cut back on alcohol.

Brewers are working to change this.

At an analyst event Carlsberg hosted last month in Stockholm, Carlsberg Chief Commercial Officer Jessica Spence says the company wanted to shift alcohol-free beer from being associated with words like "compromise," "bad taste," responsible" and "social stigma," to being associated with "core beer," "heritage," "craft" and "innovation."

Carlsberg's advertising shows people drinking its alcohol-free offerings while hiking, swimming and playing football. The brewer's nonalcoholic Nordic brand sponsored a run to raise money for cancer in Denmark last month and says it has similar fitness-focused activities planned for next year.

Heineken has taken a similar tack, spending on ad campaigns linking alcohol-free beers to an active lifestyle, a shift from its previous strategy that mainly touted the functional benefits of nonalcoholic beer for drivers, pregnant women and the like. It now has 63 variants of nonalcoholic beer, up from 15 in 2011.

Alcohol-free beer -- which is made either by halting the conversion of sugars to alcohol early or removing the alcohol after brewing is complete -- has yet to shrug off a longstanding reputation for being watery and flavorless.

"The problem for nonalcoholic beer is, if you take the alcohol out, you're taking some of the flavors out, and if you stop fermentation you end up with a very sweet product," says David Ryder, former head brewmaster for MillerCoors.

Now, brewers say technological advancements are helping them overcome this. AB InBev Brewmaster Charles Nouwen says the company has come up with specific brewing recipes that help yeast produce intense beer flavors. It then distills the liquid at a low temperature to remove the alcohol without losing the beer character and flavor.

"Our ambition is to close the gap with regular beer, so we can have both propositions without anyone noticing the difference." Mr. Nouwen says.

Carlsberg -- which says it has the world's largest collection of yeasts, at more than 2,500 varieties -- has begun using new yeasts and bacteria to remove alcohol, as well as new technology to make cereal- and fruit-based nonalcoholic beer. It has gone beyond making lagers, launching several alcohol-free wheat beers.

"Until recently there was only a couple of nonalcoholic beers and they weren't very tasty -- it was almost like water or just not the right taste -- but with Nordic they've come very close," says 30-year-old Anna Stegger Gemzoe, who drank Carlsberg's Nordic brand of nonalcoholic beer during her pregnancy last year. In Denmark, where Ms. Gemzoe lives, Carlsberg Nordic has a 43% share of the nonalcoholic beer market.

But Carlsberg still has work to do on many of its other alcohol-free brands, says Liberum analyst Alicia Forry, who sampled several of the nonalcoholic beers on offer in Stockholm last month. "They're better than ones I've had in the past," she says, "but still not something I would pay for."

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

November 22, 2016 05:44 ET (10:44 GMT)

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