ZX Ventures to explore potential of low-alcohol craft beer in China

ZX Ventures, AB InBev’s incubator unit and venture capital arm, aims to expand its low-alcohol craft beer offer in China in a move to capitalise on growth opportunities in the country’s beer market.

According to Nicolas Morelli, head of craft and specialties, APAC North, at ZX Ventures, the low- and no-alcohol craft beer market “is much more relevant in China than in any other market” because Chinese drinkers are more used to low-strength beers.

“I think non-alcohol will be really relevant for us,” Morelli said at the Food & Beverage Innovation Forum in Hangzhou. “We have low-alcohol beers within our portfolio; it’s not something that is so relevant yet in the craft community globally, but we are seeing more and more brands are doing it.”

Indeed, AB InBev CEO Carlos Brito believes 20% of the company’s sales volumes globally will come from its low- or no-alcohol portfolio by 2025 – up from around 8% currently. 

Last year, ZX Ventures opened a new craft brewery in Wuhan, China, that produces beers for its Goose Island, Boxing Cat and Kaiba brands. And in recent weeks, three new Goose Island IPAs have gone on sale in the country, with ABVs of between 3.5% to 4%. But Morelli believes more can be done to capitalise on the demand for weaker beers.

“We need to explore more 2% alcohol or 2.5% alcohol,” he said. “We are starting to have in different trials of zero alcohol. I think it’s really tough to do to be honest. We have the technology to do it in our brewery in Wuhan, but it’s really tough to do a zero-alcohol beer because the technology that you need to actually do it, it’s a little more complex.”

In China, ZX Ventures is initially targeting growth in Beijing and Shanghai and then aiming to expand into other cities. The Boxing Cat and Kaiba beer brands, which are both based in Shanghai, were acquired by AB InBev in 2017.

“We believe that Boxing Cat has an amazing opportunity to succeed in Shanghai and we are using Kaiba more in the south of the county,” said Morelli.

“With Boxing Cat, the idea is to have more sessionable beers that are easier to drink. The role that we see for Boxing Cat in China is to be the gateway brand to put consumers that consume premium to jump and trade up to craft… It’s an amazing craft brewery, we have an amazing portfolio of varieties. The idea is to put Boxing Cat as this bridge between premium and craft.”

ZX Ventures believes it has room to grow with Boxing Cat, Kaiba and Goose Island and is currently not looking purchase other craft beer brands in China.

Morelli said: “We believe that with these three brands, if we focus in the different channels and the different styles that we believe could succeed in China, we will make a better portfolio than having a lot of different brands that at the end no one knows.”

ZV Ventures sees China’s burgeoning e-commerce market as crucial to bringing its beer brands from larger cities to other areas in the country, and the unit is growing faster in e-commerce than in traditional channels. “For us, it’s the easiest channel to go there and put our brands in the hands of consumers in different cities,” said Morelli.

There are also plans in place to launch a new amber larger next month, first in e-commerce and then in other channels. Meanwhile, the unit will also bring both Pirate Life and Four Pines – the Australian craft breweries that AB InBev acquired in 2017 – to China, mainly available through online retail.

While Morelli admits that the craft market in China is still “really small”, by expanding Boxing Cat, Kaiba as well as imported craft brands throughout the country, he is optimistic for the future: “We expect to have a big impact on the craft community and in the craft segment.”