A “de-alcoholisation facility” sounds like somewhere to check in after a boozy Christmas, but in the new annexe of a brewery in south Wales they are extracting hangovers from beer.

With demand for no-alcohol and low-alcohol (“nolo”) beer taking off in the UK, the hi-tech brewing apparatus enables the plant at Magor, which produces more than 1bn pints of Budweiser, Corona and Stella Artois a year, to make the increasingly popular teetotal versions too.

The new unit is part of AB InBev’s global brewing empire and at its official opening on Friday, Brian Perkins, whose wider management responsibilities include running the drinks group’s UK arm, acknowledged that in the early days alcohol-free beer tasted “lousy”.

Alcohol gives beer a sweet, warming, full-bodied taste, as well as affecting how other flavour compounds evaporate, resulting in its distinctive flavour. So removing it and being left with a drink that still tastes good has been a huge challenge for the industry.

“No-alcohol beer used to taste terrible because the technology was quite primitive,” Perkins said. “Beer is very delicate; you need to treat it with care, and that ended up affecting the taste. You got beer with no alcohol but it tasted lousy.”

But the world has moved on. The de-alcoholisation unit uses state-of-the-art technology that represents a “significant step forward in preserving the full flavour and aroma of the beer”, according to the company.

The brew undergoes its metamorphosis inside hulking stainless steel columns, with the alcohol extracted using a process called vacuum distillation. This involves reducing the atmospheric pressure, lowering alcohol’s boiling point and allowing the beer to be heated to a warm temperature to retain taste while evaporating the alcohol.

Chris Bryant, left, formally opens the Magor ‘de-alcoholisation’ facility at Magor in south Wales. Photograph: Budweiser Brewing Group

By avoiding prolonged exposure to high temperatures, the original character of the tipple (if you are partial to Stella or Corona) is maintained while ensuring it is alcohol-free. Perkins’ view is that the machine “treats the beer very sensitively and delivers a fantastic taste”.

From the outside, the news that AB InBev, the world’s biggest brewer with annual sales of $59.8bn (£44.9bn), is investing in no-alcohol beer might seem like a turkey voting for Christmas, but Perkins calls it a “massive opportunity”.

The demand is coming from several places, including drinkers opting for a headache-free Monday-night beer and “zebra stripers” – those alternating between alcoholic and non-alcoholic drinks on a night out.

AB InBev’s Brian Perkins raises a pint with Chris Bryant, the minister for trade policy. Photograph: Budweiser Brewing Group

“We don’t see it as a disruptor – we see it as something that’s making the category more inclusive,” he said.

With 29 no-alcohol beer brands under its belt, including Corona Cero and Budweiser Zero, in its last quarterly update the brewer said its 0% beers powered a 27% increase in global revenue.

The availability of alcohol-free beers on tap in pubs is expected to further normalise the choice. In the summer, Stella Artois 0.0 made its draught debut at Wimbledon and the range is now being trialled at a small number of UK pubs in readiness for a bigger rollout next year.

skip past newsletter promotion

after newsletter promotion

The prize could be big. In 2024, the UK beer market was worth more than £13.5bn, according to the drinks industry data company IWSR. Since 2019, the average annual growth in demand for no-alcohol beer has topped 20% to account for 2% of the market by volume. IWSR predicts this figure will double to 4% in 2029.

Susie Goldspink, IWSR’s head of nolo alcohol, said 0% beer was the most dynamic area of the new market. “Innovation levels are high, consumer engagement continues to grow, and there is plenty of headroom for growth,” she said.

One gripe from consumers is that alcohol-free beer often costs the same as the heavily taxed real thing. Perkins says it charges a fair price and points to the additional expense involved. “We brew the beer according to the same process, and then add a step and that step has required new capital equipment and millions of dollars,” he said.

AB InBev’s new de-alcoholisation facility at Magor, south Wales. Photograph: Budweiser Brewing Group

The $3.9m that the company has poured into the de-alcoholisation facility is small beer in the context of the vast global brewing industry, but Perkins calls it a “significant step” at a time when he senses rivals “pulling back” from investing in the UK. “Magor has long been a centre of innovation … and this facility helps secure its role for the future,” he said.

It is not hard to see why competitors might sit on their hands. The hospitality industry is in turmoil as consumers rein in spending at a time when business costs are rising. The government’s decision to raise employer national insurance contributions was unpopular, but the overhaul of business rates announced in the budget has proved the final straw for some.

Attending the opening, Chris Bryant, the minister for trade policy, pointed to the business rates help package, which includes £3.2bn in transitional relief (which caps the increase in rates for each year).

Bryant said the investment in Magor was “protecting jobs and making sure that we’ve got them into the future. People’s [drinking] habits are changing and that’s why it’s good we’re going to have alcohol-free beer brewed in south Wales, rather than relying on it coming from the Netherlands or Belgium.”