By Saabira Chaudhuri

Americans drinking more hard seltzer through the pandemic helped beer giant Anheuser-Busch InBev SA partly offset a continuing slump in sales of Budweiser and Bud Light.

Hard seltzers -- essentially flavored alcoholic sparkling water -- have emerged as one of the hottest parts of the booze market in recent years, tempting more health-conscious drinkers away from beer. In response, AB InBev launched Bud Light Seltzer early last year, has since invested in several new flavors of the brand and recently rolled out Michelob Ultra Hard Seltzer.

On Thursday, the world's biggest brewer said those efforts were paying off, as sales at its "beyond beer" unit, which includes hard seltzer, ready-to-drink cocktails and other products, grew double digits to top over $1 billion.

That helped AB InBev report overall fourth-quarter sales growth on an organic basis -- which strips out currency moves and acquisitions and divestitures -- of 4.5%. Revenue on a reported basis dropped to $12.77 billion from $13.33 billion a year earlier. Net profit jumped to $2.27 billion from $114 million a year earlier, when results were hit by higher finance costs.

AB InBev was late to jump on the seltzer wagon, originally driven mainly by White Claw, owned by Mike's Hard Lemonade Co., and Truly Spiked & Sparkling, made by Boston Beer Co. Now, though, the drinks giant sees seltzers as a priority and key way to win back defecting beer drinkers. It said Thursday that its hard seltzer brands grew at double the rate of the industry last year, helped by the launch of Bud Light Seltzer.

The company plans to take a multipronged strategy to developing its seltzer business, said Chief Financial Officer Fernando Tennenbaum, rolling out products at various prices to cater to different demographics. The new Michelob Ultra seltzer, for instance, is low-calorie, premium and aimed at people who like buying organic products, while the Bud Light seltzer is more mainstream, he said. The company is also partnering with rapper Travis Scott to roll out a new agave-based spiked seltzer in the U.S. called Cacti, and has other seltzer products in the pipeline, Mr. Tennenbaum added.

Hard seltzers tend to be low in calories and carbohydrates, attracting young drinkers focused on health and wellness, women and, perhaps most significantly, wine and cocktail drinkers. Beer has lost share to spirits in particular in recent years, a trend that accelerated through the pandemic.

Expanding in hard seltzers, which are often sold in single-serve cans and distributed like beer, has been a way for brewers to win back market share from their spirits rivals, although the latter are also investing in their own hard seltzers.

Smirnoff owner Diageo PLC in January, for instance, reported a 47% jump in organic net sales for its ready-to-drink unit in North America in the last six months of 2020. The spirits giant launched a new seltzer under its Ketel One vodka brand late last year and said it plans to participate in the category in a bigger way in coming years.

Globally, industry tracker IWSR forecasts sales by volume of ready-to-drink products -- like hard seltzer and premixed cocktails -- will grow 21.8% a year between 2019 and 2024, taking share mainly from beer. It said ready-to-drink products jumped 43% globally last year, driven by growth in the U.S.

AB InBev has moved to defend its foothold in the seltzer category, earlier this month filing a lawsuit against rival Constellation Brands Inc. for selling Corona Hard Seltzer. AB InBev has licensed the Corona brand to Constellation for the sale of beer in the U.S. but says it never agreed that Corona could be used for hard seltzer. Constellation has denied that it has broken its agreement with AB InBev and said it would defend its rights.

Overall, AB InBev reported its North America volumes edged down 0.7% on an organic basis in the fourth quarter. It said its mainstream portfolio -- which includes Bud and Bud Light -- lost 1.2 percentage point of market share. World-wide volumes rose 1.6%, helped by Central and South America.

The company said it expects global sales and profits to improve meaningfully this year from last as pandemic-related restrictions ease. But it warned its margins would be pressured by higher costs, including from unfavorable foreign-exchange rates and commodity prices.

AB InBev continues to be saddled with a huge pile of debt following its $100 billion-plus acquisition of SABMiller, the world's no. 2 brewer, in 2016. On Thursday, it said its net debt to normalized earnings before interest, tax, depreciation and amortization ratio was 4.8 times at the end of last year, which is over two times its goal.

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

(END) Dow Jones Newswires

02-25-21 0754ET