Hard seltzers, the feistier cousins of nonalcoholic sparkling waters like LaCroix, are surging in popularity – a small but growing reason for optimism within the flagging beer industry.
Flavored malt beverages, driven by the explosive growth of hard seltzer sales, are one of the fastest-growing segments within beer and are helping to offset some of the market share lost to wine and spirits in recent years. Time will tell whether the boozy bubbly waters – led by brands like White Claw, Truly Spiked & Sparkling and SpikedSeltzer – continue to rise or fall flat.
Not too long ago, hard sodas, such as Not Your Father’s Root Beer, were the talk of the industry, a nostalgia-induced fad that lasted only a couple of years before sales began to sharply decline. But some executives and industry experts believe the less-sugary seltzers are likely to continue booming as more American consumers reach for products they consider to be healthier.
“The biggest question is, ‘Will the traction hold?’” said Eric Shepard, executive editor of Beer Marketer’s Insights, a trade publication covering the beer industry.
No hard seltzer has been more successful than White Claw, the top-selling brand in the Chicago market and throughout the U.S.
“Our aspirations are significant – not only transformational for the beer industry but transformational for our organization. We think the true potential of the brand is still relatively untapped,” said Phil Rosse, president of Chicago-based Mike’s Hard Lemonade Co., which makes White Claw.
Sales of White Claw have exceeded $117 million this year, according to sales data ending Sept. 2 provided by the company, which do not include sales at Costco or liquor stores. The entire Mike’s Hard business is up more than 20 percent, largely because of White Claw, which launched in May 2016.
White Claw sales tripled last year and likely will again this year, Mike’s Hard spokesman Sanjiv Gajiwala said. That surge in demand has led to some supply shortages this year, prompting the company to invest in more manufacturing lines that should boost supply by early 2019, Gajiwala said.
Who exactly are White Claw drinkers? They are both men and women, Gajiwala said. Some of them drink wine, spirits and light beer. Some are “lapsed” drinkers, he said, meaning they had stopped drinking altogether. But the common thread, according to the company’s research, is that they’re “healthy lifestyle” consumers.
Marketed as a “better for you” option for active, healthy types, most of the top hard seltzers are relatively low in calories – about the same as light beer – low in carbohydrates and gluten-free. Most, including White Claw, are even sold in skinny cans.
Hard seltzers fit into the “work hard, play hard” mentality of many young professionals, said Casey O’Neill, a member of the innovation team at Boston Beer that developed Truly Spiked & Sparkling. O’Neill said she came up with the idea for Truly about two years ago when she went out for drinks with friends after a workout. There weren’t any good options for a light and refreshing gluten-free drink that wasn’t either too sweet or too alcoholic, O’Neill said.
“That lit the light bulb,” she said.
In perhaps a sign of the times, Truly and other flavored malt beverage brands are now driving sales growth for Boston Beer, the company long known for Sam Adams beer.
So far, hard seltzer has been dominated by the larger alcohol companies that already have national distribution networks in place. Anheuser-Busch InBev bought SpikedSeltzer in 2016 and rolled it out nationally last year. Chicago-based MillerCoors launched its Henry’s Hard Sparkling Water last year. Diageo’s Smirnoff Spiked Sparkling Seltzer is another top national competitor.
The national brands that succeed in the long run likely will win on pricing and execution rather than taste, said Chris Furnari, editor of Brewbound, a beer industry publication.
The consumers drinking these products are less likely to be loyal to a specific brand, Furnari said, recalling some gatherings this summer with millennial friends and coolers of hard seltzers. The question Furnari said he heard several times was: “Can you get me a seltzer?”
No requests for a specific brand or even flavor – just “a seltzer.”
“There’s a lot of run room for these products, but there are some question marks, too,” Furnari said. “Can this be a year-round thing? Is someone going to drink a seltzer in December?”
The marketing minds at Anheuser-Busch are at work on that very question. This Halloween, SpikedSeltzer will launch an ad campaign promoting the mermaid – featured on the brand’s label – as a costume. SpikedSeltzer also can be used as a cocktail mixer, which will be promoted around the holidays.
Anheuser-Busch plans to ramp up marketing and investment behind SpikedSeltzer going forward, said Chelsea Phillips, vice president of Beyond Beer Brands for Anheuser-Busch.
“(Hard seltzers) are a wide-open space of nothing but opportunity that we’ve just begun to dabble in,” Phillips said.
The opportunity for hard seltzers includes growing out West, where they’ve been slower to catch on, according to recent Nielsen data that show market-share growth. They also mostly sell in stores – not bars or restaurants. That too could change if demand continues to swell.
U.S. sales of hard seltzers in retail stores alone garnered $336 million in the 12 months ending Aug. 11, according to Nielsen data. That’s an increase of 168 percent from the same period a year earlier.
That’s a long way from when Nick Shields first Googled “hard seltzer” back in 2012.
“When it came up blank, I was a happy man,” said Shields, co-founder of SpikedSeltzer, which is widely acknowledged as being the first hard seltzer on the market.
After launching in 2013, Shields and his partner Dave Holmes grew the Connecticut-based business to distribution in 13 states before Anheuser-Busch came calling in 2016. Being acquired by the largest beer company in the world was a “little stressful,” but also necessary to grow the brand nationally, Shields said.
“We still have plenty of work to do,” Shields said. “We’re not resting on our laurels.”
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