[Read about the latest in the U.S. hard seltzer market and what’s in store for 2020.]
The hard seltzer revolution that swept across America is about to land in the U.K., with Anheuser-Busch InBev’s “disruption” innovation arm, ZX Ventures, leading the charge.
The company recently announced the nationwide launch of Mike’s Hard Seltzer, the first major hard seltzer brand to arrive on British shores. By getting in early, the multinational is working to position itself as a frontrunner for the U.K.’s potentially huge market—something AB InBev failed to do in the U.S.
It’s not doing so with a new brand, however. AB InBev bought the international brand rights to a collection of alcoholic products from rival Mark Anthony Brands in 2015 for $350 million (£270 million). The multinational is using ZX Ventures to roll out Mike’s Hard Seltzer, which falls in line with almost all other mass-produced alcoholic seltzer brands by being a 99-calorie, 5% ABV product. It’s unclear if there will be an eventual U.K. release of White Claw, the best-selling hard seltzer in America, which is still produced by Mark Anthony.
In the U.S., hard seltzer is predicted to become a $2.5-billion industry by 2021, but it’s expected to hit stiffer competition in the U.K. There are several barriers that any hard seltzer brand will need to overcome in the nascent market, starting with the fact that “seltzer” is not a word often used in the country. Labels for Mike’s Hard Seltzer show the use of “Hard Sparkling Water” instead.
There is also a question as to where the product will sit and compete, with Mike’s branding aimed at spirits and cocktail drinkers rather than beer lovers. The U.K. has shown plenty of willingness to adopt new forms of alcohol, with brands like Crabbie’s Alcoholic Ginger Beer and Rekorderlig Cider having spent a few summers in the limelight. More than anything, though, Mike’s seems to be a response to the rise in health- and wellness-focused consumers—a shift that has also spurred an increase in low- and no-alcohol beer. At 5%, but with no sugar and less than 100 calories, Mike’s Hard Seltzer is likely to interest drinkers in that space.
"Brits are leading healthier lives, and as such there is a demand for an alcoholic drink with natural flavors that is low-sugar, low-calorie, and low-ABV, but retailers aren’t currently equipped to offer these options,” says Ana De La Guardia, general manager for Mike's at ZX Ventures.
But here’s the problem: those retailers are, in fact, equipped.
The U.K. off-trade is already crowded with ready-to-drink options, many of which are low-calorie and have a similar ABV to Mike’s Hard Seltzer. Jack Daniels & Light Cola is sugar-free and contains just 64 calories, while Gordon’s Gin & Slimline Tonic sells for about £0.20 less than Mike’s, has fewer calories at 75, and is sugar-free. Whether British drinkers will be persuaded to leave behind their G&Ts is a key question—U.K. gin sales surpassed £2 billion in 2018, and have nearly doubled since 2016. The ready-to-drink, alcoholic beverage category achieved £472 million in total sales in 2018, and has hit £308 million in off-trade sales over the last year alone. Fighting for market share in that small but growing category are giants like Diageo, Bacardi, and Global Brands, which have considerable marketing resources and established routes to market. Daniel Woolfson, food and drinks editor for U.K. trade magazine The Grocer, isn’t sure this will pose a problem for hard seltzer, though.
“In the States, hard seltzer fills a niche that is already filled over here,” says Woolfson. “But I don’t think it will be stealing any [existing] market share. The reason ready-to-drinks have been so successful is that they have lured people from other categories, particularly new drinkers and wine lovers. Hard seltzer will help bring more in.”
Woolfson expects wine to suffer most if hard seltzer proves a success in the U.K., saying the category often loses out to new innovations in ready-to-drink. If the real race is to attract new drinkers rather than convert old ones, hard seltzer will have a few technical advantages in doing so. Unlike premixed cocktails and spirit mixers, it will be taxed as a beer, so will have a lower duty rate. This will reduce cost in packaged, off-trade sales, and even more so if it’s sold in larger serves on draft. Hard seltzers also benefit from being exempt from the Weights and Measures Act, so they can be poured in any size. That means venues can experiment with different serves, glassware, and garnishes to entice first purchases, as well as give consumers the option to choose larger servings.
On a much smaller scale, the lower duty represents an opportunity for craft brewery importers, and for U.K. breweries to produce their own hard seltzer releases. James Clay and Sons, one of the U.K.’s largest independent beer distributors, just started bringing in hard seltzer brands from the Colorado-based Oskar Blues Brewery and the Connecticut-based Two Roads Brewing Company, and has seen huge demand from beer-focused customers across on-trade, off-trade, and online retailers. Watson says most of the on-trade demand comes from accounts looking for an alternative to beer that can be poured on tap, keeping service at the bar quick and efficient.
“They can serve it in the same time it takes to pour a Pilsner, and get the same margin across them,” says James Watson, James Clay’s marketing manager. “We’ve got 10 accounts that have taken it, and 100 who are on a waiting list. We also have a few of the major supermarkets banging on the door, but we can’t get the stock for them at the moment.”
The U.K. brewing industry often looks across the Atlantic for new inspiration, so Americana and a love of products with “craft” credentials may prove enough to generate initial excitement around smaller-batch hard seltzer. Two Roads is counting on its provenance and use of natural ingredients as a way to differentiate its offerings from Mike’s.
“Our hope is that, as one of the early players [in the U.K.], we become associated with that segment right away,” says Phil Markowski, Two Roads’ master brewer. Markowski led the creation of the H2ROADS hard seltzer line, which uses 100% real fruit in lieu of extracts and flavorings, like White Claw or Truly hard seltzers. So far, H2ROADS has focused on Leeds, Manchester, and London, with an eye to build markets in Edinburgh and Glasgow next year.
“We’re not placing a lot of emphasis on the U.K. yet, but it’s one example of where we think being ahead of competition could definitely pay off,” Markowski adds.
Skeptics may find it easy to write off hard seltzer given the obstacles in its path, but in the U.S. the category found a huge gap in the market, and will sell around $1.5 billion worth of product in 2019. If either James Clay or ZX can find a way to build something similar in the U.K., there is a potential for millions to be made for the first brands to market. The growth of ready-to-drink beverages mixed with the demonstrated demand from James Clay’s customers suggests there way well be a 250ml-can-shaped gap in the low-calorie brewed beverage market.
Words by Jonny Garrett