THE GIST
Constellation Brands is playing catch-up in the hard seltzer wars.
While Molson Coors has Henry’s Hard Sparkling Water (and, as of last month, Atwater Brewery’s hard seltzer line), Anhseuser-Busch InBev has its own Bud Light Seltzer, and Boston Beer has the country’s number-two line with its Truly Hard Seltzer, Constellation Brands is one of the few major beer companies that hasn’t yet planted its flag in the ascendent category.
That changed on Jan. 30, when Constellation announced it would make a minority investment in PRESS Premium Alcohol Seltzer, a fast-growing hard seltzer brand founded in Milwaukee in 2015.
The new year is shaping up to be an important one for the country’s third-largest beer supplier. Constellation was initially a wine and spirits company, then swiftly became the dominant player in imported beer, and is now setting its sights on seltzer as the next winning category.
The investment in PRESS gives Constellation a foot in the door with a brand whose sales in grocery, convenience, and other retailers (as tracked by market research firm IRI) grew nearly 67% from 2018-2019. According to a PRESS spokesperson who spoke to Brewbound, the overall sales of the hard seltzer were around 35,000 barrels across all stores, with the company eyeing almost 73,000 BBLs for 2020.
Financial terms of the investment were not disclosed.
The deal adds a first hard seltzer arrow to Constellation’s quiver. The company also plans to launch four flavors of Corona Hard Seltzer this spring with the backing of a $40-million ad spend. That move is notable because, as sales of flagship Corona Extra cool, the PRESS partnership could bolster Constellation’s roster in a category that could reach $2.5 billion in sales in 2021.
The investment is part of Constellation’s Focus on Female Founders program, which has pledged to invest $100 million over the next decade in female-founded and female-led beverage alcohol start-ups.
“PRESS is a premium brand that we think has great potential for exponential growth within a white-hot segment,” Jennifer Evans, vice president of Constellation Ventures (a venture capital group within Constellation Brands), told GBH in an email. “With a top-10 position in the seltzer category and triple-digit growth over the last year, PRESS has proven they can build, fulfill, and grow consumer demand.”
WHY IT MATTERS
As one of the largest beverage alcohol companies in the country, Constellation has thus far lagged behind Anhseuser-Busch InBev and Molson Coors in the hard seltzer arms race. AB InBev’s Bud Light Seltzer line debuted in January, selling about 13,500 BBLs of product in IRI-tracked stores in the first three weeks of the month. The product line was also featured in AB InBev’s lineup of Super Bowl ads. Molson Coors is in the process of beefing up its hard seltzer portfolio, which until recently included only Henry’s Hard Sparkling Water, a brand that holds just 2% of the hard seltzer market. Molson Coors’ recent acquisition of Detroit’s Atwater Brewing was motivated in part by Atwater’s existing hard seltzer line.
The PRESS investment sees Constellation align itself with a fast-growing hard seltzer company, potentially to hedge its bets against lagging Corona sales. From 2017-2018, Corona Extra lost 2.4% of volume in IRI-tracked grocery, convenience, and other stores nationally, and remained flat last year.
Constellation’s partnership with PRESS could play out in especially important ways in California. In that state—the biggest beer market in the U.S., and thirteenth largest in the world—Reyes Beverage Group, one of the country’s largest distributors, has over the past two years consolidated Constellation distributors under its umbrella. Though it’s traditionally been a “blue” house affiliated with Molson Coors, Reyes has leaned more heavily on its Constellation brands as sales for Molson Coors’ core brands, including Coors Light and Miller Lite, have slumped. Notably, Corona Extra also lost 10.2% of its volume in IRI-tracked stores in California from 2017-2018, followed by another 7% drop last year. Constellation and Reyes no doubt see the potential for other products to offset those losses.
Adding PRESS to the Constellation roster offers a counter to this trend. In California, Reyes has the top overall beer brand in Constellation-owned Modelo, and it’s also recently scooped up distributors carrying Mark Anthony Brands, the parent company of White Claw.
This means the Reyes-Constellation juggernaut has California’s top beer brand plus access to two distinct lines of hard seltzers that can appeal to different demographics. White Claw continues to rule among the young “ain’t no laws” set, with the key demographic of 21-to-29-year-old consumers responsible for half its sales. PRESS will likely position itself as a more sophisticated, premium seltzer with culinary flavors, including Blackberry Hibiscus, Grapefruit Cardamom, Lime Lemongrass, and Pomegranate Ginger. The company’s website includes flavor descriptions like “sweet and tart bold citrus with a sophisticated and subtle pop of woody, herbal spice” and “wonderfully crisp with a delicate sweet unique vanilla-like flavor and soothing chamomile.” In announcing distribution in Colorado last summer, PRESS founder Amy Walberg called her brand an “elevated seltzer experience.”
Constellation has proven itself an adaptable company, able to tailor its brand portfolio to a changing market. Originally focused on wine and spirits, it began scooping up imported beer brands as that segment was growing. Thanks to its 2013 deal to control U.S. sales of Corona, Modelo, Pacifico, and Victoria, it entered 2015 with a net income of $1.9 billion. It spent much of that cash on another growing segment: craft beer. At the height of craft beer’s popularity in 2015, Constellation threw down an unheard-of $1 billion for San Diego’s Ballast Point Brewing Co., one of that world’s brightest stars. While just a few years would prove that the $1 billion wasn’t exactly well spent, it was money Constellation could afford to dedicate to a portion of the market it (correctly) saw growing.
As craft beer growth wanes, Constellation now turns its attention to the meteoric rise of hard seltzer. Though the company is a bit behind the eight-ball in this segment, it’s not going to sit the round out. Given Constellation’s long-standing focus on the “premium” side of the market over budget products—its portfolio includes High West Distillery and Charles Smith's Washington Wine Brands, plus minority investments in Catoctin Creek Distilling Company and Bardstown Bourbon Company—PRESS is a logical partner.
With its finger on the pulse, Constellation’s investment in PRESS responds to a market thirsty for seltzer and imports, both of which it is poised to deliver. If Corona’s hard seltzer line also turns out to be a slam-dunk, all the better.
Words by Kate Bernot