THE GIST
The stage is set for hard kombucha’s mainstream breakthrough. The category includes fermented tea beverages which—legally defined—have ABVs above 0.5%; most have alcohol content comparable to beer. Sales of hard kombucha are likely to continue their dramatic rise, growing from $1.7 million in 2017 to more than $12 million in 2019, according to figures reported by Shanken News Daily. (That puts the category roughly on par with Sol Chelada’s 2019 sales.) Hard kombucha sales in grocery, chain, and liquor stores tracked by IRI, a market research firm, have averaged a nearly 220% growth rate in dollar sales over the last three years.
Despite hard kombucha’s upward trajectory and the arrival of new brands within the past year, the category has yet to find its breakout star. White Claw’s dominance made hard seltzer a national phenomenon and paved the way for other brands. Hard kombucha hasn’t yet found its White Claw. But Sierra Nevada Brewing Company’s new 7% ABV Strainge Beast hard kombucha, which launched in select markets this month ahead of a nationwide rollout in September, has a shot at the title. The brewery plans to leverage the size of its national distributor and retail partners to become the dominant brand in a category that’s so far defined by plurality.
But Strainge Beast seems to have lost some momentum since it was announced in February. The product, which was initially slated to release in March, is just now hitting shelves. COVID-19 altered the plan soon after its announcement, and the fanfare that greeted the news of Sierra Nevada’s first national non-beer beverage seems to have waned. Meanwhile, its competitors made moves: Flying Embers rebranded and Jiant entered major markets. Will Strainge Beast muscle its way to the front of the pack, or join the widening hard kombucha fray?
WHY IT MATTERS
Hard kombucha embodies a number of trends within the larger alcohol industry. Namely, it’s a boozy version of a popular, non-alcoholic beverage, echoing the hard seltzer, hard coffee, and hard tea trends. It also appeals to health-conscious drinkers and those interested in “functional beverages,” and benefits from the health halo around regular kombucha’s probiotics.
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As traditional beer brewers have sought to hedge their bets against declining sales, they’ve turned to non-beer beverages like seltzer, tea, and Micheladas. Hard kombucha brands are another arrow in that quiver: KYLA is owned by Full Sail Brewing Company, Tura by Boston Beer Company, Kombrewcha by Anheuser-Busch InBev, and now Strainge Beast by Chico Fermentation Project, a non-beer division of Sierra Nevada.
Yet none of those players has yet captured a dominant share of the hard kombucha market. Boochcraft, an early entry to the hard kombucha space, leads the pack with 2019 annual sales of just under $4 million in IRI-tracked stores, and $2.3 million year-to-date through May 24. That 2019 output was roughly equivalent to what 4 Hands Brewing Company sold in those stores during the same period. Behind Boochcraft is:
JuneShine, with 2019 IRI-tracked sales of $2.5 million, and $1.7 million year-to-date through May 24.
Flying Embers, sold almost $440,000 in 2019, but has surged to $1.3 million through May 24 becoming the category’s solid #3.
Beyond these three, KYLA and Nova Easy Kombucha are destined to break $1 million in 2020. The field has also widened considerably, with three other brands (Wild Tonic Jun Kombucha, Kombrewcha, and Local Roots) collecting more than $100,000 through the first five months of this year.
With overall beverage trends working in its favor, hard kombucha is primed for a breakout. Once relegated to natural food stores or organic aisles, kombucha—including hard kombucha—now draws 70% of its sales from multioutlet retailers such as grocery or big-box stores. When Sierra Nevada announced Strainge Beast in February, the brewery’s national reach, quality-control laboratories, and insistence on cold-chain distribution, seemed to give it a boost in its bid to become that mainstream crossover brand.
Cold-chain distribution is especially important, given that shelf-stability has presented a challenge for regular and hard kombucha producers alike. Some brands pasteurize their product to make it shelf-stable at room temperature, but Grossman was adamant Strainge Beast remain unpasteurized. He and other kombucha makers believe that that contributes to a more authentic kombucha flavor; in regular kombucha, it also ensures that high pasteurization temperatures don’t kill the drink’s beneficial probiotics. (Boochcraft also requires cold-chain distribution because it uses fresh fruit juices in its products.)
Strainge Beast launched this month on draft and in 16oz, single-serve cans for a suggested price of $4.99 in initial markets that include San Francisco; Sacramento; San Diego; Santa Cruz, California; Portland, Oregon; Phoenix; Raleigh and Asheville, North Carolina; Knoxville, Tennessee; and Tampa. In September, it will debut in four-packs of 12-oz cans for a suggested retail price of $13.99 nationally.
Sierra Nevada founder Ken Grossman says after attending a previous year’s KombuchaKon, an industry conference, he saw a chance for his brewery to “stabilize some of the challenges” the kombucha industry faced in terms of fermentation quality and consistency. In 2010, the category faced a crisis when testing showed several brands’ ABVs to be above the 0.5% threshold listed on the bottle, leading manufacturers and retailers to pull them from shelves. Lawsuits followed, and some brands began pasteurizing their products to avoid refermentation after packaging.
But Grossman says Sierra Nevada’s lab-backed quality control and its contractual requirement that distributors store its products in refrigerated warehouses reduces these risks. Those stipulations also eliminate the need for pasteurization.
“Getting it to retailer shelves and consumer hands in optimal quality is an uphill battle for all of us, but that’s even harder for a smaller company,” he says.
Grossman notes the relatively small scale of many of the existing hard kombucha brands. Where some have six to eight salespeople total, Sierra Nevada has about 200 nationally, not to mention existing relationships with distributors and mainstream retailers like grocery and convenience stores.
“We’re able to activate a lot quicker,” he says. “Being early helps, but we have a little more horsepower than some other players in terms of getting that product onto shelves.”
The company will have to recapture some of the early attention it generated for Strainge Beast back in February—which now feels a lifetime ago. Its competitors have been busy in the meantime, and shoppers may find themselves less likely to take chances on unfamiliar products as the pandemic continues. The world Strainge Beast is entering in June is one characterized by many anxieties, including economic ones, which could spell trouble for a boutique product that costs $13.99 for a 12oz four-pack.
The big-picture upshot for Sierra Nevada is that the Chico Fermentation Project it created to launch Strainge Beast has a broad enough mission—non-beer products—to soldier on, no matter the fate of this particular release. Other companies such as Molson Coors and Craft Brew Alliance have similarly thrown spaghetti at the wall with non-beer beverages. They’re aware that a number of these products will fail, but such large breweries can absorb the misses in pursuit of a few hits. Grossman says that trial and error are built into the structure of Chico Fermentation Project, too.
“As the consumer has evolved and certainly as the retail marketplace has changed—take a look at hard seltzer—the consumer seems more open-minded to a range of beverages,” he says. “We want to have, I guess, flexibility to experiment in areas that may or may not resonate with Sierra Nevada drinkers.”
Words by Kate Bernot