Photo courtesy of Mike Brannon/The Glass Jug
THE GIST
On July 23, Boston Beer Company’s stock price fell 26% following an admission from CEO Dave Burwick that demand for the company’s Truly Hard Seltzer was lower than expected in the second quarter of the year. That in turn caused the company to revise its quarterly earnings downward by $55 million to $603 million. The move sparked a flurry of headlines in the financial, beverage industry, and general press suggesting that hard seltzer’s meteoric rise may be over—but such headlines ignore billions of dollars in sales and a continued growth trajectory for one of alcohol’s hottest categories.
“The hard seltzer craze has come to an end,” CNN reported. “Hard seltzer boom goes flat,” read Reuters’ headline. “Boston Beer stock is crashing because the hard seltzer boom is basically over,” Yahoo! Finance stated.
Yet such dire and sweeping pronouncements misstate reality. Hard seltzer as a category continues to outperform the overall alcohol market, at least doubling the growth rate for beer and total alcohol this summer—and it’s continuing to grow. U.S. consumers are buying more hard seltzer now than they ever have, and retailers are bullish on a continued upward trajectory. Responding to a Goldman Sachs survey in July, more than 70% of convenience store retailers said they plan to allocate more shelf and cooler space for hard seltzers this year. That’s down from 90% earlier in the year, but again, hard seltzer continues to outpace beer and flavored malt beverage (FMB) growth in those stores. More shelf space for seltzer is likely to translate into continued growth for these brands, as well as the ongoing addition of new brands and stock keeping units.
Chris Creech, owner of The Glass Jug Beer Lab brewery and bottle shop in Durham, North Carolina, hasn’t seen a dip in drinkers’ interest in seltzers. A festival The Glass Jug held last weekend—focused exclusively on seltzers, cider, and sour beer—sold out all of its 225 tickets.
“If seltzer were dying, we wouldn’t have sold out that event,” Creech says.
While it is true that hard seltzer’s growth rate has cooled slightly from the record-setting, triple-digit numbers it’s posted over the past few years, that growth is coming on a much higher base volume than ever before. Hard seltzer sales in chain retail stores tracked by market research company IRI have reached $3 billion year-to-date, about the same amount as Bud Light, the U.S.’s best-selling beer. Bud Light sales, meanwhile, have been in decline for years.
Just because one company, Boston Beer, overestimated the growth of its seltzer brand—and revised its prospects from white-hot to merely quite hot—is hardly a death knell for what was a more than $4 billion category last year. (Truly has also outpaced the seltzer category for two years.)
Despite the headlines, hard seltzer isn’t dead in the U.S. In fact, it may have barely reached its prime.
WHY IT MATTERS
Headlines proclaiming the death of one of the alcohol industry’s most important categories beg to be read with a critical eye. What those headlines lack—as headlines often do—is context and data.
The truth is that hard seltzer has never been more popular than it is right now:
U.S. hard seltzer sales in chain retail stores reached 10% of the beer market for the first time in June and July of this year, according to data shared in a report from Fintech InfoSource and the National Beer Wholesalers Association (NBWA).
Year-to-date, hard seltzer has sold 20% more volume in 2021 than it did last year. (Keep in mind that last year included several periods of pantry-loading due to the pandemic.)
Seltzer sales from wholesalers to retailers this year are occurring at twice the rate of beer sales, according to Fintech InfoSource and the NBWA.
NBWA chief economist Lester Jones said in a July presentation that these numbers are “as expected” based on overall industry trends.
IRI-tracked chain retail stores so far this year have sold more than 6.2 million barrels of hard seltzer. That volume is more than last year’s total annual production by Boston Beer, Sierra Nevada Brewing Company, Spoetzl Brewery, CANarchy Craft Brewery Collective, Firestone Walker Brewing Company, Bell’s Brewery, Artisanal Brewing Ventures, Stone Brewing, Deschutes Brewery, SweetWater Brewing Company, and New Glarus Brewing Company combined.
The data hardly paints a picture of a hard seltzer death spiral. Instead, Boston Beer’s revision of its Truly forecasts is a small blip for hard seltzer’s otherwise historic rise. Truly will be just fine: Even in its more modest projections, Boston Beer expects 25-40% growth in Truly sales to wholesalers and retailers this year.
Contrary to last week’s alarmist stories, there is little doubt that hard seltzer overall will continue its ascent. Rabobank, a Dutch bank focused on food and agriculture, released a report in March estimating that hard seltzer could make up 20% of the U.S. beer market by 2025, and called 50% growth for the category next year “an achievable goal.”
It based its thinking on three tenets, which take into account long-term industry trends:
Consumer preferences that led to hard seltzer’s growth (such as affinity for low-calorie and low-carb drinks, a desire for bold but easily understood flavors, interest in beverages that blur traditional alcohol categories, etc.) will continue to play out.
Retailers will continue to devote shelf space to hard seltzers, leading to even greater sales. “Nothing else is growing this fast,” the report states.
Large beverage companies—Boston Beer, Molson Coors Beverage Company, Anheuser-Busch InBev, Mark Anthony Brands, etc.—are continuing to push hard seltzer with new products, flavors, and marketing campaigns. Small players, too, are expanding the category and contributing to its overall growth.
“Hard seltzers are the success story of the U.S. beer market,” the report states. “It’s not just the current size of the category, which is attention grabbing enough, but the fact that it can sustain significant growth for many years to come.”
Rabobank expects much of that growth to come from new competitors to category leaders White Claw and Truly. Smaller brands in the so-called “long tail” of the hard seltzer market can still be quite lucrative. For example, Topo Chico Hard Seltzer, introduced in March, has already sold $26.6 million in IRI-tracked chain retail, about the same amount as Bell’s Two Hearted (which had three months more sales year-to-date) and Blue Moon LightSky, which was Nielsen’s top-selling new craft beer brand last year (per the “craft” definition used by retailers and market research companies, not the Brewers Association).
Creech has watched this transformation play out in his bottle shop, which once stocked White Claw and Truly, but has since swapped them for seltzers made by local breweries and smaller producers.
“Seeing someone like Boston Beer revise their product down is less about the category as a whole not growing as fast, but more that there’s diversification,” he says. “Not everyone’s buying [Truly] seltzer because now they can buy a local seltzer.”
Hard seltzer, local or otherwise, also has room to grow in bars and restaurants. While hard seltzer has typically been a beverage drinkers reach for in stores, it’s increasingly making inroads on-premise. Hard seltzer’s share of on-premise beer sales reached 3.3% so far this year, up from 0.8% in 2018, according to the Fintech InfoSource and NBWA report. As hard seltzer sales continue to grow in stores, they’re competing in an entirely new channel, as drinkers start to buy them at bars, restaurants, sporting events, and music venues.
Major beverage makers are still banking on drinkers’ continued thirst for hard seltzers. In March, multinational company Diageo scooped up Far West Spirits, maker of Lone River Ranch Water hard seltzer, for an undisclosed price. And earlier this month, Boston Beer announced a long-term partnership with global spirits company Beam Suntory to produce a line of beverages that could include hard seltzers. Two of the largest beer companies in the U.S., Anheuser-Busch InBev and Constellation Brands, are currently engaged in a lengthy and costly lawsuit over Corona Hard Seltzer. Their energy and spending behind hard seltzer brands is just another indication that beverage companies expect hard seltzer to continue to pay dividends well into the future.
Words by Kate Bernot