THE GIST
After an enviable start following its February launch, HARD MTN DEW’s sales have hit the brakes hard. According to market research company IRI, national sales volumes declined over three consecutive months in grocery, convenience, and other chain retail stores from the mid-summer into fall. A sales boost from an October launch in Ohio was the only reason the brand bounced back in IRI’s latest four-week sales period: In its first month, the Buckeye State accounted for 34% of all HARD MTN DEW volume sold in the four weeks ending Nov. 6.
Since its February launch, the alcoholic version of the popular soda has failed to maintain momentum, essentially finding temporary sales gains solely by opening new markets. HARD MTN DEW debuted in Florida, Tennessee, and Iowa in February, and has since rolled out to six more states, including Virginia, Oklahoma, Nevada, Missouri, Minnesota, and Arkansas.
Declining sales for HARD MTN DEW come at a difficult time for the brand and for Blue Cloud Distributing, the wholly owned subsidiary of PepsiCo that distributes it. Blue Cloud faces regulatory scrutiny and criticism from existing beer wholesalers who claim, without details, that it has marketed HARD MTN DEW to children. (Blue Cloud did not respond to a request for comment.) Despite arriving to wild fanfare, the flavored malt beverage (FMB)’s failure to capture organic volume adds to a growing list of challenges.
“I don’t think it’s doing too well,” says Tia Dunn, an employee at Fareway Grocery in North Liberty, Iowa. “We’ve had quite a bit [go out of code] and our manager had to pull cases off the shelf.”
In March, a manager at the store said that the product had been selling well and had its own floor display. Today, it’s struggling, and Dunn says she’s unsure whether it’s still stocked.
WHY IT MATTERS
Without new markets, HARD MTN DEW’s overall sales numbers look dismal. The brand has floundered in its original launch markets:
In Florida, volume has declined every month in grocery, convenience, and other chain retail stores since it arrived in February.
Tennessee chain stores have sold less every month since the end of April.
Des Moines, Iowa grocery and big-box stores tracked by IRI show the brand held 18.1% share of FMB sales when it first arrived. Now it’s 2.8%.
For the four-week period ending Nov. 6, HARD MTN DEW posted negative month-to-month sales growth in at least eight of its nine existing sales markets. (Data for Arkansas, the ninth market, is not available.) It was a continuation of months of declines across HARD MTN DEW’s distribution footprint.
Boston Beer Co., the company that produces HARD MTN DEW, would no doubt like to offset shrinking sales by opening new states of distribution to inject volume and dollars. Boston Beer declined to comment for this story, but founder Jim Koch said during the Beer Insights Seminar in November that regulators in 20-30% of states could block distribution of HARD MTN DEW, presumably due to concerns about how it complicates the traditional three-tier system of alcohol distribution.
PepsiCo, which licenses the HARD MTN DEW name and soda formula to Boston Beer to produce the alcoholic version, has brushed off concerns about this slower-than-expected rollout; leadership told Beverage Digest in September that the partnership is a long-term one.
Playing the long game is a necessary perspective. Current headaches would be more justifiable if HARD MTN DEW were a top seller. But the less-rosy reality tests how much patience PepsiCo and Boston Beer have for this product as its momentum stalls.
Out of the gate, HARD MTN DEW’s flagship variety pack went from a near top-25 FMB to hovering around 50th in the category last month.
At its sales peak in April, the portfolio claimed nearly 1% of all FMB dollars sold in the U.S. despite being available in just a few states. It’s now 0.6% even after adding six additional states.
HARD MTN DEW’s trajectory isn’t unusual. FMBs like HARD MTN DEW generally include many brands that launch and get discontinued within a year or two as part of normal churn.
Twisted Tea, one of the country’s top-selling FMBs, has 22 different flavors and line extensions that have been tracked by IRI in recent years; today, nine are still on the market.
Smirnoff Ice has almost 60 brands listed in IRI, but only about half registered sales in October.
So, while many brands have relatively short lives, few receive as much attention (or have required as much effort to launch) as HARD MTN DEW.
Because of the business relationship between PepsiCo and Boston Beer, and the time and money invested in releasing a high-profile brand, there’s a possibility that sunk costs will keep HARD MTN DEW afloat for a bit longer. But without sales upticks from new states of distribution, PepsiCo’s investment will be more difficult to justify with each passing week in the red.
HARD MTN DEW’s struggles also raise questions for future launches. Next year’s debut of Lipton Hard Iced Tea—a partnership between Blue Cloud and FIFCO USA—will inject needed volume into Blue Cloud’s books. But will that and HARD MTN DEW be enough of a portfolio to justify the company’s existence? Both beverages will compete against Monster Energy and CANarchy Craft Brewery Collective’s forthcoming FMB, The Beast Unleashed, which will debut in January and is likely to court the same consumers who buy HARD MTN DEW.
It’s a question with high stakes, because both Boston Beer and PepsiCo bet big on HARD MTN DEW:
PepsiCo built an entire alcohol distribution division from scratch to launch this product, including more than 200 employees and a fleet of dedicated trucks. It also continues to fight regulatory and legal battles to justify its existence. Pluribus News reports that Georgia regulators denied Blue Cloud its wholesale license in the state this spring, calling the PepsiCo/Blue Cloud/Boston Beer triad “a violation of the three-tier system.” (Blue Cloud had previously said it was “in negotiations” with Georgia regulators.) The complications don’t end in the Peach State: Beer wholesalers in Nevada and Illinois have complained to state regulatory bodies about Blue Cloud’s presence there.
Meanwhile, Boston Beer is suffering its own HARD MTN Dew headaches. Some distributors that carry Boston Beer’s portfolio of Samuel Adams, Twisted Tea, Truly, and Dogfish Head products have taken umbrage with Boston Beer for partnering with Blue Cloud—instead of them—to distribute HARD MTN DEW. This dispute reached a boiling point in Virginia, where those wholesalers filed a complaint in October with the state’s Alcoholic Beverage Control Authority.
Jim Koch has tried to ease tensions, telling the audience at the Beer Insights Seminar that “at the end of the day, this is an experiment,” referring to Boston Beer’s partnership with Blue Cloud. He seemed to suggest that should Blue Cloud decide it’s no longer worthwhile to distribute HARD MTN DEW, existing Boston Beer wholesalers might want to pick up that product.
“We’re the supplier, who do you think’s gonna get the volume in those states? The Boston Beer distributor,” Koch said, as reported by Brewbound. “I hope [Blue Cloud is] successful and good, but if they turn out not to like this business or not to work out—which, they’re a partner, I hope it does work out for them—if it doesn’t work, where is that volume gonna go? We’re the supplier, we can determine that.”
But will those wholesalers even want HARD MTN DEW, or will they view it as a distressed asset with dwindling sales? Data from the summer and fall suggest the brand will continue to shed sales as its novelty wears off in existing markets. Aside from rapidly opening new states to find new volume, it’s unclear how PepsiCo or Boston Beer will alter HARD MTN DEW’s trajectory.
Lauren Reardon, assistant store manager of a Kroger grocery store in La Verne, Tennessee, is waiting to see how this plays out in her own store. In March, Reardon said the store had sold out of its first delivery of 18 cases of Hard MTN DEW within four days.
“I know that we did have a display of HARD MTN DEW on the floor, but we took it down after we sold through it. It’s probably been four or five months since we took that down,” Reardon says. “It slowed a little bit because the hype went away.”
Words by Kate Bernot