THE GIST
For five years, hard kombucha companies have worked to bring the category into mainstream territory. The challenge for these businesses—including segment leaders—is appealing to shoppers outside strongholds on the West Coast. As time passes, brands have continually fought to shift from niche to normal among shoppers looking for an alcoholic alternative.
California, Oregon, Washington, Hawaii, and Alaska make up half of all hard kombucha sales in U.S. chain retail, according to NielsenIQ data analyzed by 3 Tier Beverage. The question is whether hard kombucha can win new fans in the rest of the country with new flavors and products, or whether it’s a beverage inherently tied to the familiarity of standard kombucha and the cities and states where that drink is commonly consumed.
History is what makes it hard: Kombucha in the U.S. was effectively born in the West. In 2020, SYMBIOSIS, a kombucha trade publication, reported that California was home to roughly three times as many (regular) kombucha brands as the next leading state, Florida. And all five of the U.S.’s top-selling kombucha brands (GT’s, KeVita, Health-Ade, Humm, and Brew Dr) which, combined, represent about 80% of the category, are headquartered in California or Oregon.
Hard kombucha and traditional kombucha brands alike have said that reaching new customers in new geographies is going to be key to their survival as growth slows: They don’t want to be perceived as solely niche beverages in California Whole Foods. But for some of the country's largest hard kombucha brands who have the widest distribution footprints, California grocery, convenience, and other big box stores are still a main focus. California stores comprise a significant portion of national sales volume for the likes of Jiant (50%), JuneShine (66%), and BoochCraft (90%) in 2023.
Greg Serrao, co-founder of JuneShine hard kombucha and ready-to-drink cocktails, told Brewbound this summer that the brand needs to “grow up,” and the goal is for JuneShine to be an “omnipresent product” like Mike’s Hard Lemonade or Twisted Tea. And Humm Kombucha CEO Jamie Danek told BevNet in 2021 that “if we really want this category to grow, we have to think outside the box and make it so more people can have access to the product.”
But does hard kombucha resonate deeply outside of the West Coast to make these goals realistic? Category volume was down -7.8% in chain retail’s most recent 52-week sales period, slightly worse than the craft beer category. Moving forward, it will depend on how geographic white space is viewed: Either regions like the Midwest and Northeast are full of unrealized potential, or they’re markets where shoppers just don’t connect with kombucha—hard or otherwise.
WHY IT MATTERS
Areas outside of the West have been growing as a portion of the overall hard kombucha market, but the region that includes California and Oregon still represents the vast majority of sales for major brands.
Seven western states have so far this year made up 77% of chain retail volume sales for JuneShine, the U.S.’s best-selling hard kombucha company, according to data tracked by market research company Circana.
That figure was 75% in 2021 and 72% in 2022.
The U.S.’s number two brand by dollar sales, Flying Embers, is more geographically diversified. Last year, 42% of its volume sales came from those western seven states—still heavily oriented toward the West Coast.
JuneShine’s marketing director of marketing, Annie Atwell, says that while kombucha may not have coast-to-coast recognition, it does tend to be well recognized in cities, citing markets like Denver, New York City, and Boston as particularly strong.
“When you look at the data for non-alc kombucha sales, you see its demand growing out from those tier-1 cities into tier-2 and tier-3 cities, so we expect hard kombucha to follow a similar path,” Atwell wrote via email.
As the hard kombucha category declines in general, emerging markets outside of traditional bastions become more important opportunities.
“The category has seen declines recently, but there are definitely pockets of growth including Colorado, Tennessee and Georgia,” says Mary Mills, a consultant at 3 Tier Beverages. “I think some of the challenges are consumer education and overcoming hesitation.”
Consumer education and hesitation stem from the same root: Many shoppers, especially those outside of strong markets like California and Oregon, haven’t heard of kombucha—hard or otherwise. That makes them reluctant to try it.
A 2019 Mintel survey found that 46% of respondents who do not buy kombucha do not know what it is. Of the remainder, 21% knew what it was but were not interested in it, and 16% reported not liking the taste.
Google searches for “what is kombucha” show highest scores in the Southeast (including Louisiana and South Carolina) and Mountain West (including Utah). Just “kombucha” and “hard kombucha” are most searched for across Oregon and California.
Kombucha’s flavor is especially critical when it comes to alcoholic versions, where its health halo is diluted by virtue of being in a boozy beverage. (Dr Hops Real Hard Kombucha line features ABVs as high as 11%.) And when it comes to flavor, hard kombucha has lots of competition from flavored hard teas, ready-to-drink cocktails, and hard juices on the shelf. This is perhaps why many hard kombucha companies have launched new brands that mimic those flavor experiences, including Jiant's Peach Iced Tea, Flying Embers' Orange Tropical Mimosa, and GT’s Sangria Sunrise.
In the Mintel survey, 57% of consumers who bought kombucha said they did so for the taste.
Probiotic benefits were reported to be more important to them, with general health benefits coming in third.
If those benefits are reduced or removed, do enough drinkers enjoy kombucha’s tangy, fruity taste? And more broadly, are enough shoppers familiar with standard kombucha to want to try its spiked version?
JuneShine isn’t touting the probiotic benefits of its products, but it does highlight some health distinctions, even in its RTD cocktail line. Atwell notes that JuneShine’s margarita has only 6 grams of sugar, most of which the company says comes from the lime and orange juice. By contrast, the margarita from leading canned cocktail brand Cutwater has 27 grams of sugar. Distinguishing itself from competitors with more added sugars is a way for JuneShine to still capitalize on drinkers’ associations between kombucha and health without making the type of specific claims that landed hard seltzer brand Vizzy in hot water.
“We hadn’t had any direct customer requests [for hard kombucha], so we’re hoping customers will find it organically and to maybe do some in-store sampling in the future,” says Derek Keane, the category manager for beer, wine, and spirits at Hannaford Supermarkets, a chain of grocery stores in the Northeast. The stores only began carrying a hard kombucha brand, JuneShine, in the last few months; it’s stocked in coolers between ciders and flavored malt beverages (FMBs).
Keane attributes consumers’ apparent lack of awareness of hard kombucha to geography.
“We’re hoping to see the trend come east as we’re typically at the tail end, but time will tell,” he says. “Innovation starts out West and New England seems to be the last to adopt.”
Keane’s customers seem to be at the early stages of hard kombucha discovery. In chain retail sales, however, the Northeast is JuneShine’s second strongest region year to date, accounting for 10% of national sales across a dozen states from Virginia (including Washington D.C.) up through Maine. Stores in the New York City/New Jersey and Massachusetts areas perform well for companies like JuneShine and Flying Embers, and Luna Bay succeeds in Massachusetts. In the Northeast, JuneShine sold volumes greater than the Midwest, South Central, and Great Lakes regions combined.
JuneShine hopes to widen its appeal to new drinkers by offering a broader mix of products, including variety packs and ready-to-drink, spirits-based cocktails. The company tells Brewbound that the cocktails will make up 20% of its business this year. The risk, as the company admits, is that those new products will cannibalize its existing business, with current customers buying a variety pack instead of the core flavor they normally purchase.
Across California grocery and convenience stores, JuneShine's variety pack tripled its sales volume 2021-2022 while single packs of Blood Orange Mint, Topical Citrus, and Pineapple Orange all declined significantly. Jason Duranceau, beer buyer for the Carmel Mountain Ranch BevMo! location in San Diego, has seen this happen already in his store.
“Since JuneShine started the variety packs, they have sold well, and the single flavor packs have slowed down a bit. So it seems [shoppers] are looking for some variety,” Duranceau says, characterizing the category’s overall sales as “steady” over the past year in his store. “Hard kombucha buyers are very brand- and flavor-specific. Once they find their flavor, they are very patterned. I see people regularly buying the same amount of the same brand.”
Because of that, the market leaders are well established in his store, and nationally. JuneShine, Flying Embers, and Boochcraft are the top three brands by volume nationally, making up 82% of the volume of hard kombucha sold in chain retail. Even Sierra Nevada, a relatively large craft beverage player with national distribution and brand recognition, is a distant fourth with its Strainge Beast hard kombucha, which launched in 2020. So far this year, Strainge Beast has sold less than 20% of the volume that JuneShine has sold nationally.
Hard kombucha has long been looking for its White Claw: a mainstream product that paves the way for the category beyond health stores, Whole Foods, and the West Coast. JuneShine is the clear market leader, but five years after the company was founded, it’s realizing that it will need to diversify its offerings to break through to the next level.
Yet once hard kombucha goes broader, into canned cocktails and more rotational variety packs, it’s competing with bigger players on new ground: flavor. Perceived health benefits have been kombucha’s strongest differentiator thus far; Duranceau says this is the prime motivator for hard kombucha shoppers in his store, too.
Competing in the flavor area, though, puts hard kombucha on the same battlefield with larger and more established players like hard seltzers, FMBs, ciders, and canned cocktails. And in the realm of standard kombucha at least, flavor has been its largest obstacle: A 2021 survey of 215 adults commissioned by KÖE Kombucha found that 60% said they don’t like the flavor of kombucha. To achieve mainstream success as a category, hard kombucha will need to overcome both drinkers’ unfamiliarity with it and their potential aversion to its flavor.
In response, JuneShine seeks to distance itself from drinkers’ negative perceptions of kombucha’s flavor. Atwell says the brand tries to distinguish itself as being made with green tea and honey, where other brands are made with black tea and sugar; she says this produces a lighter, champagne-like flavor compared to some more acidic kombuchas.
“We try to lean into this difference as much as we can, and it's why we really focus on getting more cans in people’s hands, not just words in a marketing campaign,” Atwell wrote via email.
The conversion to a boozy version would obviously be easier in geographic areas where drinkers already know and appreciate standard kombucha. It’s why the West Coast has been a stronghold for both products; it’s the rest of the country that will decide whether hard kombucha can ever achieve breakthrough success.
Words by Kate Bernot