THE GIST
Hop water has existed for less than a decade, but in the last four years, the nascent category has seen a proliferation of producers and increased investment from alcohol companies including Constellation Brands and Brooklyn Brewery. Sparkling water with hop flavor has carved out a niche for itself, attracting drinkers looking for a non-alcoholic break from beer or for new flavors.
But as the category matures—year-to-date sales through mid-August topped $14.3 million—it’s also fracturing.
In 2019, three major brands accounted for about 50,000 cases sold through chain retail, according to NielsenIQ data analyzed by 3Tier Beverages.
That’s swelled to 27 brands this year, selling about 500,000 cases in those same stores. (For comparison, hop water is still selling less than half of what Red Ale brands made by craft breweries collectively sell in chain retail.)
Hop water sales have increased dramatically—volumes grew +142% between August 2020 and August 2022—but from a very small base of those three brands. As the pie gets bigger, so do the number of players vying for a slice. The past year has seen hop water launches from several breweries, including Texas’ Zilker Brewing and Austin Beerworks, California’s Almanac Beer Co., New Jersey’s Forgotten Boardwalk Brewery, Nevada’s CraftHaus Brewery, and others.
To weather increasing competition, brands are looking for investment from big alcohol companies while the category pushes to become more than just a beer replacement. For now, hop water is just a niche segment with aspirations of breaking through as a more widely accepted packaged drink option. The trajectory for the category ultimately depends on how well a general public will receive the idea of hop-flavored water. IPA is the defining category for America’s craft beer industry, so on that alone, hop water has a first step of getting out of beer’s shadow to appeal on familiar, yet different, merits.
WHY IT MATTERS
New players have led to some shake ups on the hop water leaderboard. Notably, Lagunitas Hoppy Refresher, which was responsible for 92% of volume sales in 2019 has seen its market share reduced to 45% this year because of so many new competitors.
Still, Hoppy Refresher is growing its sales, with volumes projected to end the year up between +40-50%.
Comparing Lagunitas’ hop water with its other regular beer brands sold in chain retail, Hoppy Refresher is now the brewery’s No. 3 brand by volume, behind Lagunitas IPA and A Little Sumpin’ Sumpin’ Ale.
Year to date, Hoppy Refresher has sold the equivalent of 16,330 barrels in chain retail, as tracked by market research company Circana.
Other early entrants have shed market share as well: H2OPS, one of the top three brands in chain retail in 2019, today commands 1.4% of the hop water market. On the flip side, HOP WTR, the second-largest hop water brand by volume nationally, only launched in late 2020.
“The pie is growing and it will continue to grow. There’s no doubt in my mind. … Is it growing as quickly as the new entrants are coming in? Probably not,” says Betsy Frost, CEO of Hoplark Brands, which makes hop waters and hop teas. She says this cycle is typical of new types of food and beverage, where a second wave of new brands floods the market before shaking out and stabilizing into core leaders plus a long tail of smaller brands. (Hard seltzer offers a recent example.)
As new hop water brands come to market, attracted by the relative ease of making the product and triple-digit category growth, the question is whether sales can continue rising at this rate. To keep expanding, hop waters need to reach new customers and fit into new parts of those customers’ routines, not just offer IPA lovers an alternative when they want a non-alc option.
But competing as a general beverage—against teas, juices, sodas, etc.—creates its own hurdles. Shoppers have more choices than ever in the drinks aisle or online: On Amazon, prebiotic drink maker POPPI has even bought ads against the “hop water” search term. Not only is competition fierce, but pricing can be a stumbling block when hop waters can cost as much as beer and more than twice as much as other sparkling waters. If a shopper on Amazon opted for a 12-pack of POPPI after searching for hop water, they could get the soda for $29.99 instead of a hop water 12-pack selling $34-$37.
In chain retail, things are just as competitive: Data from 3Tier Beverage shows the weighted average base price (excluding sales and promotions) for a case of hop water is basically the same as buying regular beer, costing roughly as much as a case of a craft brewery’s Wheat Beer or Lager. At Whole Foods, a variety of sparkling water brands—LaCroix, Spindrift, or Waterloo—all retail for less than a brand from Hoplark.
And amid the influx of new entrants, hop water is still in the process of defining itself to drinkers. Some brands—those made by breweries in particular—focus on being a zero-calorie, zero-alcohol replacement for beer:
Forgotten Boardwalk’s hop water calls itself “the next new style of IPA.”
Still others tout themselves as daytime, health-boosting beverages: HOP WTR highlights the inclusion of adaptogens and nootropics, ingredients which purport to boost cognitive function and enhance relaxation.
Sierra Nevada’s Hop Splash sells itself on what water does best: Its packaging boasts that the product is “Refreshing & Hydrating.”
While hop waters test these various approaches, big alcohol companies are eager to get on board. Hoplark earlier this week received a minority investment in its Series A funding round from Brooklyn Brewery, which creates a joint partnership to distribute Hoplark’s hop tea and its “0.0” line of sparkling waters that more explicitly align with non-alcoholic beer styles. While Hoplark’s hop teas and traditional hop waters have had country-wide distribution in Whole Foods since 2019, Frost says Brooklyn’s national distribution network will introduce the 0.0 product to new, beer-focused retailers, such as independent liquor stores.
In 2021, Constellation Brands got in on the action when its venture capital group purchased a minority stake in HOP WTR. At the time, Constellation said this move would help the company learn about what drinkers want from the functional beverage space. A new marketing campaign between the two companies—which offers a joint rebate on HOP WTR and Mexican Lager brand Pacifico as well as co-branded merch—leans into HOP WTR as a beer replacement, or at least beer-adjacent.
Because most consumers have only ever encountered hop flavors as part of beer, the concept of hop water as a non-alcoholic cousin to beer makes sense. Hop-heavy IPAs are the top-selling craft beer style in the U.S., accounting for 42% of all craft beer volume sold in chain retail, +10% from five years ago. But the non-alcoholic beer market, while growing fast, is relatively small (making up 0.7% of all beer volume in U.S. chain retail stores as tracked by Circana). If hop water wants to take up more than a sliver of that sliver, it’s going to have to break into new parts of people’s routines that have nothing to do with beer.
“We originally developed [HOP WTR] as a beer replacement, but we’ve been pleasantly surprised to see that consumers use the product all throughout their day, including morning and lunchtime,” says Jordan Bass, co-founder of HOP WTR.
Hoplark is encouraged by similar findings, with the company’s research showing that 78% of consumers drink its hop water and hop teas at any time of day, rather than during beer-related occasions that typically occur in the evening. The company has also learned that most of its consumers are shopping for sparkling water when they buy Hoplark, followed by non-alcoholic beer.
Those insights are giving hop water brands confidence to pitch themselves as more than a zero-calorie, non-alcoholic beer, but as a flavorful beverage that a person might choose instead of a LaCroix or a diet soda. In fact, as Bass met with retailers in New York City this week, he’s asking them to consider where, besides the beer aisles, HOP WTR should appear on store shelves. He says displaying multipacks of HOP WTR alongside beer reaches drinkers who are trying to moderate their beer consumption, but he’d also like to see single cans of HOP WTR in the grab-and-go lunch area or with other functional beverages such as probiotic sodas or hard kombuchas.
Ultimately, it’s how shoppers fit hop water into their lives that will determine the size of its potential market. If it remains largely a non-alcoholic beer alternative, the pool is limited—particularly given the number of brands diving in. But if consumers swap their Bublys and Spindrifts for Hoplark or Hoppy Refresher, it becomes a much wider and more lucrative splashing ground.
Words by Kate Bernot