Bump Williams: New Hard Seltzers Driving Growth While Core SKUs Still ‘Churning’

New hard seltzer offerings continue to play a “vital role” in driving growth of the booming segment, while several core SKUs keep “churning out growth,” Bump Williams Consulting found in the firm’s latest analysis of the $4.1 billion — and climbing — hard seltzer segment.

Over the last two months, the consulting firm has examined whether new products are adding new consumers to the base or sourcing drinkers from existing hard seltzer products. The answer so far, is no, new products aren’t cannibalizing existing offerings.

In his latest update, Williams offers a high-level view of incrementality within the segment, while citing NielsenIQ off-premise sales data.

Year-to-date, hard seltzer dollar sales have topped $1 billion, increasing 46% and adding nearly $344 million in off-premise retail dollar sales compared to a year ago, which Williams wrote is “impressive” given the cycling of the fridge stock-up period, on-premise shutdowns and off-premise purchasing shifts during the pandemic last year.

Of those nearly $344 million additional dollars, about 60% of the dollar sales growth is coming from new SKUs, Williams noted. Those same SKUs collectively account for about 20% of total hard seltzer sales, “indicating that they are doing some pretty heavy lifting in their short life cycle,” he added.

Nevertheless, hard seltzer SKUs that are a year or older continue to add “incrementality” to the segment’s growth rate.

Going deeper, Williams looked at the top 10 new hard seltzer SKUs, the ones with zero dollar sales compared to a year ago, and compared their incremental sales to the top 10 loss leaders. Williams found that year-to-date dollar sales of the best-selling new offerings at $163.8 million “have vastly outpaced” the losses from the 10 loss leader brands (-$100.6 million) by more than $63.3 million. Williams added that the off-premise dollar sales generated by the top-selling new SKU, Boston Beer Company’s Truly Iced Tea Hard Seltzer mixed pack ($48.7 million) have offset the dollar sales decline from the top loss leader, Mark Anthony Brands’ White Claw variety pack No. 1 (down nearly $42.8 million). That trend continues to play out for the rest of the top 10, with new brand growth outpacing existing brand losses.

Add in the growth of sophomore SKUs, such as Truly Lemonade mixed pack and White Claw’s second variety pack and that makes “for an exceptionally healthy segment,” Williams wrote.

Just how many hard seltzer SKUs are out there? Williams, citing NielsenIQ off-premise data, wrote that the SKU count within the hard seltzer segment has grown 6x since 2017, from under 100 SKUs four years ago, to 586 SKUs at the end of 2020, to 596 year-to-date through April 17, 2021.

“Granted, we still will very likely see this number continue to climb as the year continues, but it was an interesting observation as we head into the hot summer selling months,” he wrote. “It’s possible that we are starting to see innovation become a bit more tactical and controlled, while the retailers become a bit more selective about adding to their shelf sets now that they are starting to get a better handle on what is essential, what brands/flavors/formats move the fastest and what they can maybe get away with minimizing.”

Of those 596 active hard seltzer SKUs, 396 are generating some growth year-to-date, while the other 200 “are currently sitting on the wrong side of break even,” Williams wrote.

New brands such as Molson Coors’ Topo Chico Hard Seltzer, Coop Ale Works’ Sonic Hard Seltzer, and Stone’s Buenavida — which are expected to add more incremental growth — also haven’t popped in the data set yet. So there remains a long runway ahead for the segment.

Looking at pack sizes, Williams wrote that while 12-packs remain the top packaging format within the hard seltzer segment, single-serve cans (19.2, 24, 25 and 16 oz.) are trending up for popular flavors and “sales outrank a meandering 6-pack landscape that has seen its collective sales stall (+6%) in favor of other formats.”

Meanwhile, Williams is keeping an eye on style trends, such as ranch waters and cider variants. In Texas, ranch waters now account for 5% of total hard seltzer sales and 13% of the overall segment’s growth in chain stores, with Lone River Beverage Company and Anheuser-Busch’s Karbach brand leading the way. Nevertheless, ranch water remains just 0.4% of total hard seltzer sales nationwide.

Looking ahead, Williams is forecasting sustained growth of 60% this year, and “high double-digit growth” over the next five years. Still, Williams acknowledges potential headwinds that could derail hard seltzer sales growth trends, among them aluminum can shortages, out of stocks at retailers, shelf and floor space mismanagement, and poor quality of “taste.” And there’s always competition from ready-to-drink canned spirits and canned wine, which Williams calls “that other shoe to drop … as the segment matures and eventually slows down.”

“[B]ut right now we are seeing a beautiful joint effort between new and existing brands to keep the baseline sales steady while peppering in those incremental gains on top,” he wrote. “There are bound to be some casualties along the way in the form of [discontinued] brands, flavors and packages but for right now, the incremental gains remain well ahead of the cannibalized losses.”