Editor’s Note: 3 Up, 3 Down with 3 Tier Beverages is a quarterly insights series available to Brewbound Insiders, via the Chicago-headquartered, beverage-alcohol-focused consulting and data firm.
In this latest installment of 3 Up, 3 Down, 3 Tier product team consultant Stephanie Roatis shares a trio of insights on industry growth and three underperforming areas ahead of the summer selling season, with NIQ data through April 20, 2024.
THREE UP:
Craft Light Options, Just in Time for Summer.
Light lagers were the third fastest-growing craft style of the latest quarter, following hazy imperial IPAs and imperial IPAs. The style grew +62% to $4.8 million, in Q2, with volume also up +76%.
While light lagers are a relatively small subset of total craft – ranked No. 28 by dollar sales – new launches are rapidly expanding the style. No brand extension generates over $1 million in annual revenue yet, and eight of the top 30 brands are new to the space. The No. 1 brand, Rhinegeist’s Cincy Light Lager, was just launched in May 2023 and holds 13% dollar share.
Craft light lagers include regional craft brands experimenting with lighter options, and the share has a much longer tail than other styles like hazy imperial IPAs, where New Belgium holds 85% of the dollar share. The top 10 brands all grew dollar sales in the double-to-triple digits and roughly 30 new brands entered the style.
Light lager’s surge comes in time for summer, when consumers are reaching for sessionable options for refreshment. Other light options are growing across craft, including Shiner’s Light Blend (+14%), Revolver Blood & Honey (+1,000%) and Farmer’s Light Lager (+42%), to name a few.
(Brewbound reporter Zoe Licata previously dove into craft light lager trends for the March/April issue of BevNET Magazine. Read the full story here).
Hard Tea Up in out-West
Hard tea continues to grow at impressive rates, with volume up +22% in the latest quarter and distribution up three points nationwide, to 76%.
Hard tea grew considerably more out West*: the Pacific division grew volume +45% and distribution +12 points, the Mountain division grew volume +53% and distribution +5 points, and the West South Central division grew volume +52% and distribution +5.5 points.
Even canned cocktail-leader Gallo’s High Noon Sun Sips now plans to get in on the action with its new Vodka Iced Tea, hoping to quench consumer’s thirst for hard tea varieties.
Hard Tea brings in about $52 million to the Pacific off-premise market. Outside of the usual suspect Twisted Tea, five of the top 10 brands are new to the region: AriZona, New Belgium, NOCA, Nasty Beast, and Lipton.
Two-thirds of the brands in the category are new or growing. Twelve oz. can 12-packs remain the top package format in all food channels, while 24/25 oz. single-serve cans reign supreme in the convenience channel.
*Mountain: AZ, NM, CO, UT, NV, WY, ID, MT. Pacific: CA, OR, WA. West South Central: TX, OK, AK, LA
Tequila Reposados
Tequila reposado was the No. 3 fastest-growing spirit by absolute dollar and volume growth in the latest quarter. The aged-tequila variety grew dollars +18%, to $205 million in quarterly sales, and grew volume to 470,000 quarterly cases.
Most of this growth comes from the ultra price tier, or from bottles priced $50 and up. As we’ve seen premiumization wax and wane in different categories, the $50+ tequila segment is no exception. Seven of the top 10 largest growing brands were still priced below $70 per 750ml bottle. Eight of the top 10 largest ultra reposado brands are priced below $60 per bottle.
Meanwhile, the reposado space priced above $75 bottle and further above $100 is much more volatile, with certain brands surging while others struggle to gain footing in an extremely competitive subcategory and against economic headwinds.
THREE DOWN:
Cocktail RTDs Slowing Down (For Now)
Spirits-based ready-to-drink cocktails (RTDs) finally show signs of a potential plateau – or at least a brief pause – as sales growth rates decelerate from last year’s highs of +100% growth.
Across total U.S. off-premise channels in Q2, growth expectations have halved. Latest 52-week volume sales were up +39%, while the latest 26-, 13-, and 4-week sales slowed to +31%, +23% and +16%, respectively.
Compared to Q2 2023, growth dropped from +58% to +23%. While spirits-and-soda varieties like High Noon have driven much of the historical RTD sales, higher-gravity RTDs like On the Rocks (Beam Suntory), BuzzBallz (Sazarac), Monaco (Atomic Brands) and Cutwater (Anheuser-Busch InBev) can capture uncovered sales if consumers turn to higher-ABV options. As we’ve commented on higher ABV ciders and craft options growing their respective categories’ sales, RTDs could see a similar shift.
A note for readers here that, alternatively, wine-based RTDs are up, with trends accelerating since last year. Dollar sales are up +33% largely due to four brands: BeatBox, BuzzBallz, Big Sipz and André.
Sangria Hit Hard, Despite Private Label Growth
Sangria declined -9% in off-premise channels in the latest quarter versus Q2 2023 – more than any other wine segment. Fourteen of the top 15 brands lost volume sales, with only major growing brand: private label.
In our last installment of 3 Up, 3 Down, we discussed private label as a bright spot amidst the seltzer decline. Private label seems to be creeping up in other segments as well; it is the fifth largest sangria ‘brand’ with $1.9 million in sales, up +24%.
As more consumers have returned to on-premise consumption, it tracks that consumers could prefer house-made sangria in a bar setting over a premade bottle off the shelf. Sangria sales are cyclical, typically peaking in the summer months. However, we’ll have to see if these sales rise in the on-premise due to patio weather, or if they rise in the off-premise as consumers reduce their out-of-home spending due to inflationary pressures.
12- and 15-Packs Struggle As Consumers Look for Value
Assorted craft dollar sales declined -12% in the latest quarter of off-premise scans. With 4.4% volume share of total craft, it is the seventh largest style offering.
The largest declines came from 12-packs and 15-packs. Twelve-packs had 76% volume share and recorded a -10% decline in dollar sales, while 15-packs made up 11% share of craft and dollars dropped a whopping -25%.
The top eight craft brands in 12-packs largely contributed to the -10% decline, while 15-pack declines were shared across most selling breweries. As craft prices continue to rise year after year, consumers may be trading down in pack size to make room in their fridge for other trial options. The space is now split between craft beer, ciders, flavored malt beverages and RTDs. Consumers may be reaching less for variety packs within craft and diversifying across categories.