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.
Non-alcoholic beer, wine and spirits had their time in the spotlight during Dry January, while high ABV ciders are taking off.
In this second installment of the quarterly series, 3 Tier product team consultant Stephanie Roatis shared three insights on industry growth, as well as three underperforming areas across bev-alc scan data.
Below is Roatis’ analysis, according to data from NielsenIQ through January 28.
3 Up
Dry January Had Its Most Popular Year Yet in 2023.
It’s no news that non-alc has made headwinds in the latest year as more consumers are building their own definition of what more balanced intentional drinking looks like. According to NielsenIQ Product Insight search trends, 19.3% of online alcohol searches in 2022 contained “non-alcoholic” or “alcohol free.”
Bars and restaurants are offering more Non-Alc occasions, whether by just offering NA products, or hosting dry events, like Nothing’s Left Brewing and their weekly dry-bar, Not A Drop Of Alcohol (NADA). Anheuser-Busch InBev (A-B) had previously set a goal of making 20% of its beer non-alc or low-alc by 2025. Leading NA craft brewer Athletic just received a $50 million investment from Keurig Dr. Pepper to further grow its non-alc facilities.
So what did January 2023 tell us about this growing segment? Looking at off-premise data during the highly-anticipated Dry January (the four weeks ending January 28), non-alc beer grew +38.1% compared to Dry January 2022, while total beer was up +7.9%. NA Craft Beer and NA Import Beer are similarly-sized segments; NA Craft brought in $10.1M in January while Import brought in $9.2 million. NA Craft is up a whopping +44.2% in January 23 vs. December 22, with Athletic Brewing at the helm. Import is up +6.6%, with Heineken leading the charge.
Other segments that benefited from Dry January (or Damp January) include domestic premium ($5.1 million, up +6.4%) and domestic super premium ($1.8 million, up +2%). With no signs of non-alc slowing down after January, look to brands like Athletic Brewing for innovation.
In-Cider Scoop: Imperial as a Growth Segment Follows Similar Trend to Craft Beer
Cider had a transformative 2022, as the landscape continued to shift away from Big Cider and further into regional and local craft offerings. While cider’s volume declined -7.7% in 2022, regional ciders saw their off-premise dollars balloon +22 share points since 2018, to 54% of the category. 2 Towns Ciderhouse, Schilling Cider, Downeast Cider, Incline and Golden State each increased their dollar sales by at least $1 million in 2022.
What makes these regional players so popular? Item innovation and flavor expansion. In the last quarter alone, these cider houses rolled out 10 new items. Four of the top 20 cider SKUs are now imperials (defined as 8% ABV or higher), coming from these top cider houses. Imperial ciders now hold 6.5% of total cider sales nationwide, up from 2.7% a year ago. Dollar sales of imperials grew +140%, outpacing the total segment (+5% in the latest 13 weeks). 2 Town’s Cosmic Crisp and Schilling Company’s Excelsior imperial ciders are the seventh and ninth largest SKUs in total cider.
This follows the trend we covered in our Q2 2022 3 Up 3 Down on high-gravity craft beers. Imperial IPAs and hazy imperial IPAs have been the fastest growing segments within craft (up +9% and +295%, respectively), while craft overall experienced a decline of -1% in the last quarter. Cider’s consumer preferences are floating towards higher-ABV, stronger-flavored ciders, similar to how they are in craft.
Tequila’s Blanco and Reposado Segments are Calling the Shots.
Tequila grew +9.2% in the latest quarter versus last year, compared to total spirits, which were up just +3.4%. This excludes tequila-based RTDs, which now make up 16% of total RTD sales and are growing. According to the Distilled Spirits Council of the U.S. (DISCUS) and market research firm IWSR, tequila and mezcal (excluding RTDs and cocktails) contributed to 31% of spirits’ $3.8 billion on- and off-premise revenue growth, or the equivalent of $1.2 billion, in 2022.
Much of tequila’s recent success comes from an explosion in blanco and reposado, up +8.75% and +14.3%, respectively. Their combined absolute dollar growth grew +$55 million and their dollar share increased +1%. Blanco’s largest gainers were Jose Cuervo, Casamigos, 1800, and Hornitos. Reposado’s biggest stars were Casamigos, Gran Coramino, Hornitos, and Espolón.
Notably, within both subcategories, only one new brand entered the Top 50 dollar sales ranking. Gran Coramino’s Reposado, owned by comedian Kevin Hart, surged to more than $2.3 million in the latest 13 weeks alone, becoming the 18th fastest-selling reposado with 17% distribution nationwide.
3 Down
Seltzer Rationalization Continues as Segment Giants Turn to RTD Offerings
Hard seltzer’s 13-week dollars are down -10% versus total beer/malt (+6%), and flavored malt beverages (FMB) have officially surpassed it in dollar sales ($809 million vs. $927 million, respectively). As hard seltzer producers race to innovate and keep their product in the mix, manufacturers have crept into offering ready-to-drink and FMB products in addition to seltzer.
For example, A-B’s Bud Light Seltzer is releasing a nationwide, limited-edition Cocktail Hour variety pack this April that will mimic the taste of cocktails while still using hard seltzer as its base. Molson Coors’ Topo Chico Hard Seltzer, which is now a top four seltzer since its launch in 2021, is slated to launch Topo Chico Spirited, a spirits-based RTD line, nationwide. Truly Vodka Soda, Boston Beer Company’s spirits-based RTD, pulled in $5.8 million in the latest 13 weeks after only launching last year, and is now a top 9 RTD brand.
Even traditional beer brands like Dos Equis are launching RTD alternatives like Dos Equis Margarita, which brought in $212,000 in the 13W. As hard seltzer may be feeling its saturation points, big brands are pivoting to offer RTD flavors to maintain their dollar share of total alc.
Craft Finding its Footing as Consumers Lean into Imperials Over Other Segments
Craft growth was flat in the L13W, compared to overall beer/malt (+6%). IPAs (+4.78%) and American wheat (+1%) grew while 13 other style groups dropped between $1 million to $5.8 million in the L13W. Also, eight of the top 10 styles dropped in dollar sales.
The +$29.5 million growth within IPAs, as well as some growth within pilsners and hop water, fortunately covered most losses in craft beer experienced from other styles; however, more cuts are expected into 2023 as new and exciting alcohol innovations take up increasing shelf and brewery space. Within IPAs, imperials (both traditional and hazy) helped boost total IPA sales +4.8%, with hazy imperials surging to four times their size last year.
Will Table Wines Innovate into Wine-Based Cocktails?
In the L52W table wine is down -3% while $10-and-under wine has declined by nearly -5%,
dropping a point of table dollar share against some of its more pricier alternatives; however, the $10 and under category still drives 50% of all table wine sales across total U.S., while $20 and up still only make up about 9%. While table wine and sparkling wine dollar sales are both down -2% in the last quarter, they continue to make up 92% of L13W wine sales, up a half point of dollar share versus the entirety of 2022.
As wine-based cocktails become the fourth largest selling wine segment, up +30% in L13W at $112 million in sales, more traditional table wine companies may begin considering launching products in this space to diversify their offerings. While subcategories like wine-based cocktails and specialty wines continue to grow and are undeniably key innovation segments, they have a long way ahead before they take away from table and sparkling.