Anheuser-Busch-backed Kombrewcha Looks to Gain Traction in Surging Hard Kombucha Segment

Kombrewcha CEO Garrett Bredenkamp is looking to the hard seltzer segment for inspiration as the hard kombucha brand backed by Anheuser-Busch’s ZX Ventures looks to compete in the fast-growing segment.

As such, this fall, Kombrewcha will introduce two new flavors — Blood Orange and Mango Pineapple — to a 12 oz. 4-can variety pack, which also includes existing offerings Berry Hibiscus and Ginger Lemon.

“When you look over at hard seltzers, those are some of the highest selling SKUs and highest selling flavors, so we made the hypothesis that some of that was going to come into hard kombucha,” he said. “We wanted to have the flavors that we thought would really resonate and stand out in the marketplace against all the other palate of flavors that all the other players in the category have.”

Kombrewcha is touting the variety pack as a “first of its kind,” priced at $9.99 and aimed at driving trial in a world in which sampling opportunities have dried up due to the COVID-19 pandemic.

“We know that hard kombucha is all about driving trial,” Bredenkamp added. “So we have to make the product as accessible as possible for not only the person who already drinks hard kombucha or already drinks non-alc kombucha, but also accessible for the person who might be in the aisle who is a cider drinker or hard seltzer drinker.”

The move signals another effort by Kombrewcha — which was co-founded by Honest Tea co-creator Barry Nalebuff in 2013 and received investment from A-B’s ZX Ventures three years later — to gain a foothold in a growing segment of functional alcoholic beverages. Last year, Kombrewcha upped its alcohol content (from 3.2% ABV to 4.4% ABV), unveiled new packaging design and phased out 4-pack bottles in favor of 6-pack cans.

The hard kombucha segment thus far has been dominated in the off-premise by five brands: Boochcraft (32% market share), non-alc brand GT’s Classic Synergy Kombucha (22%), JuneShine (14%), Flying Embers (10%) and Kyla (6%), according to market research firm Nielsen. Those brands accounted for 83% of the dollar sales in Nielsen tracked off-premise channels, and the lion’s share of hard kombucha sales are coming from one state: California, which accounts for 52.1% of dollar sales.

Year-to-date through mid-June, dollar sales of hard kombucha in off-premise retailers were approaching the $20 million mark, an increase of 63% compared to the same time last year, according to market research firm Nielsen.

Bredenkamp sees those numbers going even higher, with sales hitting a little more than $1 billion within the next five years. By his estimates, the segment could reach as much as $100 million in sales by the end of 2020.

Kombrewcha is looking to get more of that action. After initially focusing on its home market of New York City, Kombrewcha added distribution in California and the Pacific Northwest in early 2019. The move has proven fruitful, as Oregon, Washington and California have quickly accounted for half of Kombrewcha’s business, Bredenkamp said.

“Depending on which data you look at, it’s still 80% of hard kombucha sales are happening in those three states, right?” he said. “So we know that we need to be a part of that market, and it really has shifted suddenly for us. And we’re really proud of the distribution that we’ve been able to get in California, as a non-local player, with Whole Foods and Ralph’s and Vons and Safeway.”

Although gaining traction with consumers in those markets as a non-local player is challenging, Bredenkamp admitted that the strength of the A-B distribution network has helped close the gap.

“What that allows us to do is really act like a small startup and approach the market as a small startup,” he explained. “But we get the production quality of Anheuser-Busch brewery, that’s only going to allow us to scale and help us win the market in the future. To get the distribution and sales and marketing arms of Anheuser-Busch, that’s only going to allow us to scale and be more competitive in the future.”

That leaves Kombrewcha tasked with building “a scalable and repeatable model” for launching new markets — a greater challenge due to the pandemic wiping out sampling and experiential marketing. However, Bredenkamp said the company is closer to cracking the code.

“We have the scale and the organization, and the resources behind us to really be successful and capture a great part of the market and more importantly just bring more people into the category,” he said.

In addition to hard kombucha’s stronghold markets, Bredenkamp said Kombrewcha is looking to “markets that are about to tip,” such as Philadelphia; Asheville, North Carolina; and Washington, D.C. Those markets are attractive due to the strong distribution via A-B, as well as markets where non-alcoholic kombucha has proven popular. Part of the opportunity is that non-alcoholic kombucha still only has 20% to 30% household penetration.

“There is a lot of whitespace in the market still that’s out there for whoever can go grab and grab it,” he said.

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