Bump Williams: Are New Seltzers Stealing Share From Existing Brands?

Hard seltzer sales have totaled more than $750.4 million year-to-date through March 20, giving seltzer an 8.5% share of the overall beer category, according to NielsenIQ data shared by Bump Williams Consulting (BWC) in a recent report.

However, the tough pandemic comps from the stock-up period are just beginning and the segment will have a hard time cycling last year’s off-premise numbers. Hard seltzer dollar sales are up 56.6% year-to-date, but they’ve slowed to +29.8% over the last four weeks, and +1% for the week ending March 20. Remember though, these numbers are off a much larger and inflated base, as consumers shifted their purchasing behaviors when the on-premise channel shut down.

In BWC’s latest data dive, the firm explored whether new brands and line extensions are “building the segment or stealing share and volume from existing players.” Their conclusion: Both new and existing brands have been “largely incremental.” Established brands’ declines have been “more than offset by ‘what’s new’ on the shelf.”

“Most of the leading suppliers continue to see net gains to their portfolios as innovation helps to grow seltzer overall through attracting new shoppers (%HH Penetration), generating interest (purchase frequency) and/or creating impulse on top of current behaviors (volume per trip),” BWC wrote. “Still, one has to wonder at what point we might start to see less of a steady build and more of a relay race, with each new brand eventually handing off the baton to the next teammate with fresher legs. While hard seltzer may settle into that cycle at some point down the road, the data above suggests that that time is certainly not right now.”

As such, BWC is projecting “very bright and explosive growth” for the segment over the next five-plus years, assuming the on-premise is unlocked for hard seltzer in 2021, there aren’t quality issues with the data, producers maintain their focus on “better-for-you” attributes, flavors meet consumer demand, retailers continue giving the segment shelf and selling space to avoid out of stocks, and producers dodge supply chain issues.

A few notes from BWC’s analysis: Boston Beer’s Truly has accounted for more than 40% of seltzer’s year-over-year growth, while White Claw and Mike’s Hard Lemonade Seltzer make up 24% of incremental growth. A-B (excluding former Craft Brew Alliance brands) chipped in 16%. Those three suppliers account for 89% of seltzer’s year-to-date dollar sales and 80% of year-to-date dollar growth.

BWC added that other suppliers are “contributing more than their fair share of the growth of the segment,” with Molson Coors and Constellation Brands each accounting for between 6% and 8% of seltzer gains this year. Meanwhile, the rest of the top 10 manufacturers contributed around 0.5% to 1% of the growth, with BWC highlighting ranch water maker Lone River Beverage Company, which was recently acquired by Diageo. BWC added that the growing tail of macro and independent seltzer brands collectively contributed about 4% of the segment’s year-to-date growth.

“Still a very top-heavy segment so the dog is still very much wagging the tail for now, but share continues to creep up for those smaller brands … particularly in more isolated regions/markets,” BWC said.

BWC also took a deeper look at the top three players.

Mark Anthony’s seltzer portfolio has increased dollar sales by $64 million compared to a year ago, which BWC said “almost mirrors” the combined gains from White Claw’s second variety pack and single-flavor Black Cherry pack. A portion of the growth though was offset by declines of its first variety pack, which BWC attributed to consumers switching packs and possibly even out of stocks.

Nevertheless, BWC said the “net impact” of the three brands was “largely positive.” Factor in incremental gains from standalone flavors, the launch of the Mike’s Hard Lemonade variety pack and White Claw Iced Tea once it begins tracking, and BWC sees “a generally healthy portfolio.”

As for Boston Beer, Truly’s Lemonade and Iced Tea variety packs are “generating sizable incremental” dollar sales and make up about 80% of Truly’s year-over-year growth. The Berry, Tropical and original mixed pack also chipped in “notable gains.” However, the Citrus mixed pack has suffered. Nevertheless, the company has five variety packs adding incremental growth compared to a year ago.

“When retailers and distributors really get behind a company (brand), they can really drive volume gains; and Boston Beer certainly has the love from their retailers and distributors across the country,” BWC said.

Finally, A-B’s seltzer gains in 2021 are coming from the launches of Michelob Ultra Organic Seltzer and Bud Light Seltzer Lemonade, while its original variety pack has posted year-over-year declines, which BWC attributed to those new product launches. That’s also affected the rest of its seltzer portfolio, which BWC said has collectively declined $4.6 million.

“But ABI certainly used their collection of declining [hard seltzer] brands to maintain their shelf space; and that in and of itself is a victory for them,” BWC wrote. “Still, the story remains the same in that for any trade-offs taking place within the ABI umbrella as a result of recent launches, the net result has been overwhelmingly positive for the total portfolio of brands they offer.”