Hard seltzer could account for 10% of total beverage alcohol sales by 2025, according to a report from financial services firm Credit Suisse.
“There is too much focus on how large seltzer can be as a percentage of U.S. beer,” the Credit Suisse Equity Research Americas team wrote. “We think that is [the] wrong metric, given that 50% of share is gained from wine and spirits.”
Since 2019, hard seltzer, which currently accounts for 3.5% of total beverage alcohol, has been pulling share from all three categories. In the last 12 months, it has gained 48% of its volume from the beer category (up from 44% in the same period the previous year), 24% from wine (down from 29%), and 29% from spirits (up from 28%).
“At 3-4% today, this share of throat can nearly triple and approach the size of wine,” Credit Suisse wrote, adding that it arrived at this estimate “by equalizing alcohol content across beer, wine, and spirits and assuming seltzer and spirits take share at the expense of core beer and wine.”
Year-to-date through June 13, hard seltzer accounted for 10.19% of all beer category dollar sales, according to market research firm IRI. The segment’s share gain is accelerating during the peak summer selling season. Hard seltzer accounted for 12.08% and 11.05% of beer category dollar share in the four- and 12-week periods ending June 13, respectively.
By 2025, Credit Suisse predicts that the “generational trend of category fragmentation for beer” will result in most major beer segments converging in the 13-18% share range, as some segments (premium lights and value) lose share, others (imports and craft) remain about the same, and hard seltzer gains share. In Credit Suisse’s own estimation, this model “understates seltzer’s potential,” as hard seltzer’s household penetration rate has increased 9.3 points in the last two years, dwarfing all other beer category segments, according to data from market research firm NielsenIQ.
Hard seltzer reached 13.2% household penetration in the 52-week period ending May 22, the sixth-highest rate, behind overall beer (41.7%), imports (20.8%), craft (18.1%), domestic premium (17.8%) and flavored malt beverages (16.1%), according to NielsenIQ. The number of hard seltzer buyers has increased 40.3%, to 16.6 million shoppers, which added an incremental $420.1 million to the segment. Those buyers spent an average of $16.70 (+9.2% from the previous years) per trip on an average of 5.7 trips (+8.3%) per year, for an average of $95.20 per buyer in the 52 weeks ending May 22.
Overall, the hard seltzer segment is growing, but not at the breakneck pace of last year, due to the slowdown in sales of segment leader Mark Anthony Brands’ White Claw. Off-premise dollar sales of White Claw have declined -12.1% at multioutlet food and convenience retailers for the four weeks that ended June 13 — a negative trend that is accelerating (-8.9% for the 12 weeks ending June 13, and +3.9% year-to-date) amid increased competition, according to market research firm IRI.
Adjusted to remove White Claw, the seltzer category has grown 132% year-over-year, and 550% on a two-year stack, according to Credit Suisse. With White Claw included, the segment has only posted 5% year-over-year growth.
The hard seltzer segment has become increasingly crowded in the last two years, with new entrants from major players in 2020 (Anheuser-Busch InBev’s Bud Light Seltzer, Constellation Brands’ Corona Hard Seltzer, and Molson Coors’ Vizzy Hard Seltzer and Coors Seltzer) and 2021 (Molson Coors’ Topo Chico Hard Seltzer, A-B’s Cacti and Michelob Ultra Organic Seltzer, Mark Anthony Brands’ Mike’s Hard Lemonade Seltzer). Both years also saw line extensions from major players, including Boston Beer’s Truly Lemonade, Iced Tea and Punch; White Claw Iced Tea; Vizzy Lemonade, Bud Light Seltzer Iced Tea and Lemonade; and Corona Limonada.
Although White Claw’s sales have begun to flounder with increased competition, its next closest competitor, Truly, is thriving.
“Truly contributed the most points of growth to the seltzer category in March, April, and May 2021,” Credit Suisse wrote. “At the same time, White Claw has been flat to down. No other innovation contributed more than 3.5pp to growth.”
In May, Truly contributed 6 points of growth to the hard seltzer segment, which grew 5 points. White Claw declined by 9 points, which offset growth from Truly (+6 pp), Michelob Ultra Organic Seltzer (+3 pp), Vizzy (+2 pp), Topo Chico (+2 pp), Mike’s Hard Lemonade Seltzer (+1 pp), Cacti (+1 pp) and all other brands (+1 pp). Diageo’s Smirnoff Spiked Sparkling declined -1 pp and Corona Hard Seltzer was flat.
Truly has sliced the share gap between it and White Claw in half, which is down to 14 pp from 30 pp one year ago, according to Credit Suisse. Truly is also closing the velocity gap between it and White Claw. When it launched in April, Truly Punch was the first seltzer innovation product to roll out at a velocity 15% higher than all White Claw packs.
Since their introductions earlier this year, Truly Iced Tea and Punch have reached 25% of the brand’s sales. Truly Lemonade, introduced in January 2020, is Truly’s best-selling SKU and Boston Beer’s No. 2 SKU overall behind Twisted Tea Original.
On its own, Truly Lemonade accounts for about 6% of the hard seltzer segment, and 62% of all lemonade-flavored seltzers. Its next closest competitors, Mike’s Hard Lemonade Seltzer and Bud Light Seltzer, each hold about 15%.
Introducing three major brand extensions in 15 months has paid off for Truly, Credit Suisse noted.
“The reward for Truly is that distributors and retailers are becoming more comfortable with its rapid innovation pipeline and allocating early distribution accordingly,” the firm wrote. “It took Truly Lemonade five months to contribute over $10 million in incremental monthly sales. In comparison, Iced Tea took two months and Punch took less than one month.”
Credit Suisse predicts that Truly is well-positioned for growth as large-scale events return and the on-premise reopens, noting that the brand has official partnerships with the National Hockey League, pop star Dua Lipa and “multiple e-sports teams.”
“We think there is substantial opportunity to grow in the on-premise, which accounts for 20% of industry volume,” Credit Suisse wrote. “As seltzer grows as a share of alcohol, we expect significant demand for bars and restaurants to add seltzer offerings and the obvious choices will be off-premise leaders.”
White Claw has a larger share on-premise than off-premise, and it grew on-premise sales last year despite widespread restrictions at bars and restaurants, Mark Anthony Brands CEO Anthony Von Mandl said, according to Credit Suisse.
According to IRI scan data, dollar sales of the Truly brand family are increasing, but decelerating as the calendar cycles past tough comps from last year’s elevated off-premise sales:
- +90.3% for the 52 weeks ending June 13;
- +65.3% year-to-date;
- +42.3% for the last 12 weeks;
- +41.1% for the last four weeks.
Dollar sales of all variety packs of Truly’s fruited seltzer flavors have declined in the last 4- and 12-week periods, ending June 13:
- Berry variety pack, -17.7% L4W, -11.4% L12W;
- Tropical variety pack, -29.3% L4W, -21.7% L12W;
- Citrus variety pack, -37.4% L4W, -31.3% L12W.
Only the citrus variety pack has declined in both the year-to-date (-26%) and last 52 week (-15.9%) periods.
Even with the growth of Truly, White Claw holds a large dollar sales lead over its top competitor. Year-to-date through mid-June, off-premise dollar sales of the White Claw brand family total $853,394,701, while the Truly brand family is at $551,323,941.