Distributors expect the hard seltzer segment to end the year with 155% growth and come close to doubling in 2021 with much of the growth coming from leading brands, White Claw (Mark Anthony Brands) and Truly Hard Seltzer (Boston Beer Company), according to a report from Goldman Sachs Equity Research arm.
“Overall, distributors continue to broadly view the category as a two-horse race with White Claw and Truly as the gold standard, maintaining their strong combined 70%-plus share positions while the rest of the field competes head-on with new entrants,” Goldman Sachs wrote.
Goldman Sachs, for its part, remains “bullish” on the segment, and believes 2021 could be “a pivotal shakeout year for hard seltzers.” The firm expects the hard seltzer segment to reach $30 billion in dollar sales by 2025, which would account for about a quarter of the total beverage alcohol category. For the 52 weeks ending November 28, hard seltzer dollar sales have reached $3.984 billion in off-premise retailers tracked by market research firm Nielsen.
In Goldman Sachs’ “Beverage Bytes” survey of 50 wholesalers who serve roughly 145,000 retail outlets, the majority (62%) said they do not think the hard seltzer category will double again in 2021 due to the size it reached in 2020. Hard seltzer accounts for about 7% of total beer category volume and could reach 35% of category volume by 2025, according to the firm.
Respondents forecasted the most growth for White Claw (+103%) and Truly (+101%) and are predicting successful sophomore years for 2020’s new entrants:
- Constellation Brands’ Corona Hard Seltzer — +88%,
- Molson Coors Beverage Company’s Vizzy Hard Seltzer — +78%,
- Anheuser-Busch InBev’s Bud Light Seltzer — +77%,
- Molson Coors’ Coors Hard Seltzer — +75%.
Distributors’ expectations are still rosy for some established players, such as Diageo’s Smirnoff Spiked Sparkling Seltzer (+55%) and E & J Gallo’s High Noon Hard Seltzer (+54)%, but less so for others, such as A-B’s Natural Light Seltzer (+13%) and A-B’s Bon & Viv Spiked Seltzer (+3%).
2021 will be full of hard seltzer innovation with new brands (Topo Chico Hard Seltzer from a joint venture between Molson Coors and Coca-Cola, Sun Rise Hard Seltzer from a joint venture between Heineken USA and AriZona Iced Tea) and line extensions from segment leaders (Truly Iced Tea Hard Seltzer, Mike’s Hard Lemonade Seltzer), but the new product that excites wholesalers the most is A-B’s Michelob Ultra Organic Seltzer, which the company announced will hit shelves on January 12.
More than 20% of survey respondents told Goldman Sachs Michelob Ultra Organic Seltzer was the seltzer launch they were most looking forward to, followed by more than 15% who named Topo Chico as their top new entrant.
“Distributors who like Mich Ultra believe it has the most staying power and widest cross-category appeal,” Goldman Sachs wrote. “On Topo Chico, distributors are excited especially to see if the brand is able to bring new Hispanic consumers into the category.”
Although wholesalers are excited for some new seltzer brands to launch in 2021, they cautioned that the segment is at risk for oversaturation, which could lead to “consumer/retailer fatigue and diminished brand loyalty with a risk that both consumers and retailers become overwhelmed by the sheer variety across the category — similar to the experience in craft beer,” Goldman Sachs wrote.
Next year, 93% of wholesalers told Goldman Sachs they plan to allocate more shelf and cooler space to the hard seltzer segment; 7% said they plan to allocate the same amount of space. No survey respondents said they planned to take space away from seltzers.
The majority of wholesalers said they plan to dedicate more shelf and cooler space to the segment leaders White Claw (+70%) and Truly (+61%). For Topo Chico (+44%) and other new entrants (+41%), wholesalers are planning to allocate incremental space. Although some wholesalers are planning to dedicate incremental space to the hard seltzer introductions energy drink makers Monster (46%) and Bang (43%) have teased, about a fifth of respondents told Goldman Sachs they don’t plan to allocate any space to these potential new brands.
Brands that wholesalers say will lose the most cooler and shelf space in 2021 include Bon & Viv, which 74% of respondents said they plan to give less space, Natty Light Seltzer (64%) and Smirnoff (50%). A third to nearly a quarter of wholesalers said they plan to give less space to Bud Light (33%), High Noon (25%), Coors Hard Seltzer (23%) and Vizzy (23%).
Following the successful launch of Truly Hard Seltzer Lemonade in January 2020, Mark Anthony will roll out Mike’s Hard Seltzer Lemonade in March 2021, which ranked third as the most exciting seltzer debut for next year.
Nearly all — 96% — of wholesalers told Goldman Sachs they expect Mike’s to be a moderate threat or a big threat to Truly Lemonade, which has sold $247 million at off-premise retail stores year-to-date through November 29, according to market research firm IRI.
Both Truly and White Claw will introduce new tea-flavored hard seltzers in January and March, respectively, but wholesalers’ response has been tepid on the new sub-segment. Less than half (48%) of wholesalers said they expect new tea seltzers to be successful; about a third (31%) believe they will be unsuccessful. About a fifth (21%) said they are unsure. Nearly half (44%) said they believe tea seltzers will cannibalize existing hard teas.