Goldman Sachs Retailer Survey: Truly Outperforming Hard Seltzer Segment, Out-of-Stocks Plague Beer Category

Retail sales of Boston Beer Company’s Truly Hard Seltzer continued to increase in Q3, to an estimated +51% year-over-year, according to a recent “Beverage Bytes” retailer survey by Goldman Sachs analyst Bonnie Herzog.

Although sales growth for the quarter was slower compared to Q1 and Q2 (+128% and +76%, respectively), Truly outperformed the overall hard seltzer segment (+18% in Q3), suggesting it gained share. Surveyed retailers expect Truly sales to increase +50% year-over-year in 2021, and +28% in 2022.

Sales growth expectations for the overall hard seltzer segment in 2021 and 2022 have been adjusted downward to +19% and +8% year-over-year, respectively. In a Q2 survey, retailers had predicted the segment would increase +30% in 2021 and +8% in 2022.

Retailers expressed optimism about Molson Coors’ Vizzy Hard Seltzer, which increased sales +80% in Q3, as well as High Noon (+23%), and Topo Chico. Sales for the segment share leader White Claw were flat in Q3, compared to increases of +15% in Q2 and +88% in Q1. Retailers predicted the brand family to only grow +4% year-over-year in 2022, a decrease from Q2 predictions of +22% growth.

The deceleration of hard seltzer growth had many retailers predicting a shakeout of the segment, most likely within the next year, driven in-part by out-of-stocks, as well as the increasing popularity of other “beyond beer” segments, such as hard kombucha.

While 15% of retailers plan to increase shelf/cold box space for hard seltzer in 2022, the majority (60%) plan to maintain the same shelf space for the segment. In doing so, retailers plan to be more selective with the SKUs they allocate space, with some predicting the number of stocked SKUs in the segment to be cut in half by the end of 2022.

Of the retailers who plan to increase hard seltzer space, the majority (60%) said they expect to allocate the added space primarily to the top hard seltzer brand families, including Truly and White Claw. Retailers also expressed optimism for Topo Chico, Vizzy and Bud Light Seltzer. Some mentioned allocating the space to the increasing subsegment of ranch waters.

Out-of-Stocks to Continue Through 2022

Overall, sales growth in the beer/flavored malt beverage (FMB) category was relatively flat in Q3, increasing +1% year-over-year. For context, the category grew +3% in Q2, and +12% in Q1, according to previous retailer surveys. Herzog credited the slowdown to an increase in on-premise occasions, as well as continued out-of-stock pressures.

As such, retailers in the Q3 survey predict the beer category’s sales to grow +3% year-over-year in 2021, compared to previous expectations of +5% growth and +10% growth in Q2 and Q1 surveys, respectively. Additionally, retailers now expect sales in the category to grow +4% in 2022, down from Q2 predictions of +5% growth.

The majority of retailers in the Q3 survey (75%) characterized the out-of-stock situation as “bad” or “very bad,” increasing from 50% in Q2 and 38% in Q1. Nearly two-thirds predicted out of stocks to continue to be an issue through Q2 2022, driven by supply chain issues including glass and aluminum for packaging.

Molson Coors and Constellation Brands had the most out-of-stocks in Q3, according to about 67% of retailers surveyed. Retailers emphasized that Constellation’s out of stocks were seen through all its brand families, particularly with Modelo and its 6-pack and 12-pack glass packaging.

About half of retailers described Anheuser-Busch InBev’s out-of-stock issues as bad/very bad, an increase from 17% in Q2. About 40% placed Boston Beer Company in the bad/very bad category and 20% placed White Claw and Mike’s producer Mark Anthony Brands in the category, both an increase from no retailers reporting out of stocks as bad/very bad for the two companies in Q2.

With continued supply chain issues, surveyed retailers expect pricing to increase again in 2022, on top of 2021 price increases.

Boston Beer and Constellation Dominate Q3 Growth

Constellation outperformed other quarters, with +19% year-over-year sales growth in Q3, a significant acceleration compared to Q2 (+3%). Retailers expect Constellation’s brand families to increase +9% in 2022, an increase from Q2 predictions of +4% growth.

Convenience sales for Boston Beer increased +17% in Q3, a slight deceleration from Q2 (+18%). Retailers expressed optimism for the company brand families, expecting sales growth to increase to +16% in 2021, and +8% in 2022.

Molson Coors posted moderate growth (+1%) in Q3 compared to -1% growth in Q2. For the fiscal year 2022, retailers expect convenience sales of the company’s brand families to remain flat, down from +2% growth expectations expressed in Q2.

A-B, Heneiken, and craft beer were all predicted to decline in sales -1% in 2022.