Jefferies: Hard Seltzers Are Losing Battle to Tough Summer Comps Despite Growth of Spirits-Based Subsegment

Hard seltzers ended the summer season down -5.5% year-to-date through September 10 in multi-outlet plus convenience channels, as the segment continues to battle tough comps of years past, financial services firm Jefferies reported, citing NielsenIQ data.

The segment recorded a -7% dollar sales decline year-over-year (YoY) in the four weeks ending September 10, with a -8.2% YoY decline in the 12-week period. Comparatively, the segment recorded a +16.2% YOY increase in 2021, a +165% increase in 2020 and a more than +225% increase in 2019.

“Needless to say, long gone are the blistering ’19-’20 growth rates (recall mid-’19 euphoria dubbed ‘The Summer of Seltzer’), given difficult YoY comps, [ready-to-drink] competition, on-premise recovery (category under-indexes), consumer fatigue (e.g., return to light beer), and higher consumer trial now some five years into [the] category’s development,” Jefferies said in its report.

The latest declines are driven by a decrease in malt-based hard seltzer sales. Malt-based offerings – which hold a 93.4% share of hard seltzer in the last 52 weeks, ending September 10 – declined -11.4% in the four-week period and -12.6% in the 12-week period.

Spirits-based hard seltzers – which hold a 9.7% share of the segment in the 4- and 12-week periods and 6.6% share in the 52-week period – increased dollar sales +72% in the four-week period and +87.2% in the 12-week period. Last year, malt-based hard seltzer dollar sales increased +13.5% YoY, while spirits-based offerings increased +187.5%. However, the sub-segment declined -19 bps month-over-month (MoM), while malt-based offerings increased +19 bps, which may indicate spirits-based offerings are “slightly more seasonal than malt-based,” Jefferies said.

E & J. Gallo’s vodka-based hard seltzer brand High Noon Sun Sips continued to dominate spirits-based hard seltzer sales, accounting for 7.8% of the segment’s total dollar sales in the four-week period, and 5.1% share in the last 52 weeks. The brand increased dollar sales +74.2% YoY in the 4-week period, and +95.9% in the 12-week period. High Noon has recorded two consecutive years of triple-digit dollar sales growth since its launch in 2019, +379.3% YoY in 2020 and +179.6% in 2021.

Despite dollar sales declines, hard seltzer holds a similar share of total beer sales versus the segment’s booming year in 2020. In Q2 2022, the segment held a 9.4% share of total beer in NielsenIQ-tracked off-premise channels, up from a 8.7% share in Q122 and 8.6% share in Q4 2021. While the share was down YoY versus Q2 2021 (10.8% share), it was above Q2 2020 (9%).

Mark Anthony Brands maintains the majority share of hard seltzer sales (42.7% in the 52-week period), led by White Claw. The brand recorded a +3% increase in dollar sales in the four-week period, but a -1.6% decline in the 12-week period. The increase was due in part to the growth of White Claw Surge, its 8% ABV line extension, which grew dollar sales +214% in the four-week period, while the base White Claw line declined -5.9% and White Claw Iced Tea declined -77.5%.

White Claw dollar sales declined -5.8% YoY in 2021, after back-to-back triple-digit growth in 2020 (+127.1%) and 2019 (+311.4%). Dollar sales for the base White Claw line declined -9.8% YoY in 2021, after a +124.9% increase in 2020 and +310.4% increase in 2019. The overall brand gained +144 basis points (bps) MoM, suggesting it may not be a totally seasonal brand.

Boston Beer Company continues to record double-digit declines for Truly Hard Seltzer, which holds a 24.3% share of the segment in the 52-week period. Dollar sales in the four-week period declined -22% YoY, with YoY declines across the brand’s various line extensions, including Truly Lemonade (-39.4%), Truly Iced Tea (-74.5%), Truly Punch (-34.3%) and Truly Extra (-8.1%). The base Truly Hard Seltzer line, which holds a 9.9% share of the segment, declined -19.4% YoY in the four-week period and -9.4% in the 12-week period.

Truly Margarita, Boston Beer’s malt-based answer to the cocktail-inspired bev-alc trends, launched in January, accounts for 2.7% share of the segment in the 52-week period, 3.2% share in the last four weeks, and gained 21 bps MoM. Comparatively, Mark Anthony Brands’ 2022 innovation White Claw Surf, launched in March, accounts for 2.8% share in the 52-week period, 1.8% share in the four-week period and lost 19 bps.

To battle Truly declines, Boston Beer has increased marketing efforts for the brand, including the launch of a multimillion-dollar, multi-channel marketing campaign last month.

SponsorUnited (SU), a global sports and entertainment intelligence platform, tracked sponsorship and media deals over the last 12 months for more than 85 hard seltzer brands in a report published Monday. Truly was the No. 1 hard seltzer sponsor in the period, with 160 deals across multiple outlets, a +50% increase versus 2021 and +105% increase versus 2020.

“This year, the brand set its sights on concert venues and amphitheaters, which comprise over one-quarter (26%) of its total deals,” SU CMO Michelle Harmon-Madsen said in a press release. “Within pro sports, the NHL is its top target – Truly has partnerships with 11 NHL teams, and a deal with the league itself.”

Anheuser-Busch InBev’s (A-B’s) Bud Light Hard Seltzer had the second most deals (130), followed by White Claw (90). No. 8 High Noon, one of two spirits-based hard seltzers in SU’s top 10 brands list by deals, had only 15 deals in the period.

Bud Light Seltzer also struggled with YoY declines, with dollar sales in NielsenIQ-tracked channels down -24.3% in the four-week period ending September 10, and -25.2% in the 12-week period. A-B holds a 11.5% share of hard seltzer for the 52-week period, but only a 9.1% share of dollar sales in the last four weeks. Q4 2019 was the last quarter A-B accounted for less than 10% share of the segment (8%), the No. 3 hard seltzer producer after Mark Anthony Brands (63%) and Boston Beer (22%).

The majority of A-B’s share is Bud Light Seltzer, which has a 7.9% share of the segment in the 52-week period, followed by Michelob Ultra Organic Seltzer (2.2%). NUTRL, A-B’s vodka-based hard seltzer brand, accounted for 0.3% of the segment’s dollar sales in the 52-week period and 0.8% in the four-week period.

Molson Coors has the fourth largest share of hard seltzer (7% in the 52-week period) after Mark Anthony Brands, Boston Beer and A-B, but is gaining share, with a 8.1% share of segment dollar sales in the four-week period, led by Topo Chico Hard Seltzer (5.1%).

Topo Chico increased sales +122.2% YoY in the four-week period and +146.8% YoY in the 12-week period. The brand alone holds a 4% share of hard seltzer dollar sales in the last 52 weeks. Dollar sales for Vizzy – which has 2.9% share of hard seltzer in the 52-week period – declined -22.9% YoY in the four-week period and -13.6% YoY in the 12-week period.

Constellation Brands holds a 2.2% share of hard seltzer, mainly with Corona Hard Seltzer, which declined -49.5% YoY in the four-week period, and -16.6% in 2021. Diageo is not far behind with a 1.5% share of the segment, led by Lone River Ranch Water, which increased dollar sales +131.4% YoY in the four-week period, and +422% in 2021.