When the fizz settles, hard seltzer survivors need to ‘stand for something’

The hard seltzer revolution has transformed the beer industry, forcing breweries big and small to embrace a phenomenon that has gobbled up a double-digit share of the market in near-record time.

Seltzer is exploding with brands – at least 156 by one count – and it’s kicked off an arms race of sorts, with each new player trying to grab territory dominated by early entrants White Claw and Truly. Most believe there’s plenty of blue sky ahead.

Half of drinkers say they crack open a hard seltzer regularly, according to a UBS survey. Online retailer Drizly found more than 60% of stores plan to make room for more hard seltzer brands next year.

Yet, after booking triple-digit growth over the last three years, the segment is showing signs of slowing down. But its 85% growth over the four weeks ended Dec. 19, according to Nielsen all-outlet and convenience store data, still makes it far and away the fastest growing segment in beer. Its rapid rise, forcing industry players to find ways to break into the segment, brings obvious comparisons to the craft-beer boom.

Indeed, if craft beer can provide a roadmap to seltzer’s fortunes, the segment will continue to grow, with more brands jostling for shelf space and attention. Once the fizz settles, major players will likely survive – but only if they offer something unique, experts say.

“Right now you have SKU-mageddon, but it’s going to get to the point of diminishing returns,” says Nick Voss, vice president of national accounts for Molson Coors Beverage Company. Retailers, he said, are looking for brands with a key point of differentiation or a purpose.

A familiar story

Boom cycles in other industries offer a glimpse of seltzer’s possible future. Yogurt, for example, has similarities, says Tim Calkins, a professor of marketing at Northwestern University. When Chobani began selling Greek yogurt in the mid-2000s, it started a revolution that introduced consumers to yogurt from Iceland, Switzerland, Australia and beyond, causing massive disruption and fragmentation in the industry. It still hasn’t shaken out, as the yogurt makers continue to fight for share, he says.

The rise of light beer in the 1970s is another parallel.

“It was a new idea, and it was a concept that everybody jumped on,” Calkins says. “If you look at what happened in (light beer), in general, you saw the big brands emerge and you (also) ended up with a few targeted niche brands.”

Economics, he says, means big brands with big footprints, production capacity and marketing muscle are likely to emerge victorious in the seltzer wars. But in hard seltzer’s case, the two biggest breweries in the nation occupy the middle tier of seltzer sales.  Mark Anthony Brands’ White Claw and Boston Beer Company’s Truly are the establishment players atop the peak, with no plans to yield any ground.

‘The next thing’

The hard seltzer leaders have “gotten to the point where they’re such a dominant player in the category that it’s going to take an awful lot to knock them off the throne,” says Donn Bichsel, founder of Chicago-based beer industry consultancy 3 Tier Beverages.

The two segment leaders have continued a run of triple-digit growth in the last year, with White Claw growing more than 129% and Truly up nearly 140%, according to Nielsen all-outlet and convenience store data for the week ended Dec. 19. The two phenoms have inspired dozens of competitors, each adding its own twist in an effort to take share, including Molson Coors.

The beverage company has found early success with Vizzy Hard Seltzer, which is the No. 5 new beer item released in 2020 as well as the No. 5-selling hard seltzer in the U.S., according to Nielsen. Its long-awaited Coors Seltzer hit shelves in August and sold more than 500,000 cases in its first month. And Molson Coors believes its growing hard seltzer portfolio can capture a double-digit share of the U.S. market by the end of this year.

In addition to Vizzy and Coors Seltzer, Molson Coors’ Leinenkugel’s brewery released Spritzen, a beer with a splash of seltzer. And it also announced an agreement with The Coca-Cola Company to introduce Topo Chico Hard Seltzer, as well as its plans to launch Proof Point, a house-developed line of hard seltzers made with premium spirits this year.

Each brand was developed with differentiation in mind, says Elizabeth Hitch, Molson Coors’ director of hard seltzers.

In Vizzy’s case, its success demonstrates how a clear point of differentiation – the “presence of positive” and the beverage’s use of acerola cherry high in antioxidant vitamin C – can resonate in the marketplace.

Coors Seltzer is unique with a social mission to restore America’s waterways. Topo Chico Hard Seltzer is a take on the popular sparkling mineral water, and Proof Point is Molson Coors’ first hard seltzer made with premium spirits.

“We’re trying to identify the next thing in this space, rather than following the market,” Hitch says. “As more and more options come into the hard seltzer category, it’s important to really stand for something. At some point, consumers are going to hit a ceiling on how many brands can compete for their share-of-mind.”

What’s next?

Analysts expect the hard seltzer market to continue to grow over the next few years; a UBS analysis, for instance, predicts it will expand from $1.6 billion in 2019 to $8 billion by 2022.

“It hasn’t reached anywhere near full penetration,” says Bichsel, from 3Tier Beverages. “Retailers are going to (stock) anything that says seltzer.”

Not every brand is destined for success. Nonetheless, Bichsel and others say, expect competition to proliferate as more players try to grab a slice of a market where four brands own 88% of hard seltzer sales.

The next wave of seltzer innovation is coming, with White Claw and Truly already staking out positions with new low-calorie options, new variety packs and more. A crop of lemonade seltzers also are set to hit shelves next year, and new offerings are expected from big names including Bang Energy, chef Gordon Ramsay and perhaps even Monster Beverage Corp.  

“You’ve got to differentiate somehow, and find a niche that isn’t the sea of sameness,” says Benj Steinman, president of Beer Marketer’s INSIGHTS Inc. “There’s a ton of players coming in with all kinds of firepower, all kinds of crazy concepts, crazy developments.”

Or, as Molson Coors’ Voss, puts it: “You’ve got to keep innovating to keep the consumer engaged.”