- Hard seltzers have enjoyed phenomenal success in the US market, causing concern to some in the wine world
- Since mid-2021, the category has been slowing as consumer seek fuller flavors and reach for canned cocktails
- Seltzers aren’t going away, but their success provides valuable lessons for the wine world
“We need more people of all kinds to love wine. White Claw is going to eat us all if we don’t change.” In late 2020 when Madeleine Thompson, a Dallas-based Wine Director, issued this warning in the New York Times, she was referring to the need for wine to become more inclusive. Yet in making this statement, she also vocalized a concern shared by many others in the wine trade. Wine was struggling to capture the imagination – and sales dollars – of younger consumers, particularly in the USA. Hard seltzers, meanwhile, were enjoying phenomenal success.
The hard seltzer story began in 1993. That year, Coors Brewing Company launched Zima Clearmalt, a clear and lightly carbonated malt-based beverage that was marketed as an alternative to beer, primarily targeting women. Its popularity peaked in 1994, when it sold an eyewatering 1.3 million barrels. By 1996, sales had dropped to around a third of this, before gradually fizzling out. Production in the USA officially ceased in 2008, but the concept of a hard seltzer – as a blend of carbonated water and alcohol, often with added fruit flavour – was born.
A Runaway Success: More Than $4 bn in 2020
More recently, the category has grown even more aggressively. In 2013, Bon & Viv was launched in the USA by entrepreneur Nick Shields, who later sold the brand to AB InBev. In 2016 two products launched that would go on to dominate the hard seltzer market: White Claw, the brainchild of the Canadian former wine importer Anthony von Mandl, and Truly by the Boston Beer Company. But it wasn’t until 2019 that sales really took off. According to Nielsen data, the hard seltzer category grew by an eyewatering 226% in 2019, and a further 165% in 2020 to achieve US sales of $4.1bn.
Seltzers were a runaway success, and the big brewers knew it. Each of the Boston Brewing Company’s quarterly results from that period make references a fast-growing category and emphasized intentions to capitalize on its growth. And their plans were working. At beginning of 2020, the company reported: “Truly continues to generate triple-digit volume growth and we are continuing to expand package and draft distribution across all channels.”
“Flavor, refreshment and dietary factors like low-carb and low-calorie.”
Products like Truly and White Claw owe much of their success to an ability to meet the needs of a growing group of mostly younger consumers. According to Brandy Rand, Chief Strategy Officer at the IWSR Drinks Market Analysis, consumers appreciate the style – and nutritional transparency – of hard seltzers. “Flavor and refreshment are the key drivers for hard seltzer consumption, followed by more dietary factors like low-carb and low-calorie”, she said via email.
Put simply, many consumers want a light, refreshing drink that is relatively low in calories and free of allergens. This value proposition is spelled out clearly in seltzer packaging. White Claw puts selected nutritional information at the forefront: 100 calories, 5% alcohol, gluten free, 2g carbs, and – a little more elusively – “made pure”. Truly makes similar statements.
What Does That Mean for the Wine Industry?
While seltzers enjoyed dizzying success, parts of the wine world started to become worried. Research published in Silicon Valley Bank’s 2022 State of the Wine Industry report indicated that younger consumers are transitioning to wine at a slower rate than previous generations. One chart showed that 33% of consumers in the 21-34 age bracket would choose to bring hard seltzers or flavoured malt beverages to a party compared to just 15% who would opt for wine. “Today, wine isn’t the next generation’s preferred alcoholic beverage”, the report says glumly.
Data from Nielsen indicates that this concern is justified. The company observed that in March and April 2020, and in the same months in 2019, hard seltzer buyers decreased their share of spending on beer and wine. While beer was harder hit – down 5.6 share points – wine also lost 4 percentage points among this group. “Hard seltzers pull drinkers from beer, wine and spirits”, says Rand, who points out that IWSR consumer research has found that consumers often switch between beverage types on the same occasion. “It’s not necessarily about either-or, it’s often a case of both”, she adds.
Signs of a Slow-Down?
Recent news about the performance of seltzers might, therefore, tempt the wine industry to breath a collective sigh of relief. After triple-digit growth in 2019 and 2020, the category posted gains of 16% in 2021 according to Nielsen. Early signs of a slow-down began to emerge last year. In July, Molson Coors announced plans to stop producing Coors Seltzer in the USA. In October, the Boston Beer Company dumped millions of cases of Truly after sales failed to live up to expectations.
Changing Consumer Preferences
There are several reasons why seltzers are beginning to cool down. In the Constellation Brands latest earnings call (Q2, 2022), CEO William Newlands acknowledged changing consumer preferences:
“We’ve … discovered that consumers are looking for more robust taste and flavour in their seltzers”, he says, predicting that the category will evolve beyond low calorie, low carb offerings. It will “open up to more distinctive consumer value propositions that include things like more flavour, different alcohol bases, and functional benefits”, he says.
The rising popularity of canned cocktails makes sense in this context. “Spirit-based alternatives provide quality, authenticity and creativity that the malt products have not yet unlocked”, says Adam Kost, founder of Country Luau Spirits, a craft canned cocktail made in Nasheville. Tara Merdjanoff, co-founder of QNSY sparkling cocktails, followed a similar philosophy: “Our products are flavour-first, ahead of the nutritional slant”, she says.
Next Stop: Canned Cocktail RTDs
Canned cocktail RTDs have now begun to challenge the seltzer category. Over memorial weekend in May 2022, ready-to-drink (RTD) cocktail sales surpassed hard seltzers for the first time on alcohol delivery service Drizly. This was repeated over the July 4th weekend when RTD cocktails held 5.4% of sales, up from 3.6% the previous year. Seltzer’s share dropped from 5.9% to 4.7%.
While this is a category shift on paper, consumers may not be aware of it. “Very few understand the difference between hard seltzers and canned cocktails”, says Merdjanoff. Research by Drizly corroborates this. In its 2021 consumer report, the company found that only 32% of consumers could correctly identify what a hard seltzer is. A larger 54% selected options that are consistent with the definition of an RTD cocktail.
Rescue Through an International Growth Strategy?
Although hard seltzers are gaining ground in several global markets, sales remain concentrated in the USA. IWSR data suggests that 90% of seltzer volumes are in the USA. “Canada, Japan, Australia, Mexico and the UK are all quite small markets for hard seltzers as the category is relatively new, but are showing double-digit growth rates on a small base”, says Rand.
Producers remain optimistic, however. When it entered the UK market in 2020, White Claw said, via a press release, that British consumers had been demanding access to the product over social media. Canned cocktail producers are also enthusiastic about prospects in Europe:
“I was in Europe last month and our premium batched cocktail brand, TAILS Cocktails, was flying off the shelves at local grocer stores”, says Brenda Fiala, Global VP of Business Strategy, Planning and Analysis at Bacardi.
Cautious Optimism
The implications for the wine trade are nuanced. Growth for seltzers might not be living up to expectations, but 16% gains in 2021 are too strong to signal the end of the category. The rise of canned cocktails in its wake might present an additional, or alternative, source of competition. But there are reasons for the wine industry to be optimistic.
New Products…
Shifting consumer preferences towards fuller flavors can present an opportunity for wine. After referencing this trend, Newlands spoke about one of Constellation’s newest products, the new Woodbridge Wine Seltzer canned drinks which launched at the end of July. In a press release, the company hinted at the ability of wine to provide the fuller flavour desired by consumers: “These beverages provide the convenience and sociability of hard seltzers without compromising on flavor.” (for more information about canned wine)
…or Better Communication
A second view is that wine could offer everything that seltzer consumers are looking for – if only it were communicated. “The most frustrating thing for me is that people don’t know that white wine can be 95 calories per glass, most white wine has no sugar, and that canned wine can be good”, says Sarah Hoffman, Co-founder and CEO of Maker Wines, which produces premium canned wines. “Ingredient transparency, nutritional information, accessibility and portability are all things that wine can deliver. The takeaway from how well seltzers have done is to listen to your customers and what they want, and meet them where they are”, she adds.
“The takeaway from how well seltzers have done is to listen to your customers and what they want, and meet them where they are.”
By delivering a product that consumers enjoy, hard seltzers and canned cocktails have rightfully earned a significant place in the alcohol market – and they both continue to grow. While it looks now unlikely that White Claw will lead to the downfall of wine, it still might provide a useful wake-up call. Natural processes, low sugar, moderate calorie content, great flavours and portability are all things that wine can supply. Hoffman is optimistic: “With great marketers, wine should win. We have everything going for us.”
