Editor’s Note: 3 Up, 3 Down with 3 Tier Beverages is a quarterly insights series available to Brewbound Insiders, via the Chicago-headquartered, bev-alc-focused consulting and data firm.
In this latest installment of 3 Up, 3 Down, 3 Tier product team consultant Stephanie Roatis analyzes data through the first month of 2024. Roatis commends the growth of hard cider, non-alcoholic (NA) beer and smaller craft brands, and dives into negative trends for hard seltzer, certain flavored malt beverage (FMB) subsegments and table wine.
Below is Roatis’ analysis, using NIQ data through January 27.
THREE UP:
Cider’s Convenience Growth Shows No Signs of Cooling Down
Roughly one quarter of cider is sold in the convenience channel, which happens to be the only off-premise channel growing volume for the segment in NIQ’s latest 13 weeks. Cider volume is up +1.6% and dollars are up +5.1% in total U.S. convenience, while total points of distribution grew +4.3%.
When we remove national and import cider brands and just look at regional players, volume growth in convenience jumps to +16.7% in the latest 13 weeks. Within the Pacific division (California, Oregon and Washington), cider is the second fastest-growing segment in c-stores after FMBs, and saw overall volume grow +17%. Seven of the top 10 cider brands grew their volume with double- to triple-digit percentage growth in the latest year, including Schilling, Square Mile and Portland Cider.
While over one-third of off-premise cider sales occur in the Pacific division alone, one other division experienced noteworthy cider growth in c-stores: the East South Central division (Mississippi, Alabama, Tennessee and Kentucky) grew cider volume +6.6% in the latest quarter, with nine of the top 10 brands growing volume. The next three growth brands are new to the market. We are seeing cider in a continued growth period, with markets and cideries outside of the traditional Pacific region having their moments to shine.
Dry January Trends Continue to Elevate Non-Alc Offerings
NA beer volume is up +29% in the latest 13 weeks, which includes the majority of Dry January. In other words, consumers picked up one-third more NA offerings in the last quarter than the year prior. While craft NA is still the leading segment at one million cases per quarter, import NA is following closely behind and closing the 1% volume gap between the two subsegments. Out of the top 10 brands driving the most dollar growth in NA beer, only two are craft brands, two are domestics, and the rest are imports.
NA wine volume is up +17.3% in the latest quarter, to more than 230,000 cases, or $23.6 million. Ninety-six percent of volume still comes from glass bottles, and over half (55%) of volume share comes from the sparkling spritzer/chardonnay varieties.
NA spirits volume is up +95%, to more than 43,000 cases, or $6.8 million. Seventy-three percent of volume comes from spirits-based ready-to-drink cocktails (RTDs), and every single spirit category grew its NA volume significantly. Some examples of NA cocktail RTDs include Mingle, Hiyo, Hella Bitters & Soda, Ghia and Recess.
While NA wine and spirits are becoming increasingly popular, they are still only about one-fifth and one-twentieth the revenue of NA beer, respectively.
Don’t Forget the Little Guys: Inspiring Confidence Beyond Big Craft
The top four fastest-growing craft styles by absolute volume this last quarter were hazy imperial IPAs (+75.6%), imperial IPAs (+5.2%), hop water (+61.4%), and light lagers (+46.76%). All of these styles are dominated by one or two large craft brands that hold a majority sway on consumers, and a lot of the absolute volume growth is driven by these major brands’ single-serve cans surging in c-stores. However, even when we cancel out the noise of these large brands, most of the trends hold true.
In hazy imperial IPAs, Little Lion World Beverage-owned New Belgium makes up a whopping 85% of the volume share (and is doing pretty well for itself). However, seven of the next 10 volume-ranked brands grew anywhere between +6% and +100% YoY. Furthermore, over 20 new brands scanning at least $10,000 per quarter entered this style and helped grow overall volume. Even without the largest brand, hazy imperials grew volume +18%.
Within imperial IPAs, 14 of the top 20 brands grew volume and more than 30 new brands broke the $10,000 per quarter threshold. Excluding the top brand, imperial IPAs grew volume +7%.
For the NA hop water style, just three brands in the top 20 declined in volume. While this style is much smaller, bringing in just $5.9 million quarterly, 16 new brands entered the category. Also of note: Six of the top 10 hop water producers exclusively make NA beer, while the others are existing breweries that launched NA line extensions.
Lastly, the top light lager brewery saw its style grow +148%, but two new brands broke the top 10 ranking in their launch year, eight of the top 10 brands grew volume, and about 12 new breweries launched this style in 2023.
THREE DOWN
Hard Seltzer Rationalization Continues as Four Brands Emerge on Top
Hard seltzer quarterly cases continue to decline, down -13% YoY in convenience, -15% in food, -14% in liquor, and -24% in drug stores.
If we exclude Mark Anthony Brands’ White Claw (which makes up roughly 60% of off-premise segment share), cases are down even further: -30% in convenience, -28% in food, -24% in liquor, and -41% in drug.
Out of the 336 hard seltzer brands, 234 have declined volume -30% and roughly half of those, many of which were small players, exited the category altogether as they failed to make a dent in the off-premise space. However, hard seltzer still has promise for its top players despite heavy SKU rationalization in the long tail over the last year.
Roughly 100 hard seltzer brands are still scanning over $20,000 per quarter, and one third of the top 100 hard seltzer brands grew volume. The largest volume-growing brands remained Happy Dad (+122,000 cases), White Claw (+24,000 cases), and Spindrift (+6,500 cases). Notably, the second fastest-growing option was private label hard seltzer (ranked No. 19, +40,000 cases).
Consumers could be gravitating towards private label for several reasons: They are trading down to curb spending, they no longer perceive top hard seltzer brands as “premium,” or they buy and prefer retailers’ NA seltzer brands and are drawn to the alcoholic option. Nonetheless, private label has an average case price of $21.19, roughly $12 less than the next most-economic offering in the top 10, signaling a heavy de-premiumization of the hard seltzer segment is on its way.
Hard Kombucha, Hard Coffee, and Hard Still Water are Losing Consumers to Big Tea
During 2020-2022, where we saw sustained periods of heightened off-premise consumption, there was plenty of innovation in the FMB space. Brands were launching hard coffees, hard teas, and hard you-name-its left and right. However, in recent months, hard tea and hard lemonade have exploded due to the resurgence of several big brands bringing attention back in, while smaller segments within FMB have seen many brands exit.
Within FMBs, the bottom three varieties dropped a collective -43,000 in cases YoY. Hard kombucha, hard coffee, and hard still water now own less than 1% of volume share as other FMB segments (traditional FMBs & hard tea) continue to grow share of their own segments and chip away at shelf space with new entrants.
Across all three declining subsegments, there remain just 24 brands scanning above $10,000 in dollar sales quarterly, primarily hard kombucha brands. Only six brands in the segment are growing in volume, of which four are hard kombucha, one is hard coffee, and one is still water. Additionally, 15 of the top 20 brands in this aggregate lost distribution. If existing brands want to survive this consumer shift, they will have to find a way to innovate and/or diversify into other segments, such as hard tea (+30.6%) or hard soda (+20%).
Table Wine is Down Across the Board, But There Are Bright Spots
Table wine volume decreased -4% in the latest quarter and -5% in the last year, with volume drops seen across all the major off-premise channels (food, liquor, convenience and drug).
Nineteen of the top 20 wine varieties lost volume ranging from -1.3% in pinot grigio to -12.8% in shiraz. Only sauvignon blanc grew its volume from last year (+3.3%). Across all 750 mL bottles, those priced between $19 and $25 saw volume grow +4.2%, and now make up 7.2% of all wine volume. The brands driving this growth include Meiomi, Bonanza, Austin, Daou and Three.
Value wines (below $19) dropped a collective -6.5% in volume. As consumer preferences continue to gravitate towards moderation, buyers may be purchasing less often, but are looking for higher-priced wines due to their perceived quality, flavor and “better for you” attributes.