Editor’s Note: 3 Up, 3 Down with 3 Tier Beverages is a quarterly insights series available to Brewbound Insiders, via the Chicago-headquartered, beverage-alcohol-focused consulting and data firm.
In this latest installment, 3 Tier product team consultant Stephanie Roatis shared three insights on industry growth, including the continued dominance of Boston Beer’s Twisted Tea over the hard tea segment, as well as three underperforming areas across bev-alc scan data, such as the loss of share of 4- and 6-packs to single-serves and 12-packs.
Below is Roatis’ analysis, according to NIQ data through April 22.
3 UP
Hard Tea Growing Up and Out, as Twisted Tea Paves the Way for New Brands
Within the last year, flavored malt beverages (FMBs) have surpassed hard seltzers’ dollar share of total beer (8.5% vs 8.3%, respectively) and is up +20% since a year ago, as the subsegment continues to innovate and outperform expectations. Within FMBs, hard tea experienced a +38% dollar sales increase in the latest quarter, followed by hard lemonade and hard soda. Hard tea brought in just as much absolute dollar growth as traditional FMBs, and is now the second largest “beyond beer” segment, making up 25% of total FMB dollars. Who is driving this hard tea growth, both on the supplier and consumer side?
Twisted Tea (shorthand “Twea”) currently is the hard tea category, accounting for 91% of hard tea dollars, but it’s also paved the way for a bevy of new entrants to squeeze in via different angles. Twea has been around since 2001, but 11 of the 63 brand families scanning in off-premise retailers in the latest quarter are brand new. Three of those new brands entered the top 10 this past year. Top growing brands are playing on premiumization (Loverboy), higher ABV (Clubtails), line extensions of existing tea brands (Arnold Palmer, AriZona), or chain restaurants entering the off-premise (Bojangles, Sonic). They are all expanding touch points to attract new and existing hard tea consumers as the category grows, and we can anticipate further share transfer from hard seltzer into the FMB (and hard tea) space as a result.
Hop Water and Non-Alc Beer Continue to Draw Larger Crowds Leading into Summer
Total non-alcoholic beer grew +32% in dollars in the latest 13-week period, with American lagers, IPAs, and hazy IPAs owning the top three styles. Hop water is now the 4th largest NA style, with the 4th largest absolute dollar growth and the largest percentage growth in the style, up 177%. Hop water is a distinct style from traditional non-alc beer style since it is brewed without the grain and thus has no traces of gluten. Notably, the top four brands make up 93% of hop water dollar share (Lagunitas, Hop WTR, Sierra Nevada, and Hoplark). Excluding hop water, Athletic is No. 2 in the total non-alc space, and the 15th largest craft brand overall, with 16% of total dollar share.
Although NA beer is dwarfed by alcoholic beer in dollar share (a roughly 1%/99% split), NA beer is now available in 58% of stores where beer is distributed, demonstrating an increased awareness by retailers on the opportunity in non-alc offerings to increase drinking occasions and basket size. Drizly’s most recent Consumer Trend survey noted that 23% of Gen Z and 24% of millennial respondents drink non-alcoholic beer, wine, or spirits; furthermore, 50% of all respondents have at least tried non-alc options, and 45% say they’re likely to participate in some sort of “dry” challenge (“Dry January,” “Sober October”) throughout the year.
American Lagers Sustain Growth in Latest Quarter
American lagers saw a growth of +3.8% in total beer in the latest quarter, up to $3.1 million. To nobody’s surprise, 64% of total American lager comes from imports, which are up +4.7% and largely composed of leaders Modelo and Corona from Constellation Brands, and Dos Equis and Tecate from Heineken, with a collective 90% dollar share. These brands are a huge growth driver of the style, but could buyers that are primed to pay $37/case of Modelo be sniffing around and experimenting with craft?
Craft American lagers are down slightly (-1%); however, this group’s landscape is shifting as top brands are declining and making way for new entrants. The top three craft American lager brands are all declining while the next seven are growing dollar share and sales. Top growing brands from Leinenkugel’s (Molson Coors), Rio, and Creature Comforts all grew quarterly share, and several new brands like Rio broke into the top 50. American lager is the No. 13 style within total craft, and the third most-prominent lager style.
3 Down
Hard Seltzer Loses More Share of the Beer category
Hard seltzer is the only subcategory within beer to lose dollar sales in the latest quarter (-16%); however, seltzer dollar sales are still 2.5x larger than they were in 2019. We continue to see the subsegment blending within the larger space of FMBs/hard seltzers/cocktail RTDs. Simply put, consumers often don’t distinguish between the base liquid of each of these segments, but they are ultimately purchasing cross-category and increasing their basket size. According to NIQ omnishopper data, spirits RTDs have the highest interaction index with hard seltzer, meaning they have the closest shared shelf-space and shoppers.
While seltzer continues to lose dollars to FMBs (+19% in L52) and spirits-based RTDs (+62%), the category itself is adapting to new players. White Claw still maintained 4% dollar growth and holds 55% of quarterly share; however, the next three largest growing brands (in terms of absolute dollar growth) all have selling points that differentiate them from White Claw. Modelo (+533%) and Spindrift (+423%) both benefit from strong existing brand recognition and Happy Dad (+122%) is packed with electrolytes that appeals to the “better-for-you” crowd. While hard seltzers are not going anywhere, they will need to continue to appeal to an audience that cares more about individual components of the drink rather than just the base liquid.
Craft 6- and 4-Packs Losing Share to Singles and Variety Packs
The 6-pack, packaging beer since the late 1930s, has grown to be the predominant pack size in the beer industry. The 4-pack launched in the early 2010s as the craft trendsetter to allow more variety on the shelf. These pack sizes used to be commonplace, but as sessionability, diversifying consumer tastes, convenience channel-heavy purchasing, and the rise of cans over bottles (accelerated by COVID) have grown, single-serves and 12-packs (particularly variety) have taken over.
Twelve- and 1-packs now make up almost half (49%) of quarterly beer/FMB/cider dollar sales and are the top two most common sizes. Singles’ dollar sales are up +11% largely due to FMBs and imports booming in C-stores, while 12-packs maintained flat sales, thanks heavily to variety packs growing among FMBs (up +64% with 50% of total FMB sales). Both 12-packs and 1-packs are up in distribution; conversely, 6-packs have stayed steady in distribution, only going up +0.3 points, while 4-packs have stayed even.
Liquor Channel Down; What’s Causing the Shift?
Convenience has grown its total beer sales a whopping +6.5% in the latest 52 weeks, while Total US xAOC (made up mostly of food stores) is up +1.9%, and liquor is down -2.5%. While convenience and food owe this largely to increasing prices (volume is otherwise flat), Liquor posted the largest price increase and the only dollar decline. The decline we see in liquor comes largely from hard seltzer, where volume is down -33% and distribution down -3pts, while increasing unit price +16%. As consumers seek out higher ABV products, the liquor channel is likely swapping seltzer spaces in its beer aisle for competing full-flavored segments such as spirits-based RTDs and FMBs. Seltzer volume is down -34% in liquor vs -19% in NIQ’s total off-premise data. Seven of the 10 largest brand extension decliners by absolute dollar sales, across total beer, are all seltzers brands.