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.
Regional cideries are gaining share from larger cider manufacturers, according to bev-alc data firm 3 Tier Beverages.
In this second installment of the quarterly series, 3 Tier product team consultant Stephanie Roatis shared three insights on industry growth, as well as three underperforming areas across bev-alc scan data.
Below is Roatis’ analysis, according to data from NielsenIQ through September 10.
3 Up
1. Regional Ciders Taking Share From Larger Producers
“Of the top 12 cider brands, 10 are local or regional. Across the entire segment, regional cider brands now make up 59% of annual cider dollar sales. In the latest 13 weeks, cider overall experienced a -2% decline due largely to the top-four national brands losing a collective $8 million.
“When we factor national brands out of the category, cider saw a +6.7% increase in sales ($83.3 million, prev. $78.0 million). Brands like 2 Towns Ciderhouse and Schilling Hard Cider strengthened their footing in the regional-dominated segment, with the largest absolute dollar increases. 2 Towns and Schilling are now the 2nd and 3rd highest-selling brands in the category, up +24% and +50%, in the last 13 weeks, respectively. These brands, along with other craft ciders in the top 12, crushed sales goals with only 3-5% distribution nationwide.”
2. Beer Bouncing Back, +4% in Q3. Imports +11.8% this Summer, Thanks to Mexican Beer Success
“Total Beer appears to have declined in the latest year, but the total category has still grown about +20% since 2018 ($47.3 billion versus $40.1 billion). This is largely due to the continued success of imports, as well as the FMB and domestic premium segments.
The import segment is now dominated by Mexican beer, which makes up 80% of all volume imported to the U.S., Roatis noted.
“Total Beer grew +3.9% from mid-June through Labor Day; over 62% of this dollar growth came from import alone, driven largely by [Constellation Brands’] Mexican imports Modelo, Corona, Pacifico, and Victoria. Notably, Victoria was the fastest-growing beer brand in August on Drizly. The largest growth imports beyond Mexico were Labatt (Canada, +3.6%) and Sapporo (Japan, +13.8%).”
3. High-Gravity Beer & American Wheats’ grow as Craft Beer Brainstorms Innovations Beyond Traditional IPAs
“Craft trends are improving as we fully exit the COVID overlap periods, although it is still losing share. While the segment [declined] -2.3% in the latest 13-week [period], styles like Imperial IPAs, hazy imperial IPAs, and American wheat are up +10%, +281%, and +6% in Q3 [off-premise] dollar sales, respectively. These three styles shed some guidance on where [craft] is headed.
“Across total craft, New Belgium (+1.7pt), Sierra Nevada (+0.3pts), and Goose Island (+0.3pts) were three of the top four dollar share gainers of Q3 ‘22 versus a year ago, largely due to increased distribution of imperial/double/triple IPAs within their product offerings. The polarization of high-ABV versus non-alc innovation continues to offer variety for all types of drinkers, as non-alcoholic hop water (+40.5%) is the fourth fastest-growing style in L52 weeks, and Athletic Brewing (a non-alc brewery) is the second top share gainer in craft Q3 (+0.4pts).”
3 Down
1. Rationalization in Hard Seltzer’s Future
“Hard seltzer has dropped -12.7% in the last 13 weeks as suppliers struggle to maintain their share against FMBs, cocktail RTDs, and imports. Despite the drop in dollar sales, new products continue to be added to the market. Total product offerings increased +3% during this sales decline, indicating that many products may be cut from distribution in the coming months. Hard seltzer has lost 1 point of share in the total bev-alc space and is down -1.8 points in total beer since last year. Single-packs, the second highest-selling seltzer offering, have continued to grow +5.6% and keep seltzer a strong sub-segment.”
2. Major Rum Brands Shift Further into RTD Space
“Rum is down -3.5% in the latest 13 weeks in total off-premise and down -6.0% in the liquor channel. As focus shifts to canned cocktails within the larger spirits space, national brands like Bacardi, Captain Morgan, and Malibu have weathered the dark (and stormy) with RTD cocktail and FMB line extensions.
“Rum is the third most-popular alcohol base for cocktail RTDs, making up 7% of dollar share after vodka and tequila-based RTDs. Similar categories that are down, like cognac, have not been able to pivot as easily across segments. Total spirits are up +35% since 2018, while the rum category is only up +2%, indicating the need for established brands to diversify across segments; however, brands less than $25 are growing, up +1.5% in the latest year, indicating a premiumization shift towards super premium and ultra spirits.”
3. Hard Coffee May be Approaching Maturity
“As FMBs surge with the help of beyond-beer segments like hard tea and hard lemonade on the rise, other segments are facing headwinds. A saturated marketplace of new SKUs is stalling growth of some other [segments] like hard kombucha and hard coffee. Together, these two segments reduced their dollar share to just over 1%. While kombucha is being outpaced, it still has room to grow in less-mature markets like the East-South, Central and New England divisions, up +91% and +10%, respectively.
“Alternatively, hard coffee seems to have hit the end of a product life cycle, down -23% in L13 with only four suppliers and 43 items playing in the space. Alternatively, NielsenIQ names more than 25 hard kombucha suppliers with over 300 items. As hard coffee continues to drop, it will open up the space for alternatives like hard kombucha to innovate and present as an alternative to hard seltzer.”
Read: 3 Up, 3 Down with 3 Tier Q2 2022: Surges in Non-Alc Beer, C-Stores and Imports