More than 75% of beer wholesalers said the summer selling season is off to “a strong start,” as Memorial Day trends either met or exceeded expectations, Goldman Sachs analyst Bonnie Herzog found in her latest “Beverage Bytes survey” of about 40 distributors covering 145,000 retail outlets (about a quarter of the total U.S. outlets that sell alcoholic beverages).
Driving the momentum, Herzog wrote, is the “strength of the recovery” of the on-premise channel, hard seltzers and so-called “trusted brands.”
The optimism stretched to a possible full recovery of the on-premise by the end of the year, according to 65% of the wholesalers surveyed. Pandemic-accelerated behaviors such as at-home consumption, smaller gatherings and online orders though could still chip into that return to pre-pandemic volume and traffic levels.
Meanwhile, about 85% of wholesalers surveyed said they’re seeing “some” to “a lot of” interest in hard seltzers in on-premise retailers, Herzog reported. That’s led to projections that 8% of hard seltzer’s overall volume could flow through the on-premise channel this year, with Truly expected to gain the most traction, followed by White Claw. Days before the pandemic forced the closure of bars and restaurants, Boston Beer announced plans to release Truly Wild Berry on draft.
Even with the continued growth of hard seltzers, wholesalers are increasingly conservative with their projections for growth within the $4.5 billion segment. They believe it may grow around 30% this year, compared to 87% in 2020, which Herzog referred to as potentially “concerning” for Boston Beer’s stock (SAM).
Despite the more conservative forecasts, Herzog remains “bullish” on Boston Beer stock (SAM). Wholesalers are more upbeat about Truly’s ability to “outperform/take share” with new innovations such as Truly Punch and narrow the “share gap with White Claw.” In fact, Herzog found evidence that Truly is outpacing White Claw in several markets and the brand is making headway in on-premise retailers.
Additionally, Herzog sees Truly primed to benefit from the “shakeout” of underperforming and smaller brands in the fall resets; 60% of wholesalers surveyed said they expect a shakeout to occur by the end of the year.
Nevertheless, she wrote that “a quicker-than-expected maturing” of the hard seltzer segment could put pressure on Boston Beer’s stock in the near-term, but “the stock should ultimately outperform” if Truly grows 2x the segment and sets the stage for “upside of its topline guidance for FY21 (including 40-50% shipment/depletion growth).”
Given those projections, Herzog wrote that she’s confident in Goldman’s 75% volume growth estimate for Truly, but lowered the overall hard seltzer segment’s growth projection by 10 points to 60% this year.
NielsenIQ: Hard Seltzer Dollar Sales +3.6% in 4 Weeks Ending May 29
Market research first NielsenIQ reported that hard seltzer off-premise dollar sales are up +29.3% year-to-date through May 29. However, sales have slowed over the last four weeks to just +3.6%. Still, the segment’s dollar share of the overall beer category stands at 9.4% year-to-date, an increase of +2.1%, and has climbed to 10.7% over the last four weeks, an increase of +1.5%.
Among the top five players, Truly is the only brand to increase sales (+29.3%) over the last four weeks. Segment leader White Claw (-19.6%), Bud Light Seltzer (-1.5%), Corona Seltzer (-22%) and Smirnoff (-56.6%) are each down over the last month as the calendar cycles past elevated sales during last year’s on-premise shutdown period.
Through the first five months of the year, Truly is up +62% compared to last year. Its top competitor, White Claw, is down -1% on the year, while it was a mixed bag for the rest: Bud Light Seltzer (+36.3%), Corona Hard Seltzer (+17.1%), Smirnoff Spiked Sparkling Seltzer (-33.8%).
Meanwhile, Chicago-based market research firm IRI reported that off-premise dollar sales of hard seltzer are up 42.3%, to more than $1.5 billion, year-to-date through May 16. Over the last four-week period, seltzer dollar sales have decelerated to up just 9.6%, the firm reported.
Cowen Hard Seltzer Growth Estimate to +75% in ’21
Cowen analyst Vivien Azer raised her hard seltzer growth estimate to +75%, up from +45%.
Azer wrote that the toughest comparisons from last year’s pandemic-driven, on-premise shutdown and consumer purchasing shift are now in the rearview mirror.
Despite overall deceleration and 6% growth in May’s NielsenIQ scans, the seltzer segment’s growth “remains healthy heading into the key summer selling season,” she wrote.
“[W]hile we have seen a deceleration from peak two-year average growth of 280% in April and May 2020, two-year average growth seems to have generally normalized at an average 177% over the last 11 months,” Azer wrote.
Citing Cowen’s proprietary consumer survey, Azer wrote that hard seltzer frequency of 35% among current drinkers was “well ahead of the category’s 10% share in combined beer, in Nielsen.” As such, consumer engagement “looks sticky,” with the segment sourcing most of its male consumers from beer and female consumers from wine. Azer noted that hard seltzers are also growing in popularity among 35-44-year-old consumers over the last six months.
Looking at brands, Azer wrote that White Claw “will continue to be a source of share for competitors,” which she wrote “is perhaps the inevitable byproduct of being a category creator.”
Jefferies: White Claw Seltzer Share at 42%, Truly up to 27%
Jefferies’ latest “Hard Seltzer Dashboard” put those share losses into perspective. White Claw maker Mark Anthony Brands’ share of the hard seltzer market has declined to 42.2% in the latest four-week period through May 22, the firm reported. However, the company still holds a comfortable lead on No. 2 Truly, even with that brand’s continued share gains.
Truly’s share of the hard seltzer market over the last four weeks stands at 27.1%, driven by Truly Punch, which has grown to 3.7% share of the segment and continued growth of Truly Lemonade, which holds 8% of the segment. Truly Iced Tea, which launched in January, holds a 3.7% share in the latest four weeks, which is down slightly from its 12-week share of 4.1%.
Anheuser-Busch’s portfolio of seltzers accounts for 14.5% of the seltzer market, while Molson Coors in fourth place with 5.8% share. A-B’s Cacti collaboration with musician Travis Scott and Molson Coors’ Topo Chico hard seltzer have both slowed after hot starts. Cacti now possesses 1.5% of the seltzer market, while Topo Chico makes up 1.9%.
Constellation Brands holds 3.5% share of the segment, largely due to Corona Hard Seltzer (3.4% share).
Jefferies analyst Kevin Grundy noted that innovation drove “the entirety” of hard seltzer growth in May, led by Truly Punch, White Claw Iced Tea, Cacti and Topo Chico.