The convergence of beverage-alcohol and non-alcoholic brands may be a new trend, growing exponentially in the past few years, but it’s been decades in the making, according to leaders in the space during a BevNet Live panel last week.
Spindrift founder and CEO Bill Creelman, Boston Beer Company CMO Lesya Lysyj and former Coca-Cola and VEB executive Matt Hughes shared the stage for Day 2 of BevNet Live in New York City.
“These categories have been living together – out of necessity, because one needs the other, the non-alc or the alc – for years,” Creelman said. “The thing that’s different here is now it’s the non-alc brands that are starting to get a little bit of traction and are starting to lead the conversation, which I think is super exciting.”
Spindrift, a Massachusetts-based sparkling water brand, launched Spindrift Spiked, a 4% ABV hard seltzer, in early 2021. At the time, the then decade-old company was looking for how it could both meet a consumer need and usher the brand into “the next generation of whatever consumption that is.” The brand first expanded with non-alcoholic tea, lemonade and cider extensions, before adding bev-alc to meet consumers “at a different part of the day.”
While the hard seltzer segment is in decline, Spindrift Spiked has still found growth In the last 52 weeks (through April 22), increasing sales +188% and volume (measured by case sales) +31% in NIQ-tracked off-premise channels, according to data shared by 3 Tier Beverages.
Spindrift Spiked’s ability to connect with consumers is partially due to some consumers already associating the Spindrift brand as a mixer for bev-alc, Creelman said. That association is even stronger with Coca-Cola products.
“Consumers have been choosing to blur the lines for a long time,” Hughes said. “What we found at Coke was that we had trademarks that consumers not only knew and loved well, but also were already using those non-alcoholic products in some way with alcohol.”
Hughes retired earlier this year after more than 15 years with Coca-Cola. During that time, he helped create and operate the soda giant’s bev-alc platform. The company accelerated its presence in bev-alc in the past few years through brand authorization agreements with big beer companies, including Topo Chico Hard Seltzer and Simply Spiked Lemonade with Molson Coors, and Fresca Mixed with Constellation Brands. It then ventured into ready-to-drink canned cocktails (RTDs) last summer through a partnership with Jack Daniel’s Tennessee Whiskey.
“The combination of high household penetration and brand awareness, associated with an occasion-based usage that was already present, made it a lot easier for, in this case, Coke to put together these products that were great tasting and, frankly, more convenient for the consumer to have already mixed it,” Hughes said.
“It’s a huge profit pool: $200-plus billion beverage-alcohol space, highly segmented, many of the subcategories are ready for disruption,” he continued. “So there’s a monetary reason for investors and brand owners to go after this space.”
For bev-alc brands, particularly beer, partnering with non-alc beverage brands provides an opportunity to connect with younger consumers and counteract declines, Lysyj said, noting that beyond beer segments have grown “like crazy” since the hard seltzer boom, while beer has faced a “slow decline.”
“It’s where the younger drinker’s going, it’s where the more diverse drinker’s going, and there’s so much variety there and so much potential,” Lysyj said. “We’re all just scrambling to find innovative ways to capture that drinker.”
Boston Beer entered the convergence game in 2022 with the launch of Hard MTN Dew, a 5% ABV flavored malt beverage (FMB), created through a partnership with PepsiCo. PepsiCo took its involvement in bev-alc one step further and created a new wholesale entity, Blue Cloud Distribution, to sell and distribute Hard MTN Dew and any future bev-alc offerings.
Boston Beer has also expanded its spirits-based offerings, launching bottled spirits and cocktail-inspired FMBs through a joint venture with Beam Suntory, and extending its Truly Hard Seltzer brand with vodka- and tequila-based versions.
Lysyj cautioned companies looking to expand into new categories not to get distracted by immediate growth and expand too quickly, admitting that Boston Beer has made the mistake in the past.
“We’re a very innovative company, we always are placing a lot of bets, and the biggest mistakes we’ve made is we go too fast, we get too excited, and we get to go too quickly to either expand or launch line extensions or whatever before we’ve just held the held the line,” Lysyj said.
“We see some success or salespeople get really excited, a retailer gets excited, ‘Hey, how come it’s over there and we don’t have it over here? Why don’t we just add these couple of states?’ and the next thing you know, you’re just going way too quickly,” she continued. “It’s like you’re not growing the garden with enough fertilizer and water.”
Creelman echoed those remarks, advising beverage brands not to enter bev-alc too quickly, even if the growth potential is exciting.
“If your everyday is still putting out fires – trying to figure out how to get your core product out into the market, all those sorts of very fundamental things – you definitely want to finish that work first, before you turn your attention to something that is quite challenging,” he said. “Almost like a second business.”
Lysyj also advised companies not to “be afraid to pivot,” using Boston’s Beer’s Twisted Tea brand as an example. The hard tea brand has been one of the few Boston Beer brands with exponential growth recently, but has “failed three times” over its life, she said.
Twisted Tea was launched as a “high-end tea,” similar to a “hard Snapple,” and was expected to cater to those consumers, but ended up resonating with “construction workers in Maine,” Lysyj said. The company pivoted and leaned into the demographic.
“Listen for where you’re actually getting traction, and it may not have been what you intended, but go with that,” Lysyj said.
The crossover of bev-alc and non-alc products has faced some pushback, with some, including the National Beer Wholesalers Association, expressing concerns that large non-alc beverage companies are using pay-to-play relationships – prohibited in bev-alc – to get better shelf space.
Asked if there was concern of increased regulations, Hughes said there are “a lot of rules already in place,” and if everyone plays by those rules, “I don’t see why that would change things.” However, he acknowledged, without naming specific brands, that rulebreakers could cause problems for others in the future.
“When fools rush into a category, then there’s often times friction from that, and we’ve seen that happen time and again,” he said.
“I think it is getting sorted out,” Creelman added. “There’s now starting to be a really clear path or brightly lit path. As long as you stay on that, you’re going to be safe.”
The full panel, along with other panel’s from BevNet Live, can be watched here.