In a time of uncertainty for beer, flavored malt beverages (FMBs) have found steady success and growth above nearly every other segment.
Nearly halfway through 2023, FMBs and non-alcoholic have been the only two beer segments to consistently record double-digit dollar sales growth in off-premise channels. FMBs increased dollar sales +20.6% year-to-date (YTD), accounting for 8.8% of category sales in NIQ-tracked channels (total U.S. xAOC + liquor plus + convenience) in the period (ending May 13), according to data shared by Bump Williams Consulting (BWC).
Hard Teas are driving the growth within FMBs; the subcategory increased dollar sales +38.7% YTD, to nearly $385 million, now accounting for 2.3% share of total beer dollar sales in NIQ-tracked channels. Across all outlets (on- and off-premise), dollar sales for hard tea have improved +31% YTD versus 2022, maintaining that momentum in the last four weeks (+39% L4W), according to BWC.
With such significant growth above all other “beyond beer” and FMB segments, one would think there must be a few new hard tea brands hitting the market and driving growth through innovation. While this is somewhat true, the real king of hard tea has reigned for more than 20 years: Twisted Tea.
Boston Beer’s Twisted Tea accounts for 91% of hard tea sales in NIQ-tracked off-premise channels (through May 13), according to BWC. Through Q1 2023, Twisted Tea accounted for 27% of total FMB sales in off-premise channels, increasing dollar sales +34% year-over-year (YoY) in the quarter, according to Boston Beer’s Q1 earnings report. And while the brand is more heavily weighted in the off-premise channel, it still accounts for 50% of FMB volume and 82% of FMB volume growth in the on-premise, Boston Beer CEO Dave Burwick shared during the company’s Q1 call with investors.
Boston Beer is “confident” that Twisted Tea will maintain double-digit growth through the rest of 2023, with plans to expand both package and on-premise distribution and increase the brand’s presence in undeveloped markets, according to Burwick. To stay fresh, the brand continues to innovate by providing a range of offerings that speak to consumer trends, such as fruit- and flavor-forward beverages, variety packs, and Twisted Tea Light, a lower-calorie option that Boston Beer is expanding nationally this year.
“We are answering pretty much all the consumers’ needs in the tea category for products that have any kind of volume,” Boston Beer founder and chairman Jim Koch told investors in April. “There are niche tea products, some of them that [have] higher prices, but they’re less than 1% share. I’m not seeing anything that I would consider meaningfully different or better than Twisted Tea.”
Fighting to Knock Twisted Off the Throne
Twisted Tea is two decades of consumer familiarity ahead of any hard tea entering the market today, suggesting competitors might be a “a bit late to come into a category that’s so owned by one product,” Koch said.
“[Twisted Tea’s] got 90-some percent of the category and the next product might have five,” Koch told investors. “I don’t see what would differentiate another tea to make significant inroads in Twisted Tea.”
But Twisted Tea’s dominance hasn’t shied anyone away from trying to get their own piece of the pie (or slice of the lemon?). Several new hard tea competitors have entered the market in the past year, including offerings from large beverage brands, such as Lipton Hard Iced Tea from FIFCO USA and PepsiCo and Peace Hard Tea from Molson Coors and Coca-Cola. Even restaurant chains are getting in the mix, with the release of Bojangles Hard Sweet Tea, a 5% ABV FMB that’s a collaboration with the North Carolina-headquartered fast-food chain and Appalachian Mountain Brewery, a former Anheuser-Busch InBev-owned craft brewery recently bought back by its original founders. The Bojangles spinoff is remaining under A-B’s ownership, with Appalachian’s new owners advising the brand.
Both beer and spirits brands are also trying their hand at hard tea, with craft breweries such as Cape May launching a new summer seasonal Hard Iced Tea and Deep Eddy Vodka launching Vodka + Tea Hard Seltzers (5% ABV) this summer.
The number of hard tea brands on the market has grown exponentially in the past three years, increasing from about 80 in 2020 to nearly 150 so far in 2023, a +80% increase over the period, according to BWC. Year-to-date, hard tea brand counts increased +22% versus 2022. SKU counts for hard tea – the number of hard tea flavors and packages – have increased from 161 in 2020 to 216 in 2023, according to BWC.
When excluding Twisted Tea, hard tea brands only account for 0.2% of beer dollar sales in NIQ-tracked off-premise channels. However, those brands are recording trends that are “just as strong, if not stronger” than Twisted Tea, according to BWC VP of analytics and insights Dave Williams. Hard tea brands other than Twisted Tea increased dollar sales +49.6% YTD in NIQ-tracked channels through May 13, to nearly $34 million. In the last 4 weeks, hard tea, excluding Twisted Tea, increased dollar sales 62.5% versus the same period in 2022, while the total segment increased dollar sales 39.4%.
“I can’t think of another consumer category where the number one player has over 90% share,” said Kyle Cooke, co-founder and CEO of Loverboy, an independent hard tea company “Find another consumer category where there’s a true monopoly.
“That excites me,” Cooke said. “There’s Twisted and then there’s a blue ocean of opportunity for a better-for-you brand.”
The closest other incidence would be hard cider, which has been dominated by national brands such as Boston Beer’s Angry Orchard for years. But in 2022, regional hard cider brands passed national brands, accounting for more than 50% of the segment’s dollar sales. If hard tea follows a similar pattern, regional hard tea brands could overtake Twisted Tea. But Angry Orchard also skidded ahead of the segment switch, recording significant declines before the rankings shook up. Twisted Tea continues to record growth.
Loverboy is up for the challenge. The New York-based company launched in 2018 as a better-for-you hard tea brand, and has since expanded to 47 states, with a portfolio that includes canned spritzes and wine-based ready-to-drink canned cocktails (RTDs). The company is “on track to be a million case brand,” supported by placements at national retailers such as Total Wine and Kroger, according to Cooke.
Loverboy is the No. 4 ranked hard tea brand in NIQ-tracked off-premise channels, increasing dollar sales +40% in NIQ-tracked off-premise channels (L52W, through April 22), according to data shared by 3 Tier Beverages. Its next competitor, No. 3 Clubtails, owned by Geloso Beverage Group, increased dollar sales +24% in the period.
Cooke believes Loverboy is fully capable of putting a significant dent in Twisted Tea’s share of the segment, but it will rely on retailers jumping on board and giving brands more shelf space.
“I think retailers, just like wholesalers, are still trying to make sense of how to allocate space,” Cooke said.
Retailers and wholesalers have been burned by the rapid growth and then stagnation of other beyond beer segments, such as hard seltzers. For a short time, it appeared hard tea might see the same fate, with beer brands extending hard seltzer lines with hard tea versions, such as Bud Light Seltzer Iced Tea from A-B and Truly Iced Tea Hard Seltzer from Boston Beer, both since discontinued.
“What excites me is the stuff that’s getting cut are the extensions on extensions,” Cooke said. “We’re in the early innings of hard tea now.”
Retailers might need some more convincing. The Beer Purchasers’ Index (BPI), the National Beer Wholesaler Association’s (NBWA) monthly indicator of beer distributor purchases and segment demand, reported a FMB/hard seltzer reading of 24 in April, indicating wholesalers are shrinking their FMB inventories. A reading greater than 50 indicates a segment is expanding, while a reading below 50 indicates a segment is contracting.
FMB’s April 2023 reading is significantly below its April 2022 reading of 40 and even more below its April 2021 reading of 90. However, those numbers may be skewed by retailers contracting hard seltzer space, and could return to above 50 should hard teas and other FMBs continue their growth trends.
Can Hard Tea Growth Last?
While FMBs are one of the few beer segments growing right now, it remains a small part of the category. And with FMB trends rising and falling quickly in the past, some wonder how long this period of growth can last.
The rollercoaster is par for the course with FMBs, according to Danelle Kosmal, VP of research at the Beer Institute (BI), a beer trade organization.
“[FMBs], it tends to be a segment that’s somewhat cyclical,” Kosmal said during the BI’s 2023 state of the industry webinar. “We see a new sub-segment within FMBs launch, it does really well for a couple of years, it does a good job to engage new drinkers – to engage drinkers that are just seeking something new, different types of flavors, something fun – and then we see a bit of a decline and then an introduction of another sub-segment.”
The trend has turned FMBs into a tool for the beer category, allowing companies to innovate and capitalize on consumers’ wants. It’s an “important role” but not necessarily a role with “longevity,” Kosmal said.
In the end, longevity “doesn’t matter” for FMBs, as there will always be “a new innovation that’s going to come and enter the space” which will “continue to drive excitement for drinkers,” Kosmal said.
This story was originally published in the May/June issue of BevNET Magazine. Read other stories from the issue here.