Off-premise dollar sales of ready-to-drink canned cocktails (RTDs) and hard seltzers have more than doubled in the past three years, increasing +155% since 2019 (through January 8, 2022), according to NielsenIQ data, shared by the Beer Institute’s (BI) VP of research Danelle Kosmal during a webinar Thursday.
In 2021, the segment recorded $9.6 billion in off-premise sales, including sales of spirits-, wine- and malt-based RTDs, as well as hard teas and hard kombucha. The segment is expected to grow from a 10% share of total beverage alcohol in 2020 to 22% share in 2025, according to market research firm IWSR, which includes hard seltzers in its RTD definition.
When split into subsegments, hard seltzers accounted for $4.6 billion in off-premise sales for the 52-week period ending January 8, followed by FMBs ($3.4 billion), spirit-based RTDs ($800 million) and wine-based RTDs ($300 million), according to NielsenIQ data shared by Danny Brager, owner of Brager Beverage Alcohol Consulting, during a webinar with Kosmal on Wednesday.
Although spirits-based RTDs were short of a billion dollars in 2021 – “a long, long way behind the lofty levels of flavored malt beverage sales and hard seltzers sales” – Brager noted that spirits-based seltzers (such as E. & J. Gallo’s High Noon Sun Sips) and spirits-based RTDs (such as Anheuser-Busch InBev’s Cutwater) are the fastest growing subsegments within RTDs, with +142% and +115% growth, respectively, in off-premise dollar sales for the 52-week period.
Wine-based RTDs, the next largest RTD subsegment for growth, recorded a +35% increase in off-premise dollar sales. Canned wine (-5%), traditional FMBs (-5%), wine spritzers (-16%) and wine seltzers (-26%) each recorded declines in dollar sales in the period.
There has also been a significant increase in competition in the hard seltzer and RTD segment. The number of hard seltzer brands with more than $5 million in sales annually increased from nine in 2019 to 32 over the last 52 weeks (through February 26), according to Brager. There are now 286 spirit RTD brands, 19 of which have more than $5 million in annual sales (up from 7 in 2019). Wine RTD brands increased to 213, doubling its brands with more than $5 million in sales from five to 10.
“We normally don’t see huge churn within the top 12, top 10 brands of segments,” Brager added. “But versus 2019, there are seven new brands that are now top 12 for hard seltzers, four for wine [and] six for spirit RTDs that weren’t top 12 back just three or four years ago.
“So still a lot of change, a lot of churn, a lot of new things coming in,” he continued. “I think that brings into question, can this continue? Can these categories continue to absorb the number of new entries that are coming in?”
To kick off the BI’s webinar Thursday, president and CEO Jim McGreevy emphasized the “need as an industry to continually speak up on behalf of differentiation” between beer, spirits and wine, and for brewers to fend off equalization efforts by the spirits industry. McGreevy also praised the level of competition in the beer industry, likely sparked by the U.S. Treasury’s report published in February on competition in the beverage-alcohol industry.
McGreevy previously spoke out against the report’s characterization of competition within the beer industry. The report also noted that different federal excise tax rates for beer, wine and spirits created a “competitive disadvantage” for spirits-based drinks such as RTDs.
“You all know that beer is different and better than our competitors’ products; We are the beverage of moderation,” McGreevy said. “I’m proud to say that in state Legislatures across the country and in Washington, D.C., the three beer trade associations and our consumers and our members are sticking up for consumers to protect the long-standing policy of differentiation in taxation and access, and we’ll all continue to do so.”
Kosmal noted that spirits-based RTD shoppers spend twice as much on alcohol ($684 in the 52 weeks through October 9) compared to average bev-alc consumers ($345).
“I would say that the numbers here clearly show that spirit-based RTDs don’t need tax breaks to thrive,” Kosmal said. “They don’t need tax breaks to achieve triple-digit growth rates as we’re seeing right now.”
A Look Back at 2021 and Early 2022 Trends
Kosmal also offered a look back at 2021 trends during Thursday’s webinar. Here are a few key takeaways:
Spirits led depletions growth, while beer was relatively flat and wine has been on a downward slide since last spring. Kosmal, citing BI/SipSource data, shared that spirits depletions increased 7% for the 12 months ending February 2022, while beer and wine declined -0.7% and 6.8%, respectively.
Kosmal called beer’s performance “pretty consistent.”
Shipments outpaced depletions in 2021, posting the highest volume estimates in a decade. Beer shipment volume reached an estimated 208.1 million barrels, the highest level since 2010, and marked a +1.1% year-over-year growth compared to 2020 and +2.2% growth compared to 2019. Those numbers could be updated, but Kosmal said this illustrated beer’s “resilience, strength and grit.”
Beer is still about halfway to on-premise normalcy. In 2021, 86.9% of beer’s volume flowed through the off-premise channel (+3.7% volume growth compared to 2019), compared to 13.1% in the on-premise (-20.3% decline compared to 2019).
Compare those splits to 2020, when 91.1% of beer’s volume was concentrated in the off-premise channel and just 8.9% in the on-premise. At the time, consumers shifted their purchasing amid the closures of bars, restaurants and taprooms during the pandemic.
In pre-pandemic 2019, 83.6% of beer’s volume was in off-premise retailers, compared to 16.4% in the on-premise channel.
Kosmal sees it as “unlikely” that the on-premise channel returns to “complete pre-pandemic norms” and called this a “critical” summer in “determining the next norm for beer.” She added that opportunities in the on-premise include creating connections with local establishments and at-the-brewery experiences.
Nevertheless, Kosmal expects a continued shift in volume to off-premise retailers, as consumers continue the at-home trends of dining, ordering online and outdoor gatherings.
Kosmal pointed to 2021 Google searches that signaled a shift away from COVID’s issues — finding toilet paper and testing sites — and more searches for entertainment information, such as nearby bars and restaurants.
Beer is off to a “rough start” in 2022. Every metric is in the red over the course of the first two months of 2022. Those include:
- Off-premise sales to consumers, via NielsenIQ: -10.1% in January, -4.1% in February;
- Sales to retailers: -7.5% in January, -0.3% in February;
- Domestic tax paid shipments: -6.2% in January, -5.8% in February;
- Sales to wholesalers: -6.3% in January; -4.4% in February;
- Imports: -3.7% in January, and February data was not yet available.
Kosmal also noted that on-premise channel share change for January and February 2022 is down 3.2 share points compared to the same period in 2019. The bulk of that change is going to the total off-premise market, followed by convenience, grocery, mass merch and dollar stores.
Kosmal called February 2022 “more promising” with depletions nearly flat for the month, and she expects more promising trends for the spring. She added that the category is facing tough year-over-year comps following 2021.
Segment Trends: Mexican Imports Drive Growth, Seltzers Hold Share, NA Beer Fastest Growing Segment
Imported beer, primarily Mexican imports, is the beer category’s biggest share gainer, growing its share +1.6% compared to a year ago. As for Mexican imports, they’ve increased their share of total imports 14 share points since 2019.
Non-alcoholic beer is the category’s fastest growing segment, increasing dollar sales +18.1% year-over-year and growing its dollar share 0.1 points, Kosmal shared, citing NielsenIQ data through March 12. In fact, non-alcoholic beer has doubled its share over the last four years, up to 0.8% in 2022. Kosmal added that craft is the fastest growing segment in non-alcoholic beer, which is evidenced by companies such as Athletic Brewing, which crossed the 100,000-barrel threshold in 2021.
“This is an exciting space,” Kosmal said. “There’s a lot of room for growth. There’s even more room for innovation and capturing new and lost drinking occasions.”
Kosmal pointed to the continued trend toward health and wellness in alcohol consumption. Citing an online survey by The Harris Poll on behalf of the BI, Kosmal said 49% of beverage-alcohol drinkers (55% men, 43% women) have taken steps to cut back on their alcohol consumption. Although she added a caveat: Survey respondents are often “aspirational.” Still, she noted that 62% of craft beer drinkers and 66% of hard seltzer drinkers said they were cutting back on their alcohol intake.
The survey found that 26% of respondents said they cut back on the number of days per week they drink. Similarly, 26% responded that they were also cutting the number of drinks per occasion.
The reasons for cutting back included reducing alcohol intake to improve mental clarity (21%). Meanwhile, 17% responded that they were drinking more low- and no-alcohol beverages in place of alcoholic beverages, which Kosmal noted was the lowest response rate.
The survey also found that 50% of drinkers ages 21-34 took breaks from drinking alcohol, while 35% of all bev-alc consumers said they took breaks. Among the reasons was health and wellness (25%). Abstinence months such as “Dry January” and “Sober September” were among the reasons for 20% of drinkers ages 21-34. The survey also found that male drinkers were more likely to take breaks.
Nevertheless, Kosmal, citing market research firm IWSR’s 2022 low/no alcohol survey, said that beer and cider was the most popular (55%) for no- and low-alcohol beverages, followed by cocktails or mixed drinks (39%), wine (35%), spirits (30%), cannabis-infused beverages (14%), and cognitive enhancers (12%).
Kosmal added that most of beer’s high-end segments are gaining share, with the exception of craft, which has lost 0.9 share points. Hard seltzers have maintained share, growing 0.1 points, while FMBs and beyond beer offerings, such as hard tea, lemonades and hard kombucha, have driven growth by adding 0.4 share points.