Spirits-based hard seltzers are nearing a double-digit share of the segment, according to a report from financial services firm Jefferies.
For the 52 weeks ending July 16, the combined malt- and spirits-based hard seltzer segment reached $4.263 billion, according to Jefferies equity research managing director Kevin Grundy.
In the last four weeks, spirits-based seltzer’s share of the business has reached 9.1%. Malt- and sugar-based hard seltzers account for 90.9% of the segment – and their sales are declining.
The overall segment recorded a -9.4% year-over-year decline for the four weeks ending July 16, according to data from market research firm NielsenIQ shared by Jefferies. Seltzer’s declines are accelerating as the segment laps its peak selling season; year-to-date through July 16, dollar sales declined -6%.
However, fermented hard seltzers (such as Mark Anthony Brands’ White Claw, Boston Beer Company’s Truly Hard Seltzer) are driving those declines, and have outpaced the segment’s losses at -13.7% for the L4W through July 16, and -12.4% for the L12W.
“Needless to say, long gone are the blistering ’19-20 growth rates (recall mid-’19 euphoria dubbed ‘The Summer of Seltzer’) given difficult YoY comps, RTD competition, on-premise recovery (category under-indexes), consumer fatigue (e.g., return to light beer), and higher consumer trial now some five years into [the] category’s development,” Grundy wrote.
Because it contains summer load-in weeks, Q2 has been seltzer’s peak period in 2020 and 2021, but this year the quarter fell short of past second quarters. For Q2 2022, hard seltzer accounted for 9.3% of total beer category dollar sales, -1.5% from where the segment was in Q2 2021, its peak share of beer.
Spirits-based offerings have absorbed 143 basis points of share in the last four weeks, and make up 9.1% of the hard seltzer segment. Dollar sales of spirits-based hard seltzers reached $237.7 million in the L52W, according to Grundy. The sub-segment is dominated by E. & J. Gallo Winery’s High Noon Sun Sips, which makes up 8% of the total hard seltzer category.
High Noon has replicated the triple-digit growth that fueled the early days of the hard seltzer segment, growing +102.5% YoY in the L4W through July 16, an acceleration over the L12W, when it posted growth of +101.1%.
Although spirits-based hard seltzers are growing at much faster rates than their malt- and sugar-based counterparts (+79.4% in the L4W), they’re starting from a smaller base with narrower market access. In most control states, High Noon’s vodka base means it is relegated to state-run liquor stores, though the spirits industry is lobbying for wider access and lower tax rates to put RTDs on equal footing with beer.
Earlier this year, such efforts succeeded in Vermont, which created a separate product category for cocktails less than 12% ABV and in packages smaller than 24 oz. Offerings in the cocktail category can be sold in the state’s 1,030 licensed beer and wine retailers and pay a lower excise tax rate ($1.10 per gallon, rather than the $7.68 per gallon regular spirits pay).
Below are several takeaways from Jefferies most recent hard seltzer dashboard.
Tea-Flavored Hard Seltzers Driving Declines
Within the White Claw and Truly portfolios, both brands’ tea-flavored variants are driving declines. White Claw Iced Tea, which accounts for 0.3% of the brand’s sales, has declined -78.6% in the L4w and -80.3% in the L12W. However, White Claw Iced Tea was the only brand in Mark Anthony’s seltzer portfolio (which includes Mike’s Hard Lemonade Seltzer) to increase share in the L4W compared to the prior four weeks. It gained 1 basis point.
Truly Iced Tea accounts for 0.8% of the brand’s sales and has declined -74.8% in the L4W and -77.1% in the L12W.
Truly Losing the Most Share in the Segment
Boston Beer’s Truly has lost more share in the L4w compared to the prior four-week period than any other hard seltzer supplier, declining -85 basis points. The brand’s largest share donor is its base offerings, which declined -34 basis points, followed by Truly Punch (-26 basis points).
Truly’s innovation products’ YoY declines are steeper than those of the core offerings, which are cycling tougher comps from 2021. In the L4W, Truly base (which includes the brand’s berry, tropical and citrus variety packs) has declined -5.9% and -20.2% in the L12W.
By comparison, Truly Lemonade’s sales have declined -41.5% in the L4W and -37.8% in the L12W. Lemonade accounts for 5.7% of the overall hard seltzer segment and gained 3 basis points of share in the L4W compared to the prior four weeks.
Truly Punch, which launched in May 2021, has declined -41.8% in the L4W and lost 26 basis points of share. It accounts for 3.6% of the overall hard seltzer segment.
At 3.7% of the seltzer segment, Truly Margarita, which launched in January, holds slightly more share than Punch, making it Truly’s third largest variant behind core and lemonade. It gained 9 basis points of share in the L4W.
Hard MTN Dew at 1% of Segment
Hard MTN Dew, Boston Beer’s collaboration with PepsiCo, accounts for 1% of the hard seltzer segment. The brand is only available in seven states, which Boston Beer expects to increase to 10 by the end of the summer. As of August, the brand is now available in Las Vegas.
Pepsi’s new Blue Cloud Distribution has encountered several regulatory hurdles in gaining licensing, which has slowed the process, Boston Beer CEO Dave Burwick said during the company’s Q2 earnings call last month.
As immediate post-launch excitement wears off, Hard MTN Dew has lost -5 basis points of share, according to Jefferies. Nevertheless, Boston is bullish on the brand’s prospects to contribute volume in 2023.
White Claw Outperforming Overall Segment
After cycling 2020’s tough summer comps, segment leader White Claw appears to have stabilized. The brand recorded YoY declines of -2.7% for the L4W, declining at about a quarter the rate of the overall hard seltzer segment.
However, White Claw’s base offerings are driving its share losses, -30 basis points in the L4W compared to the prior four weeks, followed by higher ABV offering White Claw Surge (-10 basis points).
Anheuser-Busch InBev’s Seltzer Portfolio Down Double-Digits
A-B’s hard seltzer portfolio has declined by double-digits in the L4W (-38.4%) and L12W (-32.6%) periods, with every brand family in the red.
The steepest declines belong to Bud Light Seltzer’s hard soda variety pack, which launched in time for spring resets with a splashy Super Bowl ad starring Guy Fierri. The pack has declined -95.8% in the L4W and -94.1% in the L12W.
Michelob Ultra Organic Seltzer, which has a 2% share of the overall segment, posted declines of -39.3% in the L4W and -39.1% in the L12W. It has lost -11 basis points of share in the L4W compared to the prior four weeks.
Bud Light Seltzer’s base offerings have declined -31.5% in the L4W and -16.1% in the L12W. Bud Light Seltzer base accounts for 5.1% of the seltzer segment and has lost -50 basis points of share in the L4W.
Both Bud Light Lemonade (-19.2% in the L4W and -34.6% in the L12W) and Bud Light Platinum Seltzer (-14.7% in the L4W and -17.5% in the L12W) have mostly maintained share. Lemonade was flat, and Platinum gained 1 basis point in the L4W.
Topo Chico Largest Share Gainer Among Fermented Seltzers
Molson Coors’ Topo Chico Hard Seltzer has gained +18 basis points of share in the L4W, more than any other malt- or sugar-based seltzer. The brand accounts for 5.6% of the seltzer segment, and has posted the highest growth of all major seltzer brands.
Dollar sales of Topo Chico increased +153.4% in the L4W, a significant acceleration from the L12W, when it grew +122.5%. The only hard seltzer offering to post stronger numbers was White Claw Surge, Mark Anthony’s higher ABV entry, which grew +429% YoY for the L4W and +736.8% YoY for the L12W as it cycled a limited test release ahead of its September 2021 launch.
Topo Chico’s gains are offset by Vizzy Hard Seltzer’s moderate declines. Molson Coors’ other hard seltzer brand declined -10.1% in the L4W and -13.2% in the L12W, and has lost -2 basis points of share in the L4W compared to the prior four weeks.
Overall, Molson Coors’ seltzer portfolio has gained 16 basis points of share and sales have increased +34.8% in the L4W and +25.2% in the L12W.
Lone River Ranch Water Offsets Smirnoff Declines in Diageo Portfolio
Lone River Ranch Water – which Diageo acquired in March 2021 for £49 million – has gained 5 basis points of share in the L4W compared to the prior four weeks, boosting it to 1.1% of the hard seltzer segment.
Sales of Lone River have nearly tripled YoY in the L4W, growing +196%. This marks a deceleration from the L12W when the brand grew +228.7% YoY.
Those gains are offset by Smirnoff Spiked Sparkling Seltzer, an early entrant into the segment that has since lost its footing. Smirnoff, which was the fourth largest hard seltzer brand in year-to-date sales in June 2021 in wholesalers tracked by Fintech, accounts for 0.8% of the seltzer segment. Although the brand has gained 9 basis points of share in the L4W compared to the prior four, its sales have declined -41.4% YoY in the L4W and -46.1% YoY in the L12W.