Denice R. Preston
It was 1994 when Coors launched Zima, an alcohol-free beverage that was a good substitute for wine coolers. The product was ultimately a failure. However, there are over sixty hard seltzers. What is the driving force behind the growth of the challenging seltzer market?
Hard seltzers encapsulate one paradox in a row: they’re advertised as healthy but are alcohol-based drinks. They are sold at a comparatively low price but offer an aspirational, active lifestyle. Their appeal may be only for the summer months, but they’ve been able to endure all year round and proven that they are COVID-19 proof. In 2018 it was only ten brands of hard Seltzer. In 2019, the number was 26; by 2020, there were over 65. What caused the challenging seltzer market to develop so rapidly?
This article focuses on the business and industry behind the explosive attraction of the beverage, including the product, the marketplace size, the landscape of competition, and the market drivers.
What is Hard Seltzer?
Hard Seltzer comprises carbonated alcohol, water, and fruit flavoring. It is commonly packaged in cans for convenience. The flavors available vary according to brand and go from the primary flavor profiles like black cherries, limes, and red grapefruit to more sophisticated flavor profiles like the melon basil lemon agave hibiscus and the cucumber-peach. Alcohol by volume of Hard Seltzer (ABV) ranges from between 4% and 6 percent as is the case with most beers. The alcohol type differs for each brand: Most hard seltzers contain fermented cane sugar and added fruit flavors. Other brands make malt liquor made from malted barley. In this process, the cereal grain is dried out, then soaked in water, then made to germinate. They are after that, they are dried with hot air. This can break down complicated sugars and then prepare the alcohol for fermentation. During fermentation, the yeast converts the sugars and creates alcohol. The Bud Light’s Lime-a-Rita, along with Smirnoff Ice, are malt drinks. However, some hard-seltzer brands mix vodka with real fruit juice, High Noon.
The rise of the hard Seltzer has proved explosive over the last few years; they’re not a brand new idea. 1994 was the first time Coors made a bet and launched Zima, an alcohol-free beverage with a low ABV designed to compete with other products like wine coolers. Zima is considered the first “alternative,” an alcohol group that includes drinks that includes products like Smirnoff Ice and Bacardi Silver. Coors put $38 million into advertising Zima’s debut, only to see the product fail in the long run, partly due to its peculiar taste but also because it was advertised as a product that was primarily female-oriented that was clear and tasted nothing like beer. Slate said that even though “the ladies took a shine to the stuff, the guys avoided Zima as if it were laced with estrogen.”
It was not until 2013 that the inventors of SpikedSeltzer introduced their product. In 2013, SpikedSeltzer had an ABV of 6% and 140 calories per 12-ounce portion. It was in 2015 that the brand sold over 250,000 boxes. When they first began marketing the drink, stores found themselves in “total confusion” about the product’s appeal and benefits, as per Dave Holmes, the brand’s co-founder. In 2016, however, the beer giant Anheuser Busch, which owns brands like Budweiser, Rolling Rock, and Michelob, acquired SpikedSeltzer creator Boathouse Beverage LLC and rebranded the product as Bon Viv, a reference to the term ” bon vivant,” meaning a “sociable person who has cultivated and refined tastes, especially with respect to food and drink.”
Hard Seltzer’s Market Size & Total Opportunity
The market for hard Seltzer in the world was $4.4 billion in 2019 and is projected to expand by 16% from 2027 to $14.5 billion, according to estimates made by Grand View Research. Advanced economies like Canada, the US, Canada, and Australia support the market’s growth. Asia Pacific is expected to be the fastest-growing region at a rate of 17% between 2020 and 2027. The increase in hard Seltzer is due to many companies focusing exclusively on this Australian market. In 2019, however, North America dominated the market with more than 70% of the total revenue.
Additionally, between 2020 and 2027, hard seltzers with ABVs between 1 and 4.7 percent are anticipated to expand faster than other ABV categories. They will grow at an estimated 16.6 percent CAGR. The products with lower ABVs are expected to draw healthier customers.
In terms of the population’s demographics, US millennials are the most significant users of this product. The popularity of Hard Seltzer among young people is a sign of its capacity to establish its brand identity. Between 60% and 70 percent of drinkers who are legal (21 years old and over) consider hard seltzers to be its distinct category, while less than 10% see hard seltzers as beer-like drinks. It is interesting to note that 75 percent of those who drink hard Seltzer also drink beers, which is probably why beer makers have come up with their products for hard Seltzer, such as Bud Light Seltzer and Corona Seltzer.
White Claw Reigns
At the beginning of the year of 2018, there existed ten hard-seltzer brands. A year later, that number had risen to 26. By 2020 there were 65 brands. However, White Claw, owned by Mark Anthony Brands, has remained at around half of the sales and is Truly controlled by Boston Beer Company, coming in the second spot.
NielsenIQ said the complex Seltzer off-premise sales topped $4.1 billion by 2020. This was an increase of 160% over the prior year. On the other hand, the beer market amounted to $40,000 in the year 2020, which is a more than 15% increase over the year prior, when sales off-premise totaled $36.8 billion. Hard Seltzer has also increased its percentage of the beer/cider/flavored malt beverage (FMB) category, going from 2.43 percent during the year 2019 and 8.51 percent in 2020.
White Claw remains the top-selling brand of hard Seltzer, making up 50 percent of sales. Indeed came in second place with 21.8 percent of sales. Smaller and independent hard-seltzer firms accounted for about 6 percent of the industry’s sales in 2020.
Nicholas Greeninger, CEO of Tolago Hard Seltzer, said he doesn’t think Tolago Hard Seltzer will drop from their spots but expects smaller and independent businesses to grow their sales soon.
“These are strong, recognizable brands that people move towards typically,” Greeninger stated. “They are priced at the right range and the right expectations about their products. What we’re attempting to achieve is to be the tough Seltzer to which people go when they’re looking for something high quality and unique.”
Greeninger stated that the most important thing to a successful growth for the hard-seltzer industry in general and independent and smaller producers is to innovate and constantly stay in front of consumer demands.
“One of the things we wanted to do is to create some unique flavor profiles that really shook things up and created some excitement from hard seltzer drinkers,” the man stated. “I believe the most important thing to companies such as Tolago is to keep innovating and distinguishing them from the mainstream big brands. You must offer something distinct but still offers some of the same benefits, like refreshment, that people depend on and expect from larger brands.”
