The once-hot market for hard seltzer is losing its fizz.
It’s an abrupt reversal: The category, with U.S. sales of $4.3 billion, was a hit in recent years as health-conscious consumers sought out lower-calorie options and quarantine doldrums piqued interest in new flavors. Brands like White Claw, made by the Mark Anthony Group, came out of nowhere, and big beer companies like Molson Coors Beverage, Constellation Brands and Anheuser-Busch InBev launched their own products.
Hard seltzer sales in the U.S. are now slowing dramatically, with just a 4% gain during the 4-week period ended July 11. That pace is “tepid” when compared with the 49% growth over the 12 months that ended the same date, according to Bloomberg Intelligence analyst Stephen Strackhouse, whose report draws on data from IRI.
Alarm bells are starting to ring following recent company reports. Shares of Boston Beer lost about a quarter of their value on Friday — the biggest intraday loss in more than a decade — after the company said it “overestimated the growth of the hard seltzer category in the second quarter.” It called the outlook for the category “uncertain” and slashed its overall profit expectations.
Wall Street was taken aback. Bonnie Herzog of Goldman Sachs noted the slowdown for seltzer is real and more pronounced than originally thought, while Citigroup’s Wendy Nicholson said in a note that earnings “missed estimates by a mile.”
Molson Coors, which has launched three hard seltzer brands since March 2020, recently announced it would discontinue its Coors-branded seltzer.
“I think we’ve learned over the last year that beer-branded seltzers don’t tend to perform as well,” Adam Collins, Molson chief communications officer, said in a phone interview. The company still sees seltzer as fast-growing, and plans to put its energy into its Vizzy and Topo Chico brands, he added.
Part of seltzer’s challenges are a function of its past success, said Brandy Rand, who follows the alcoholic-beverage market with research firm IWSR.
“The larger the category, the harder it is to achieve double and triple-digit growth.” The shelves are also starting to get more crowded after so many new product launches, making the category more competitive, she said.
Statistics from IWSR shows that U.S. sales volume for seltzer slowed to 130% last year after peak growth of 246% in 2018.
Rand also said beer brands may fare worse than nonbeer branded seltzers because the type of consumer who seeks out seltzers is looking for something new. “If you are already a beer consumer you are interested in drinking something different than beer,” she said.
It isn’t just beer-branded seltzers that are lagging. Boston Beer Chairman Jim Koch said that the hard seltzer market is struggling with fewer new users and a proliferation of new brands, which he said is leading to “consumer confusion.”
Drizly, an e-commerce platform for alcohol delivery, says that hard seltzers are facing new competition from ready-to-drink cocktails.
“Ready-to-drink cocktails and other new canned drinks are playing off of hard seltzer’s innovation, and in the process, taking some of its some growth momentum,” Drizly said in a recent report.
Those beverages may contain carbonated water, but are made with hard liquor, unlike hard seltzers, which are made with alcohol that comes from malted barley or sugar. More than a third of consumers group the two categories together as one, according to a Drizly survey, which would help explain why the proliferation of ready-to-drink cocktails is eroding sales of hard seltzer.
Drizly also found that consumers are increasingly interested in their drinks’ ingredients and supporting small, family-owned operations — both of which could push customers away from big, publicly owned brewing companies.
Still, big beer makers have a lot riding on seltzer. Molson Coors remains optimistic.
While growth may have slowed, hard seltzer still can grab a much larger share of the wine, beer and hard-liquor markets, Collins said. The company has made significant investment in its production capacity for the beverage, he said.
“Globally, you can see we will continue to invest behind the growth engine that is hard seltzer,” he said.
More stories like this are available on bloomberg.com
©2021 Bloomberg L.P.