Big alcohol brands are following, not leading. And where they are headed is alternative drink categories, many of them “hard” versions of nonalcoholic beverages.
Hard seltzer surpassed $500 million in sales in 2019 according to media and consumer research firm Nielsen, growing more than 200% in 2019. It took a bite out of light beer sales and contributed to a decline in the volume of wine purchases in the United States, the first drop since 1994. For the Super Bowl, Bud Light debuted Bud Light Seltzer commercials, a 5% alcohol beverage offered in four fruity flavors. California wine giant Barefoot has made the biggest investment in its 55-year history to launch four white wine-based seltzers in the first quarter of this year.
While beer sales slumped 4.6% between October 2018 and October 2019, according to Nielsen, the winners have been in low-alcohol near-beer; “hard” kombucha, coffee and tea; mocktails and other low- and no-alcohol beverage categories. Millennial and Generation Z’s interest in health, wellness and a sober lifestyle has been well documented, and they are one part of why this trend will continue. The nonalcoholic beverage market is forecast to reach $1252.54 billion by 2024 with an annual growth rate of nearly 5%.
Ross Colbert, managing director and global head for beverages for KPMG Corporate Finance, argues that big beverage companies have been slow to realize that millennials don’t trust big brands to manufacture authentic, transparent, sustainable products, particularly in beverage categories.
“Big brands did not recognize these behaviors,” Colbert says, “and it enabled a whole ecosystem of craft brand owners to emerge. It wasn’t until those artisan players started nibbling at the heels of the leaders that they said: ‘we have a big problem.'”
Big food and beverage companies have started to get it right, he says, acquiring more authentic brands and products, supplementing their research and development teams and adding on venture capital-like capabilities to build up their ability to screen, evaluate and invest in smaller, faster-growing craft brands and businesses.
“They are playing catch-up and it’s working,” he says. “Big brands are starting to get back on their front foot to deliver what a consumer is looking for.”
And what they are looking for is something that didn’t exist just a few years ago. They are mash-ups, beverages that cross categories and boundaries, even blurring distinctions between energy drinks, recovery drinks, boozy beverages and those with “functional” benefits and health halos.
“The real interesting place to be is where these categories overlap or bump up against each other. Things get very blurry,” Colbert says.
While these hard versions made their entry into the alcohol-based beverages market fairly recently, LatentView Analytics, a digital analytics firm concluded that hard versions of health drinks such as alcohol-infused kombucha are here to stay.
“Consumers seem to prefer these beverages because they are organic [which] helps them believe that it is still part of a ‘healthy lifestyle,’ a term that is not ordinarily associate with alcohol consumption,” says LatentView’s Midwest director Shalabh Shalabh.
Some of these new mash-ups represent collaborations between brands. In September MillerCoors teamed up with ready-to-drink cult coffee favorite La Colombe to debut La Colombe Hard Cold Brew Coffee. It doesn’t always work seamlessly, says Caleb Bryant, associate director of food and drink reports for market research firm Mintel, pointing to Pabst Blue Ribbon, which in July launched an 8% alcohol hard-coffee version of its signature beer, which experts like Bryant say might confuse the brand’s identity: PBR experienced a dramatic renaissance between 2005 and 2010 for appealing to hipsters with its “retro chic.”
The hard seltzers, he says, are unusual because they appeal to all ages and genders.
“You don’t see that anymore, products that have near universal appeal,” Bryant says. “Growth in this area is only going to accelerate because it touches on the core consumer interest and unmet needs, especially with beer. There is this trend toward lower alcohol by volume, flavorful but lighter.”
He says a third of Generation Z spirits drinkers say they have taken an extended break from alcohol in the past six months, and that underage drinking has fallen dramatically from previous generations. But there’s another demographic change that may account for a shift away from higher-alcohol beverages: An aging population. Generally speaking, alcohol consumption and binge drinking decreases with age.
All this temperateness flies in the face of some recent data, however. A study last month from the National Center for Health Statistics indicates deaths from alcohol-related problems have more than doubled over the past nearly 20 years. There were 73,000 deaths in the U.S. in 2017 because of liver disease and other alcohol-related illnesses, up from 36,000 deaths in 1999.
Jenny Zegler, associate director of food and drink for Mintel food and drink, may have an answer to this apparent paradox. It’s not about drinking less, just smarter, she says.
“For the longest time we really only had nonalcoholic beer to fulfill the need for moderation. You had to explain to your friends and endure the stigma that might come with it,” she says. “With these hard seltzers it’s not moderation in the ‘I’m not going to be drinking alcohol’ sense, but more in the ‘I’m going to be drinking for a long time and I don’t want to be out of control’ sense. Hard seltzer has good positioning because you can drink it all day long and you aren’t going to get bloated or drunk.”
With more niche categories like kombucha, she says that consumers are trying a hard version of a beverage or flavor they already enjoy. She says that from a corporate standpoint, offering lower alcohol versions of existing boozy categories and modestly boozy versions of nonalcoholic categories is a way to keep consumers engaged.
What will we see next?
Colbert says look for these mash-up categories with CBD added into the mix and that even faddish categories like alt-milks are eligible. Will we see hard oat milk?
“With the right blending, could there be a white Russian or Baileys from a plant-based recipe,” Cobert speculated. “Absolutely.”