Hard seltzer sales finally start to decline
September 16, 2021
Wine people will be happy to hear this: Hard seltzer sales may finally be slowing down.
The signs are everywhere, starting with news from Wall Street that Boston Beer, makers of the No. 2 hard-seltzer brand Truly, had to pull its earnings report and announce that it expects to have to write off unsold inventory this fall. The company was then sued by an investor who accused it of hiding declining hard seltzer sales.
But it's not just Truly. Sales of market leader White Claw dropped 12.8 percent for the first two weeks of September, according to Evercore ISI.
Don't get too excited: hard seltzers probably aren't going to disappear like their predecessor Zima. And it's not at all obvious that a decline in hard seltzer sales will lead to higher wine sales. But for the last two or three years, the wine industry has been looking back at hard seltzer like a tortoise with a big lead. The category didn't even exist five years ago; now it's a $5 billion business, draining consumers from both beer and wine.
Now, the hare is taking a little break. NielsenIQ Bev Al Director Mike Colicchio says "hard seltzers are clearly slowing down across all channels NielsenIQ measures." In the four weeks that ended August 28, hard-seltzer sales were down 4.2% in all the food and drug stores Nielsen follows. And this isn't a blip, as sales growth (not sales themselves) dropped month to month throughout 2021.
In August 2020, hard seltzer sales in Nielsen outlets had more than tripled over the previous 12 months. But August 2021 was just a 33% 52-week rise over August 2020, and most of that was in the first half; sales were up just 8.7% for the 26-week period.
I called three wine numbers experts to get their takes on what this means: is the hard-seltzer boom going to fade like Moscato, or is something else going on?
None of them believe hard-seltzer is going away. But their takes on it vary from "nothing to see here" to "seltzer is approaching its limit."
Longtime beverage alcohol analyst Danny Brager, now a managing director at Napa's Azur Associates, doesn't believe hard seltzer sales overall are really declining at all. Brager said that when the pandemic started, hard seltzers were not found in restaurants. That has changed: Brager said he and fellow Azur Associates managing director Dale Stratton had hard seltzers at a good restaurant in downtown Napa the week before we talked.
"If I add hard seltzers in on-premise to hard seltzers in off-premise, the category's still up 20%," Brager told Wine Business. "Hard seltzers are just starting in restaurants and bars. If you add the two channels together, hard seltzers are growing, though still not to the extent they were in previous months. It's definitely a slowdown."
Brager said that when he started tracking hard seltzers in 2017, he saw seven brands. Now there are 170. And hard seltzers aren't the only popular product in cans: spirits-based cocktails are extremely hot, and wine-based cocktails have entered the game.
"I think it's slowing down because it's really really big," Brager said. "People are going to restaurants and ordering it there. And there's just other choices. In a bigger picture than just hard seltzers in stores, the bigger picture is growing."
Moreover, while hard seltzers are drawing drinkers away from mainstream beers, Brager said that they're also taking customers from wine.
"The last time Nielsen took a good look at it, when you look at everything that a hard seltzer consumer buys, it was disproportionately negatively impacting wine. Mainstream wine," Brager said. "It wasn't really impacting spirits. It was impacting other beer products but it was impacting wine almost as much. The younger generations that we hoped would be drinking wine, they're drinking more hard seltzers and RTD cocktails and spritzers."
Stratton shared a Wine Market Council chart of answers to the question "Which of the following features in a wine would make you more likely to purchase it?" The highest number for any single answer was "No sulfites added," while "Ingredients listed" was tied for second. These are some of the marketing strengths for hard seltzer. But there's more: hard seltzer generally is less flavorful than wine, and while you'd think that would be a bug, for some consumers it's a feature.
Stratton said an opinion poll done with Civic Science showed that calories, carbohydrates and sugars are the big things that consumers are concerned with.
"The consumer is making conscious decisions. In order for me to have less calories, less sugar, less carbs, I'm willing to accept less flavor," Stratton said. "The seltzer category is very sessionable. When you think about craft beer, between the alcohol and the level of fullness that those would bring, the average consumer couldn't drink very many of those. With a hard seltzer when you're out with your friends, you can drink multiple servings of it."
It's worth noting that the burgeoning Better for You wine category hits these points, which is why it's expanding.
Christian Miller, a consultant for Wine Opinions, is a bit less bullish on the future of hard seltzer than Brager and Stratton. He said that it's possible that hard seltzers are getting close to their potential total audience, and may not be able to grow much beyond that.
"The flavor intensity is dialed down on those things," Miller told Wine Business. "They're chilled, fresh and light, because of the bubbles. We know there's a large minority of people who have sensitive palates and don't like things that are strongly flavored. They don't like IPAs. It could be picking up a lot of those people. That would be another reason why at some point it starts running across people who are harder to convert. You have people who want a taste sensation. They want an oaky Chard or a rich red or a hoppy IPA. They don't want flavored water."
Like Brager, Miller said we can't pay too much attention to the struggles of individual brands like Truly because of new competition from big-name entries like Corona and Topo Chico.
Something that may not be obvious from the marketing is that hard seltzers skew to a female audience, Miller said. And they definitely skew younger: while 59% of consumers ages 21-34 on the Nielsen household panel say they drink hard seltzer at least occasionally, that number drops to 47% of consumers age 35 to 54 and only 20% of consumers age 55+.
Of course young consumers are the future, and all three analysts mentioned the continuing decline in sales to them of wine under $11. But if the wine you're making is over $11 retail, however, Brager said wine sales are up 5% over the last 12 months. Keep cranking out the flavor for people who still want that.