The Next Growth Phase for Hard Cider

Where Benjamin Franklin was reputed to believe that "beer is proof that God loves us and wants us to be happy," his contemporary John Adams drank a tankard of hard cider every morning to ease his stomach, and William Henry Harrison ran as the "hard cider candidate" in the presidential election of 1840 (oh, to have politicians be so brave today!).

Hard cider, after decades of neglect, has made a nationwide (even global) comeback, with on-trade volumes, or those sales made to bars, hotels, restaurants, and cafes, surging 49% in 2013. Although cider still commands less than 1% of the overall U.S. beer market, it did gain another 0.5 points of share, while craft beer saw a 4% volume rise in on-trade volumes even as beer as a whole dropped 4% year over year. Over the last 10 years, consumption of hard cider has grown globally by 50% and sales are running about 6% higher annually, according to Rabobank.

Far and away the leader is Angry Orchard from Boston Beer (NYSE: SAM  ) , which owns just shy of half the market and enjoyed the largest share gains last year. Having stolen the crown from C&C Group's (NASDAQOTH: CCGGY  ) Vermont Hard Cider's Woodchuck brand, Angry Orchard has aggressively been getting itself placed onto store shelves.

The big mass beer brewers see the potential for the market and have introduced new brands or bought existing ones. MillerCoors, the joint venture of SABMiller (NASDAQOTH: SBMRY  ) and Molson Coors (NYSE: TAP  ) , bought the Crispin brand in 2012 and plans to launch this year a new, male-oriented Smith & Forge brand that has 6% alcohol by volume. 

Similarly, Anheuser-Busch InBev (NYSE: BUD  ) tapped both its Michelob and Stella Artois beers to market new ciders, and it could be the latter that makes the most indelible mark. GuestMetrics says that whereas some 70% of bars and nightclubs sell cider, fine-dining and casual-dining restaurants are much less likely to offer it. Since they have lower penetration levels, it represents a significant opportunity.

Unlike a number of its competitors, Cidre, with 4.5% alcohol by volume, is specifically targeting the white wine drinker. From a 26-state launch last year, A-B just rolled it out nationwide last week and will support it with a major marketing push.

In the U.K., cider sales have captured about one-fifth of the beer market and analysts expect it still has plenty of runway, suggesting growth here in the U.S. could still go parabolic. That's why I dismissed some analysts who said last year the cider market was already tapped out, but it should be noted that volume growth did slow considerably as 2013 wore on.

Having widened by 70% in the first quarter, it eased back to 52% growth by the third and hit 42% by the end of the year. GuestMetrics says that has more to do with the harsh market bars and restaurants are operating in than any lack of demand, since off-trade growth, or purchases made at supermarkets and corner shops with the intention of being consumed off-premises, was more robust. 

Even though restaurants represent some untapped potential, I still see Boston Beer outperforming Anheuser-Busch. The cider market more closely follows the trajectory of the craft beer market, another industry where the smaller brewer leads, and though siphoning sales from white wine will further widen cider's appeal, investors should expect it to continue to match beer's growth -- and that means Boston Beer will keep its lead bottled up.

Raise a toast
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2802597, ~/Articles/ArticleHandler.aspx, 10/25/2014 2:05:58 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement