Hard seltzer changed the way breweries made money as brewing beer became secondary to flavored malt beverages.
They were, in fact, making so much of it to keep up with the demand that even the Brewers Association changed the definition of what constituted a craft brewer to say that so long as they made some beer, they could still be considered craft.
There's some debate about just how fast hard seltzer can keep growing. While even some of the most ardent bulls expect to see growth rates ease, others forecast that the maturing market could slow down significantly. If that happens, this one brewer may have the most to lose.
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Too much of a good thing
Hard seltzer has been growing at triple-digit rates for several years and continued its meteoric rise during the pandemic, growing dollar sales to $4.1 billion in 2020. That's a 160% increase year over year, representing 8.6% of the beer market.
While some distributors think the market could double again this year, Goldman Sachs analyst Bonnie Herzog, who remains quite bullish on seltzer, doesn't think such growth projections are reasonable. Instead, she forecasts it could grow to $30 billion in retail sales by 2025 and represent as much as one-quarter of the total alcohol market.
Hard seltzer's popularity has caused a tsunami of new brands to flood the market. While Mark Anthony Brands' White Claw and Boston Beer's (SAM 0.74%) Truly still own the seltzer segment with over a 70% combined share, brewers of all stripes are coming on board. Anheuser-Busch InBev (BUD 1.43%) has a full portfolio of seltzers for just about every price point; Constellation Brands (STZ 0.78%) is banking on its Corona brand to give it traction (so far, quite successfully); and Molson Coors (TAP 0.55%) launched Vizzy, but then tapped its Coors Light brand for its own offering.
In short, brewers, much as they did with craft beer, believe more is better -- and that could be a problem.
Losing its fizz
Despite many analysts being bullish on hard seltzer's continued growth, that's not uniform. For example, Bank of America analyst Bryan Spillane actually thinks the flavored malt beverage may have peaked.
He notes that social media has been an important component of hard seltzer's success as mentions of a brand can help drive sales, yet mentions are down dramatically year over year. According to Spillane, social media posts about seltzer were up only 4.3% in May, a 73% decrease from the sequential jump of 15.9% in May 2020.
As consumers were locked in their homes, they stocked up on hard seltzer and other alcoholic beverages, leading to the robust sales growth noted earlier. But now, as consumers are heading out to bars and restaurants again, hard seltzer doesn't have nearly as much on-premise traction as it does at packaged goods stores and the like.
Data from Backbar, the nation's largest bar inventory software provider, shows White Claw is losing significant market share, with its leadership position plunging over 15 percentage points from 60.4% to 45%. While Boston Beer's Truly gained current market share as a result, it could have the most to lose if hard seltzer has peaked.
Image source: Getty Images.
The market's changing once more
Boston Beer relies upon Truly for growth. As sales of its flagship Samuel Adams lager continue their downward spiral (it hasn't reported a single quarter of growth for the beer in several years), Truly now accounts for most of its production.
Yet Bank of America's Spillane says seltzer sales growth slowed to 10% in May, down from the 16% average seen over the prior three months. Because this space is more mature now, there's no more stockpiling going on. With so many more options available, even consumers demanding seltzer at bars and restaurants -- where Truly has a 17% share -- could still result in a serious contraction.
Because Boston Beer has really gone all-in on seltzer, it stands to lose the most if what we're seeing is the top of the alcoholic beverage market's froth.
