Anyone slightly tuned into the zeitgeist has spent the last few years watching hard seltzer’s meteoric rise. Brands like White Claw and Truly reign, as the category raked in U.S. sales of $4.3 billion.
But hard seltzer is fizzing out, experts say. Boston Beer Co. SAM pulled guidance, and Molson Coors TAP axed its Coors-branded, beer-based seltzer.
While hard seltzer remains in flux, the overall RTD category is thriving. Innovative products like hard kombuchas and canned cocktails are gaining major traction and bagging large investments.
So what’s next for the hyper-convenient canned category? Experts weigh in.
Small Brands Come Out to Play
The seltzer industry is largely dominated by Truly and Mark Anthony Brands’ White Claw, which collectively command 75% of the category. But consumer are increasingly swayed by new subcategories; beer-seltzers, high-end canned cocktails, natural canned bubbly wines, and spiked kombuchas.
“With the market becoming saturated from companies exploring ways to move products, smaller brands are finding ways to get their market share by offering higher quality products than some of the larger producers,” advises Gary Wallach, the director of food and beverage of Arlo SoHo. “New, fun canned wines, along with a long list of exceptional bottled cocktails.”
“We’ve seen people looking for higher-quality products,” vouches Zach Kameron, the beverage director of Peak at 30 Hudson Yards. “For RTDs, this has led to a rise in products made with quality ingredients such as a great base spirit and natural mixers and are not overloaded with sugar. As a result, RTDs have become very regionalized, with an increased interest in craft RTDs from local companies, as opposed to big brand hard seltzers.”
Spirits Brands Entering the Fray
The overall RTD category is experiencing the meteoric growth that hard seltzer saw in 2019 – RTD products on Drizly have grown 60% in 2021 to date compared to the same period in 2020. Smaller brands like Cutwater, Crafthouse, and Volley lead the pack, with major spirits producers jumping into the market with their own iterations. For example, Taylor Fladgate makes an excellent canned port and tonic; a play to enter a new market (ready-to-drinks) and introduce a younger drinker to port, a drink oft associated with pinkies-up sippers for after long meals.
“Decades ago, the RTD category was much smaller and consisted of options higher in sugar and made with less natural ingredients that paled in comparison to traditional cocktails,” says Ignacio Llaneza, the Vice President of Brand & Trade Marketing at Disaronno International LLC. “The RTD category is now booming with a large variety of new players and explosive product development. The category is shifting moved towards higher quality, on par with premiumization trends.” Instead of going the seltzer route, Disaronno stuck to the ethos of the brand, veering towards an iced coffee frappe in a can.
Bigger Lean into Better-for-You
“We’re going to see a growing demand for alcoholic beverages that are well crafted, ‘better-for-you’ and made with simple whole ingredients,” says Kenny Richards, CEO/Founder of Halyard Brewing Company. “Canned cocktails are convenience, not innovation, and hard seltzer is beginning to plateau. Craft beer is down overall, and from the looks of recent scan data, so are wine and spirits. The growing trends right now are dominated by innovation, and in that innovation, I think we are going to see consumers continue to turn towards products with ingredient transparency, craft processes, low sugar, and delicious crushable liquid.”
Julian Penuelas, the food and beverage manager of Nautilus at Arlo SoHo, predicts standard health-beverage fare will infiltrate RTDs. “Kefir and Mexican tepache will come into the market since they have more diverse probiotics that help boost the immune system and aid digestion.”
A recent Drizly survey found health emerging as a top influence on alcohol buying, pointing to why health-adjacent options are becoming prevalent. Some recent success stories include Owl’s Brew’s tea-based seltzers and Flying Embers’ offers probiotic-spiked hard kombuchas and naturally fermented canned wines.
Three Spirit co-founder Dash Lilley is hedging his bets on wellness-fueled beverages. “Functional drinks will continue to grow and become more mainstream with crossover into the non-alcoholic space. Products that can assist in mood shift, health and socializing will become normalized providing options for consumers away from alcohol and cannabis. Key ingredients in the revolution will be things like L-theanine (a green tea extract and nootropic that promotes calm focus—this is already being used by PepsiCo PEP in their new product DriftWell), clean caffeine from new sourcing such as yerba mate, guayusa, or green tea, Cacao, terpenes found in cannabis including more forms of cannabidol. Function will infiltrate existing categories such as beer and wine and RTD’s.”
“As both retailers and customers of consumer packaged goods continue an increased focus on, and attention to, products that are differentiated from the mainstream/traditional, it is likely that market share for products in the ‘better for you’ segment of alcohol, in particular, will continue to grow in retail shelf-space as well as general dollar share,” says Jon Carpenter, the head brewmaster at Soonish.
That said, brands must be careful when treading this space. “It doesn’t appear to be enough to simply bring nuance to the table any more,” he continues. “The consumer is ever-increasing their desire for multi-faceted beverages that provide both functional value and social lubrication. According to recent market analysis data, over 55% of US alcohol consumers between 22 and 54 polled said they prefer to review nutritional information before drinking a product.”
Brands have caught on, and more and more brands catered to the health-conscious drinker are entering the market. “In the end, though growth continues amongst the ‘functional’ or ‘better-for-you’ segments of the beverage industry, so also does the number of brands available, dollars spent in both development & marketing, and consumer facings – all leading to an ever-growing fickleness in consumer habits,” says Carpenter. “Those brands capable of developing sustainable & profitable businesses will be the ones that can execute brand development in all arenas capitalization of trending value segments, providing functional value within their products, and differentiation from the herd (sometimes simply by combining multiple values into single products).”
One of the most noted takeaways towards the pandemic? The last two years have pushed a more conscious approach to drinking. “I believe the pandemic brought with it an introspective force, where we had to take a hard look at ourselves, our habits and our choices and see how they are affecting us, the people around us and our environment,” says Daniel Bedoya, the Beverage Director of Gilded Group.
Carpenter continues, “Though we’ve seen a rapid proliferation of strong brands in segments like kombucha, gluten-free beer replacements, functional energy drinks, low-calorie seltzers, etc., we’ve also seen a nearly equal dramatic leveling and decline for many. It begs the question of sustainability – how does a new product both gain mindshare in activation and remain relevant well after its initial splash? In my opinion, one answer is a breadth of offerings.”
“Personally, the last year has inspired in me a more mindful approach to drinking,” says Bedoya. “What are we putting in our drinks? How are they affecting us and the environment?”