Is the Bubble Bursting on Hard Seltzer?

The hard seltzer category, which has been experiencing strong growth since 2018—and has been at the center of a number of collaborations and licensing deals—has started to show signs of leveling off.

Alcoholic beverage industry analyst IWSR predicts the hard seltzer category will increase by 73% in the U.S. in 2021, a significant rate but much lower than the 130% increase in 2020. It estimates hard seltzer and other “seltzer-like” offerings currently maintain a share of 2.6% of the U.S. alcoholic beverage market, compared to .85% a year ago, and forecasts that sales will more than triple by 2023. (NielsenIQ pegged category sales for hard seltzer at $4.5 billion in the period from May 2020 to May 2021.)

While the category is not in danger of disappearing, the slowing growth rate starting in mid-2021 is giving rise to challenges for the players in this sector. Molson Coors discontinued its Coors-branded hard seltzer after a short time on the market, although it remains active with other brands, including Topo Chico, which it produces in partnership with Coca-Cola and is expanding nationally in 2022. Constellation Brands, maker of Corona hard seltzer, and Boston Beer Company’s Truly both overestimated demand and ended up with too-high inventory in summer 2021; Truly attracted attention for dumping cases rather than discounting or risking the product going bad. Meanwhile, analysts reported that market leader White Claw saw some weekly sales declines this fall.

White Claw and Truly together hold a share of around 70% of the hard seltzer market, while Anheuser-Busch InBev’s Bud Light Seltzer has quickly assumed third place. But the market has become crowded. In fact, almost 300 new hard seltzer brands were launched in the U.S. from July 2020 to July 2021, according to IWSR, up 60% from the previous year.

A leveling off of sales, along with an oversaturated marketplace, will likely spur a shakeout, with many players exiting, leaving behind a landscape featuring a few national brands, supplemented by niche regional marketers. This scenario is typical of a naturally maturing category, but hard seltzer has come to this point particularly quickly. Considering how fast the sector expanded in just two to three years, its fast maturation is not too surprising.

Amid this changing landscape, successful companies will need to focus on innovation, both to differentiate themselves and to continue to create fresh new products that keep consumers coming back for more. Achieving that goal will likely involve partnerships. And collaborations involving hard seltzer have certainly continued to come to light this summer and fall:

  • Pollen Floral Works, an independent florist in Castle Rock, Washington, worked with River Mile 38 Brewing Company in nearby Cathlamet to produce four botanic hard seltzer flavors: Passionfruit Guava, Rose and Ripe Mango, Tangerine and Violet Lavender, and Cherry Blossom Cucumber.
  • Study Break, an independent L.A.-based marketer of cocktail-inspired hard seltzer containing alcohol made from fermented oranges, joined forces with influencer Loryn Powell. The comedian, who is known for satirizing lifestyle content, has made a series of viral videos ranking more than 200 beverages and bills herself as “The Seltzpert.” Their collaboration consists of a limited edition of 1,000 12-packs of Pumpkin Spiked Latte hard seltzer containing real Colombian coffee, real pumpkin, and 6.5% alcohol content.
  • Drinkware company BrüMate enlisted alcoholic beverage maker Crook & Marker for a pickle-flavored Afternoon Dillight Hard Pickle Seltzer. The idea started as a joke on social media but became reality after 10,000 people expressed interest in the product within 24 hours. The batch of 10,000 packs, the first in a line of limited-edition seltzer flavors under the partners’ new Crook’d Brü banner, is sold online.
  • Lunar, a craft maker of hard seltzer featuring ingredients from Asia, partnered with two New York restaurants, Di An Di and 886, and artist Vanessa Nguyen to develop three new flavors tied to well-known Asian foods. The products in the limited-edition Heritage line include Tamarind and Rich Paddy Herb, inspired by the flavors of Vietnam; Pineapple Cake, from a treat considered a delicacy in Taiwan; and Mango & Chili Salt, influenced by fruit carts in Southeast Asian countries including Thailand and Vietnam. The collaborative items were available through the two restaurants and on Lunar’s website.
  • Smirnoff teamed with Colombian singer Karol G in a wide-ranging deal focused on diversity and inclusion, highlighting Latin culture. The partnership currently does not include signature products, but Karol G will promote the company’s new Poco Pico Seltzer variety pack, as well as its Spicy Tamarind line of vodkas and vodka drinks. (Spicy Tamarind is one of the flavors in the Poco Pico pack as well.)

Meanwhile, a couple of players are extending their IP into branded or novelty products. Truly and Sugarfina united to create a line of four hard seltzer-infused, non-alcoholic gummy candies tied to Truly’s Tropical Mix Pack, as well as popsicles in the same flavors. And Topo Chico paired with Neon Cowboys, a fashion tech brand, for a limited-edition item that is both a bolo tie and a reusable straw, sold at a dedicated Bolo Chico website. The product, which sold out at a price of $20, was intended to promote Topo Chico’s new line of margarita-flavored hard seltzers.

Even as the hard seltzer sector matures, most beverage-industry experts believe it will remain a substantial slice of the market. That suggests opportunities for licensing and collaboration will continue to bubble up, not just for flavor-based brands but for IP owners of all types whose properties would allow a seltzer company to stand out with a unique product introduction.

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