A few weeks ago, in early August 2020, Coca Cola became one of the latest brands to tap into the momentum of the hard seltzer category. Launching under its Topo Chico brand, the beverage will make its debut in Latin America, followed by a release in the US in 2021. As the drinks giant enters an already dynamic space, IWSR assesses the evolution of the hard seltzer category, and most relevantly, whether it’s morphing into a lifestyle in its own right, and if so, what implications does this have for brand owners competing in this space?
“The term “seltzer” has become a catch-all for fizzy, flavourful refreshment,” notes Brandy Rand, IWSR COO of the Americas. “Brand owners are realising the marketing potential of the term and are strategically using it in marketing campaigns, branding and packaging, even for drinks that may not traditionally be considered a hard seltzer,” she adds. In doing so, the drink resonates with consumers who are looking for beverages that deliver on a seltzer’s attributes – typically a slim can (for on-the-go convenience), 100 calories or less, gluten-free, sugar-free and with fun, unique flavour options. “It’s developments such as these that indicate to us that seltzers have developed into a lifestyle movement,” reflects Rand.
Hitching a line to a rocket ship
Headed into 2019, IWSR analysts flagged the rapid growth rate of hard seltzers, a category that, until then, had long gone under the mainstream radar. Soon after, the US headed into the “summer of the hard seltzer” and the category transcended beyond beer, stealing share from spirits and wine. So far in 2020, hard seltzers and other “seltzer-like” products have far outpaced the growth of all other beverage alcohol categories, with new entrants flooding the space. Far from a fad, the flavourful refreshment of seltzers (or alcoholic sparkling water, spritzers or sodas) has begun to spread globally and become indicative of a consumer lifestyle.
By the end of 2019, the value of the hard seltzer category in the US accounted for 9% of the value of the vodka and whisky market in the US combined. By 2024, this will likely double to over 20%. IWSR forecasts that US hard seltzer volume consumption will likely surpass US volumes of both vodka and whisky combined by 2022. Even in a pandemic, the category is proving popular with consumers who are capitalising on the drink’s benefits as a single-serve, refreshing and conveniently packaged beverage that, very often, caters to the health & wellness cues critical to today’s consumer.
While Truly and White Claw lead the US hard seltzer market, other brands have continued to enter the competitive landscape, with both craft producers as well as larger multi-national brand owners across beer, wine, spirits and, now, even soft drinks, jumping in on the hard seltzer craze. Many are experimenting with “seltzer-like” offerings that provide unique flavor or functional benefit cues like organic or all-natural.
“When a category is dominated by one or two key brands and then becomes disrupted by new entrants, you often see a flurry of brands enter the space to try and capture share – it’s like hitching a line to a rocket ship,” remarks Rand.
Brands entering the traditional malt-based hard seltzer market include Constellation Brands’ launch of Corona Hard Seltzer, Bud Light Seltzer from AB InBev. Now, spirit-based options are gaining consumer interest, from E&J Gallo’s High Noon Sun Sips (a flavored vodka-based seltzer branded product) and Jose Cuervo Playamar Tequila Seltzer. Both craft beer and spirit players are diversifying their portfolios to include canned cocktails or hard seltzers. IWSR estimates that 30% of US Craft distillers currently have a prepared cocktail/RTD in the market, and another 20% are currently researching or in the middle of developing one.
From martinis to seltzers
What’s most interesting about the hard seltzer category’s evolution is that it has quickly become a lifestyle movement in the US.
“We saw the same thing happen with rosé wine, which has undeniably cultivated a lifestyle of its own. In the late 1990s, anything served in a martini glass was considered a martini, even if it wasn’t of a gin/vodka & vermouth base. The term “martini” became synonymous with a sophisticated sipper, and brands wanted to tap into the attributes of the martini lifestyle, regardless of what ingredients were in the glass. We are now seeing the same patterns with the hard seltzer,” Rand notes.
What this means for brand owners
For brand owners and marketing teams, the advantage of the seltzer movement is that the beverage’s attributes resonate year-round. Seltzers aren’t a seasonal product. While 2019 may have been the summer of the hard seltzer in the US, the beverage’s popularity did not end with the warmer months. “Brand owners have an opportunity to create marketing campaigns that lean into the drink’s year-long appeal across all genders and ages,” suggests Rand. The marketing campaign for High Noon Sun Sips, for example, is centered around the day-drinking occasion, and brands aficionados “nooners”, helping to further cultivate the values of the “seltzer” lifestyle.
For brand owners not currently in the hard seltzer space, but who are exploring growth opportunities, other subcategories of beverage alcohol may also be able to tap into the cues that are giving hard seltzers their staying power; hard kombuchas, for example, could have potential here. In Texas, a trending cocktail request in the on-premise is one called “Ranch Water”, which consists of Topo Chico, tequila and lime. Its popularity has soared to the extent that beverage alcohol companies have now started to produce RTDs inspired by the cocktail as well; Texas-based Lone River Beverage Co, for example, came to market with a malt-based hard seltzer called “Ranch Water”.
One of the key attributes driving the popularity of hard seltzers is the convenience factor. This is something that the RTD (ready-to-drink) category as a whole can leverage when refreshing marketing messaging for the post-Covid-19 climate. Brand owners within the RTD space have the opportunity to seize some of the momentum that hard seltzers have created for the overall category – one that IWSR forecasts will grow in volume by 72% in the US and almost 42% globally between 2019 and 2024.
While Coca Cola is one of the latest brands to dive into the hard seltzer landscape, IWSR expects the category to continue to evolve and challenge the status quo. To learn more about how the ready-to-drink market is changing, growth opportunities for brands in this space, category innovation, markets to watch, consumer attitudes and the impact of soft drinks on the category, you may be interested in the IWSR’s upcoming report, The Future of the Global Ready-to-Drink Alcohol Market. If so, please fill in the form below to register your interest.
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