Big beer’s hard seltzer turf war is still heating up
2020 is the year the hard seltzer turf war that has been brewing truly heats up.
With volume tripling from year-ago levels and shipments reaching more than 82 million cases annually, hard seltzer easily outsells vodka. The buzzy drink has appeared in Super Bowl ads the past two years, and more than half of American alcohol drinkers now consume at least one hard seltzer each week.
The leading brand, White Claw, even has its own cultural catchphrase: “Ain’t no laws when you’re drinking Claws.”
By 2023, consumption of hard seltzers is projected to triple, according to industry researcher IWSR. That pace of growth has led to an acceleration in new entrants to the market, with as many as 100 alcoholic seltzer brands selling as many as 400 different variations this year. And while the COVID-19 crisis will result in some challenges to distribution in the coming months, hard seltzer is expected to be the fastest-growing alcoholic beverage over the next several years.
For years, two brands have captured close to 80% of the hard seltzer market: White Claw and Truly. But in the past six months, Big Beer rivals have stepped up their investments in the category. Anheuser-Busch InBev, which has admitted it is playing catch-up, is selling hard seltzers under the Bud Light and Natural Light brands. Molson Coors launched Vizzy in March, and Constellation Brands, previously “surprised” by the popularity of hard seltzers, is spending $40 million to support the launch of Corona Hard Seltzer.
“If this is what consumers are looking for, we are going to embrace it,” says Marcel Marcondes, U.S. chief marketing officer at AB InBev. He attributes the popularity of hard seltzers to a few key factors: They are flavorful, easy to drink, and relatively low in calories, aligning with a preference among more Americans to make healthier drink choices.
The world’s largest brewer’s portfolio is a mix of brands angling for different drinkers. Natural Light is for younger, legal-age drinkers who seek affordability. Bon & Viv targets women more than men. And Bud Light is aimed to lure drinkers who haven’t yet tried a hard seltzer, but just might if it’s encased in a familiar brand.
AB InBev has earned some heady growth of late, capturing 16.2% of volume when combining the sale of all three brands, ranking third after White Claw and Truly. “The data is extremely encouraging,” Marcondes says. “We are closing the gap by the day.”
The company has had some experience entering a category late but eventually winning out. During the light-beer wars of the 1970s to 1980s, Miller Lite and Coors Light hit shelves years before Bud Light—but Bud Light today is the top-selling beer in America.
Conversely, some insiders question if repeat purchasing rates are solid enough for Bud Light Seltzer to proclaim an early win. “Judge no trend on a few weeks of scan data,” says Bart Watson, chief economist at the Brewers Association. “It hasn’t continued to explode out the gate.”
From a branding perspective, the nation’s largest companies have generally steered toward launching hard seltzer variations of well-established brands: Bud Light, Corona, Smirnoff, and Barefoot are a few key examples. But interestingly, White Claw and Truly were new brands, crafted for a newly emerging category, by rivals that have been in the business for decades. White Claw’s parent is Mark Anthony Brands, owner of Mike’s Hard Lemonade. Truly is produced by Boston Beer, owner of the Sam Adams craft beer.
Boston Beer CEO Dave Burwick describes this new competition as “the White Walkers on their way to the wall,” a reference to evil characters in the HBO hit series Game of Thrones. “We are strengthening the brand in preparation,” Burwick says. “Our goal is to be No. 1.”
Truly enacted a reformulation last year to improve the taste of the brand’s flavors, inked a distribution deal with the National Hockey League, and is adding new flavors like Truly Lemonade Seltzer.
Burwick thinks that when it comes to brand building in the category, drinkers are looking for a brand that has a singular idea—rather than trying to serve multiple needs. White Claw seemingly agrees. “Brands stand for different things to the consumer,” says Phil Rosse, president of White Claw. “We don’t buy brands, we create them.”
Thanks to White Claw’s hot growth, Mark Anthony Brands says it is on the verge of being the fourth-largest beer seller in the U.S. And unlike most, it has never acquired a brand, only created them internally.
Most weeks, White Claw commands an estimated 60% of the market. Rosse says the growth of hard seltzer hasn’t cannibalized sales in the rest of the Mark Anthony portfolio, as sales have risen in the double digits for Mike’s Hard Lemonade and premixed margarita cocktails. Even with all the new entrants, White Claw sales have continued to soar as much as 300% in 2020 versus the prior year.
“For the last 21 years, we have focused on the concept that people are looking for more flavorful products,” Rosse says of White Claw’s innovation priorities. The company recently launched a second variety pack featuring tangerine, watermelon, and mango-flavored alcoholic seltzers.
Rob Wilson, managing director at L.E.K. Consulting, says he understands why the $1-billion-and-counting hard seltzer category is so alluring to Big Beer, but he thinks habits may have hardened in favor of White Claw and Truly. “I think it is going to be tough sledding for the other brands,” he adds.
A few newer entrants are trying to break through. Maha, made by AB InBev and craft brand Golden Road Brewing, is a hard seltzer brand lauding the use of only organic ingredients. Molson Coors brand Leinenkugel’s recently debuted beers with a “splash of seltzer.” Ficks Beverage Co.’s hard seltzers have zero added sugar, and CEO Ron Alvarado says the brand was built around a competitive claim of having fewer ingredients than most rivals.
Because hard seltzers appeal to drinkers who may generally enjoy a vodka soda or a wine spritzer, wine and spirits makers are getting in on the action to defend share. In the process, they are adding another 7 million cases to the total seltzer market in the U.S., IWSR estimates.
E. & J. Gallo Winery jumped into the seltzer craze in March with the launch of four Barefoot flavor combinations, including pineapple and passion fruit and strawberry and guava. “At Barefoot, we always look at what the consumer is looking for and where the Barefoot brand fits in,” says Anna Bell, vice president of marketing. “We believe the wine base is unique in the category.”
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