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Brewing Report: Hard Seltzer Hooks Craft Breweries

May 21, 2020

Brewing & Distilling Food & Beverage Colorado

According to Nielsen, the hard seltzer segment grew by more than 200 percent to $1.6 billion in 2019. If forecasts hold, hard seltzer sales could eclipse $4 billion this year.

Zima. Wine coolers. Hard lemonade.

These drinks all have two things in common. First, a sharp rise in sales and subsequent fall, and second: They aren't beer. Some of these beverages are categorized by government officials and market analysts as such, sure, but in the end they're really competitors to beer.

Likewise, the latest craze -- hard seltzer -- is categorized by market analysts as beer. But that doesn't make it beer.

The hard data

According to Nielsen, the hard seltzer segment grew by more than 200 percent to $1.6 billion in 2019, and the forecast is similar in 2020. If the latter holds true, hard seltzer sales could eclipse $4 billion -- about 10 percent of the category -- this year.

In 2018, hard seltzer sales were at $487.8 million, representing 1.3 percent of all beer sales. The 2019-20 spike is impossible to ignore.

Hard seltzer looks like it's in the midst of a transition from a seasonal product with a summertime spike to year-round staple, and it's behind much of the top-line growth in an otherwise largely stagnant beer category.

But remove the seltzer and the beer data loses a lot of its luster. It seems it would be best to create a new category for hard seltzer rather than muddy the numbers.

The U.S. hard seltzer market is dominated by two companies: Mark Anthony Brands' White Claw and Boston Beer's Truly. Combined, the two brands control about 90 percent of the market, with the former a distant frontrunner.

In January, White Claw announced a new $250 million production facility in Arizona to meet demand after previous shortages of inventory provided an opening for the competition. Then Bud Light jumped in with a Super Bowl spot starring Post Malone.

If you can't beat 'em, make seltzer

Plenty of big names in Colorado's brewing industry hope to catch the wave. Oskar Blues debuted Wild Basin Boozy Sparkling Water in late 2018. Then the hard seltzer floodgates opened. Upslope's Spiked Snowmelt and Denver Beer Co.'s O&A Colorado Craft Seltzer hit the shelves last spring, and Ska Brewing followed suit with The Hard Seltzer in December. Avery launched Sparkle in early 2020, and look for Whitewater from Great Divide in the spring.

Not to be outdone, Elevated Seltzer opened its doors in the former Grand Lake Brewing taproom in Arvada, Colorado, in July 2019 and billed itself as the first dedicated "seltzery" in both Colorado and the nation.

Brian Dunn, Great Divide's founder and president, says it's all about responding to the market. "We didn't make this decision in a vacuum," he explains. "The distributor, retailer, and, most importantly, the consumer demand for us to make a seltzer was so great that it became an obvious choice."

Great Divide will start with four flavors of Whitewater, "targeting less sweetness than most and made only with natural flavors," adds Dunn. "Our team really stepped up and they have done an amazing job of coming up with a variety of flavors that are crisp, refreshing, and taste like real fruit."

It's an increasingly easy decision to make. Several breweries that launched hard seltzers in 2019 enjoyed a nice sales bump. "The first nine months of sales were great," says Denver Beer Co. co-founder Charlie Berger. "The feedback we've been getting from taproom customers was, 'Maybe this really is a thing.' It's unlikely to be a fad, it's actually a thing."

He adds, "Like every good craft brewer, we were appropriately skeptical about hard seltzer,". "When push came to shove, we started pilot-batching it and started making a bunch of interesting ones."

The results check all of the boxes for a hard seltzer: gluten-free, low-calorie, no sugars, and 5 percent alcohol by volume.

Berger says O&A (short for Out & About) is made with pure cane sugar that's fermented with an "interesting" but undisclosed yeast strain. "We've got a great filtration process that we use, and the flavorings are all-natural," he adds. "It took a lot of test-batching. It's very different than beer."

On its categorization as a segment of the broader beer market, he adds, "It definitely could be its own thing at this point. That said, I think any product you make at a brewery is beer. From that perspective, I think our seltzer's beer."

"From the perspective of hops, barley, water and yeast, from that perspective, it's not beer. But as a brewery, we've really embraced it and I think consumers are looking for at this point are looking for things that fit the occasion they're drinking at."

"We went for a hard seltzer that fit with the occasions we could see ourselves drinking them in," says Berger. "Our seltzers are meant to have a couple of them outside of a hot pool, or on a hot day outside of a pool or at the base of a ski slope."

At Upslope, Henry Wood, partner and VP of sales and marketing, caught wind of hard seltzer in Montana about two years ago and brought it back to Boulder. "We were like, 'Is this going to be a thing of is this Zima?'" he says. "There was a lot of resistance at the brewery, as you can imagine."

Upslope VP of Brewing Operations Dany Pages "started going into chemistry mode and mixing things up with soda straws," says Wood, landing on "a pretty proprietary" manufacturing method for Spiked Snowmelt. "People are finding [making seltzer] is much more challenging than it seems."

Wood says that Upslope made about 5,000 barrels of Spiked Snowmelt in seven months of 2019, or about 15 percent of the brewery's total production for the year. "It's been gangbusters," he says. "The sales have been fantastic. It's really bolstered our growth."

Upslope is doubling down with three new recipes due out in April 2020 that feature an electrolyte blend made in partnership with Skratch Labs. "It's in that better-for-you category of adult beverage that's growing," says Wood.

He adds, "I think everybody knows beer is down or flat right now." In that sense, Spiked Snowmelt has offered a great hedge for Upslope. But Wood's not thinking hard seltzer should be recategorized as a different beverage for data clarity. "If TTB recategorizes it or Colorado recategorizes it, then all of a sudden I can't make it!" he laughs.

Regardless, Wood doesn't think hard seltzer will be poured at future installments of the Great American Beer Festival: "It sounds like [the Brewers Association] aren't going to allow it." (Fizz Fight in Denver and Los Angeles helped fill that void in 2019.)

Plenty of breweries in other states have likewise plunged into hard seltzer. Other craft breweries, like 105 West Brewing in Castle Rock, Colorado, have opted to make a light and accessible beer that fills the bill as a seltzer alternative.

"Our latest go at competing with the hard seltzer market is to not brew a seltzer, to actually make beer that tastes like beer but on the lower-calorie side," says 105 West founder Eric Seufert. "It's called Bear Claw -- a full barley beer with a touch of honey malt and enough hops to let you know it's beer."

Seufert says he thinks hard seltzer is "here to stay. A brewery has to make a choice. I would worry about it damaging your brand, but every brewery has to make a choice. You've got to find ways to raise money. You can't make only what you like, so I understand breweries that make that choice."

It's a solid strategy. Listen to the consumer and jump on market trends. If it's hard seltzer that people want, give it to them.

But it isn't beer.

Eric Peterson is editor of CompanyWeek and BreweryWeek. Reach him at rambleusa@gmail.com.