Published October 2021 in FMCG CEO
Has the bubble just burst on the alcoholic sparkling water craze, asks Richard Horwell?
Sometimes a new product comes along that creates huge excitement. This has been the case with hard seltzers in Britain. New to our shores they piqued interest, which is not surprising given the pandemic and lockdowns. With consumers unable to get to pubs, bars and clubs they were drinking at home, or making ready-to-drink (RTD) alcoholic drinks to take with them when catching up with friends in parks or other open spaces. Market forecasts predicted massive growth in the sector saying, for example, that the UK hard seltzer market was expected to reach a value of £75m by 2023 (according to a report commissioned by DRTY, February 2021).
Despite continued enthusiasm, we are starting to see the market fall. For example, Boston Beer Company stock has dropped more than 12 percent in just the last month (source Forbes). Could the hard seltzer craze be over? And if so, why? What can brands communicate? One of the obvious advantages of drinking hard seltzers is that they contain fewer calories than other alcoholic beverages. The majority of hard seltzers come in a 12oz can and contain around 100 calories (a 12oz serving of craft beer can contain as much as 350 calories) and, although the amount of sugar varies between brands, it tends to be less than three grams of sugar per serving. So, a hard seltzer could be considered a healthy option, if compared to beer, wine or fruity cocktails.
For the growing number of healthconscious consumers, hard seltzers also tick a lot of boxes, being generally gluten-free, low-carb and lower alcohol. But – and it’s a big but – UK brands selling hard seltzers are not allowed to make any health claims about their drinks, because they contain alcohol. There’ve been several complaints against hard seltzer brands upheld by the ASA (Advertising Standards Authority) for making stated and/or implied health claims, including Brewdog, High-Water, DRTY and Whisp. Categories that boom in the US can flop in the UK A lot of the projected success of the hard seltzer market in the UK has been based on the ongoing growth of the sector in the US. And here comes another but: Often categories that boom in America flop here, for example Energy Shots.
This is partly explained, as mentioned above, by the fact that in the UK we are far more limited as to what we can say about products. If you also consider that the UK population is far less familiar with what hard seltzers actually are, there will be a serious problem getting the message across to consumers. Therefore, people looking for ready-todrink products are likely to buy canned or bottled beers, RTD cocktails or pre-mixed spirit and mixer cans, such as rum and coke or vodka and soda. You can give people too much choice Several months ago, several new hard seltzers were being launched every week. In my experience, too many brands in the same category confuses consumers, leading to overwhelm rather than excitement. Kombucha is a great example of where drinks brands should learn from the past and not have too many products on the market.
There is so much white noise that consumers enter an aisle in the shop see, say, 60 different choices and either pick a brand that they know or, very often, enter another aisle in the shop for something else that they already know they like. So, with start-ups wanting to launch a hard seltzer brand, my advice would be the same as it would be to someone looking at a kombucha: a fool and his money are easily parted.
The bigger players will take the spot, because consumers turn to what they know, and the smaller brands are then left with little opportunity to stand out from the mass. Small setups competing with international companies Eighteen months or so ago, the trade journals were featuring just two or three hard seltzers. Initially they were being offered by small-scale entrepreneurs.
But very soon the ‘big boys’ caught on, as they didn’t want to lose market share. This is the serious game-changer in this market. Once the big brands enter, the sector shifts – and it’s not always good news for the smaller entrepreneurs.
Forbes hit the nail on the head: “The massive growth of the global hard seltzer market is a Pied Piper call to numerous large brewers and other companies searching for bottom line profits.” Smirnoff, Kopparberg and Coors have now all released their version of hard seltzers. The big, well-known brands are dominating the market and pushing their lesser-known rivals out. Small brands are looking at competition with big budgets. This means if they want to stand out they will need to spend in the region of £100,000 just for marketing, and yet they’ll still be limited in what they can actually say. This is an enormous amount of money to spend and potentially lose if you’re a start-up, but a drop in the ocean for established, recognised brands to invest to ensure they don’t lose market share. It is so common for little brands to fail after spending all the money they have, leaving the market to the big brands such as White Claw.
It’s not that hard seltzer will completely disappear, rather it will be the small players who will suffer and ultimately wither, while the big boys take over and thrive. It is simply not worth it for small brands – they cannot compete. The return of the brand experience For brands large and small alike, the RTD alcoholic drinks trend is going to change considerably now that bars, pubs, and clubs are reopening. As life returns to normal, people are returning to their old drinking haunts and looking forward to the ‘experience’ that offers. It’s like buying ready-to-drink coffee in Costa. They do not want to sell anything other than their own brand, which encompasses the experience as much as the end product.
Likewise, people who enjoy a cocktail want the experience of the cocktail. They want to order it and see it mixed and poured for them, not simply tipped from a can into a glass! Is there a future for hard seltzers? Are hard seltzers an exciting development in the drinks market?
Do they have a future ahead of them? I think not. As I had anticipated, forecasts are now saying that the hard seltzer craze is starting to diminish. I’m not suggesting that entrepreneurs and start-ups should not look at launching an exciting innovative drinks brand; we are simply advising that as the hard seltzer bubble has burst there could be better places to invest your energy, time and money.