The growth of hard seltzer products has seriously declined in the last weeks after demand for the new product category seems to diminish. TheBoston Beer Company, one of the biggest players in the market, pulled its earnings guidance today amid a significant slowdown in sales of its hard seltzer brand Truly.
Since the company's last guidance update for fiscal year 2021 financial performance on July 22, 2021,” the market for hard seltzer products has continued to experience decelerating growth trends. Industry reports have estimated that the full year 2021 volume for the hard seltzer market retail sales will have over 100 million fewer cases than the volumes estimated in May 2021 and over 30 million fewer cases than the volumes estimated in July 2021. While demand for the Boston Beer's hard seltzer products continues to grow at faster than category rates in measured off-premise channels, the company believe there will be continuing uncertainty about hard seltzer demand trends for the remainder of 2021,” Boston Beer said in an financial guidance update today.
As a result of this uncertainty and its impact on the volume trends, the company withdrew today its 2021 financial guidance from July. Further, the Boston Beer now expects to incur hard seltzer-related inventory write-offs, shortfall fees payable to 3rd party brewers, and other costs that will be expensed during the remainder of fiscal 2021.
Boston Beer and Truly is not the only brand to experience slowing sales. Also market leader Mark Anthony Brands and its shooting star White Claw feels the increased competition of Coca-Cola’sTopo Chico Hard Seltzer (inside.beer, 18.3.2021), Vizzy, (inside.beer, 8.2.2020) Bud Light Seltzer (inside.beer, 16.11.2019), Corona Hard Seltzer (inside.beer, 15.2.2021) and many more. The last three in particular are an example of the fact that manufacturers are now including their established big brands in the race. Others like PepsiCo’s Rockstar Hard Seltzer (inside.beer, 16.6.2021) are still ready to start.
People now ask: Is the Seltzer hype already over? or is it just the expected consolidation of the industry where market leaders inevitably lose market share to newcomers. IRI market research company listed in July about 220 brands and 1,000 SKUs, a figure that was about 50% higher than last year.
“A little bit, little bit of a luster to the specialistic segment for some consumers has been lost," said Boston Beer's President and CEO Dave Burwick during his last earnings call. "The proliferation of brands in this category has occurred, there's a herd-like mentality in this business broadly. And I think people try to bring new brands into the marketplace and there's a sameness to these brands. There's a lack of originality," he added.
For the 52 weeks ending July 10, 2021, hard seltzer sales were up more than 51% but in the last 12 weeks of that period sales were only up 7.8%, according to data from NielsenIQ. This sharp drop in growth hits an industrythat had been spoiled by exorbitant growth rates in recent years.
In the light of a) an maturing market, b) a return of volume to the on-premise channel where the beverage is less popular and c) a much bigger offer of hard seltzer choices, the decline especially of the large and already established brands is easy to explain.
The litmus test for the hard seltzer category only comes when the decline affects not only individual brands, but the entire market. At the latest when that happens, the industry has to reorient itself and look for a new trendy drink. With cannabis infused drinks, the next category is already at the start.