Sizing Up Seltzers in 2021

Hard seltzer distributors predict the category will continue to grow in 2021, led by White Claw and Truly, and there could be a shakeout in brands as more enter the space.

Goldman Sachs, New York, received feedback from nearly 50 distributors representing about 145,000 retail outlets in its recent beer distributor survey, Managing Director Bonnie Herzog said in a report on the results.

“We are incrementally more bullish on the hard-seltzer category, as we think 2021 could prove to be a pivotal, shakeout year for hard seltzers based on feedback from our recent ‘Beverage Bytes’ beer distributor survey,” Herzog said.

Distributors predicted hard seltzers will grow 155% in 2020, up from the 140% growth they predicted in a September survey. And 38% of distributors believe the category could double in 2021, which Herzog said is unlikely. The hard-seltzer category is expected to reach about $30 billion in retail sales by 2025, or about 25% of the total alcohol category, she said.

There is some concern that as restaurants and bars reopen coming out of the COVID-19 pandemic, hard seltzers could be pressured since they underindex on-premise. Herzog said Goldman Sachs disagrees, however.

“[We] believe hard seltzers’ penetration of the on-premise channel will accelerate as consumers will now increasingly ask for/demand hard seltzers,” Herzog said. “Importantly, distributors in general believe there is still much upside ahead for hard seltzers given consumers’ clear enthusiasm and the sheer size of the addressable market which includes total alcohol (vs. just beer).”

While the outlook for the category is largely positive, distributors still have some concerns. Category overcrowding is one of them, as new entrants and line extensions could lead to consumer fatigue, diminished brand loyalty and logistical challenges, distributors said.

Price destabilization as increased competition may encourage brewers to pursue tiered pricing strategies and ongoing can shortages also pose challenges, according to the report.

When it comes to distributors’ outlooks on different brands in the category, The Boston Beer Co.’s Truly and Mark Anthony Brands’ White Claw remain the gold standard, Herzog said, maintaining more than 70% category share. Distributors are excited with newcomers like Corona Hard Seltzer, Michelob Ultra Organic Hard Seltzer (set to launch in this month) and Truly Ice Tea Hard Seltzer. As the field broadens with new brands, there's likely to be a shakeout, with White Claw and Truly holding their lead, Herzog said.

A version of this story published previously at CSPDailyNews, a WGB sister brand.