Revenue & Growth
12 minute read

Hard Seltzer Industry: Unlikely to Fizzle Out

Melissa Lin
Melissa has worked in ECM, tech startups, and management consulting, advising Fortune 500 companies across multiple sectors.

Hard seltzers embody one contradiction after another: they are marketed as healthy, yet are alcoholic beverages; they retail at a relatively low price point, yet sell an aspirational, active lifestyle; their appeal would seem to be seasonal—a summertime drink—yet they have remained resilient year-round and have been proven to be COVID-19-proof. In 2018, there were 10 hard seltzer brands; in 2019, there were 26; and in 2020, more than 65. How did the hard seltzer market grow so quickly?

This article explores the business behind the explosive appeal of the beverage: the product, its market size, the competitive landscape, and market drivers.

What is Hard Seltzer?

Hard seltzer is a blend of carbonated water, alcohol, and fruit flavoring, most often packaged in cans for portability. The flavor offerings differ by brand and range from basic flavors such as black cherry, lime, and ruby grapefruit to more elevated flavor profiles such as melon basil, lemon agave hibiscus, and cucumber peach. Hard seltzer alcohol by volume (ABV) ranges from 4%-6%, similar to most beers. The type of alcohol varies by brand: Most hard seltzers include fermented cane sugar with added fruit flavoring. Other brands create malt liquor from malted barley, whereby cereal grains are dried, soaked in water and forced to germinate, and then dried with hot air, which breaks down complex sugars and prepares it for fermentation. During brewing, the yeast metabolizes the sugars and produces alcohol. Bud Light’s Lime-a-Rita and Smirnoff Ice are malt beverages. However, some hard seltzer brands, such as High Noon, combine vodka and splashes of real fruit juice.

While the rise of hard seltzers has been meteoric in the last couple of years, they are not a new concept. In 1994, Coors invested in and introduced Zima, a low-ABV beverage meant to compete with products such as wine coolers. Indeed, Zima is considered the first “malternative,” a group of alcoholic beverages that include products such as Smirnoff Ice and Bacardi Silver. Coors invested $38 million into promoting Zima’s launch, only to have the product flop long-term—partially because of its strange flavor, but also because it was marketed as an inherently female product: a beer that was clear and didn’t taste like beer. As Slate put it, although “the ladies took a shine to the stuff, the guys avoided Zima as if it were laced with estrogen.”

It was not until 2013 that the creators of SpikedSeltzer launched their product. At the time, SpikedSeltzer had an ABV of 6% and was 140 calories for a 12-ounce serving. In 2015, the product sold more than 250,000 cases. When they first started selling the product, retailers were in “total confusion” about the product and its appeal, according to Dave Holmes, the brand’s co-founder. However, in 2016, beer powerhouse Anheuser Busch, which owns brands such as Budweiser, Rolling Rock, and Michelob, acquired SpikedSeltzer creator Boathouse Beverage LLC and rebranded the product to Bon Viv—a play on the phrase “bon vivant,” a “sociable person who has cultivated and refined tastes especially with respect to food and drink.”

Hard Seltzer’s Market Size & Total Opportunity

The global hard seltzer market size was $4.4 billion in 2019 and is expected to grow at a 16% CAGR through 2027 to $14.5 billion, according to estimates by Grand View Research. The growth of the market is bolstered by developed economies such as the US, Canada, and Australia. Asia Pacific is expected to show the fastest growth, with a CAGR of 17% from 2020 to 2027. Hard seltzer growth is also due to numerous manufacturers focusing on the Australian market. However, in 2019 North America dominated the market by contributing more than 70% to the global revenue.

Further, from 2020 to 2027 hard seltzers with lower ABVs between 1% and 4.7% are expected to grow at the fastest pace versus other ABV categories, with a 16.6% CAGR. Low-ABV products are expected to attract more health-conscious consumers.

US Hard Seltzer Market Size, by ABV Content, 2016-2027 (USD Billion)

Regarding demographics, US millennials are by far the biggest consumers of the product. Hard seltzer’s popularity amongst millennials is evidence of the beverage’s ability to carve out its own identity. Between 60%-70% of legal-age millennial drinkers (21 years and older) consider hard seltzer its own category; fewer than 10% view hard seltzers as a type of beer. Interestingly, 75% of hard seltzer drinkers also buy beer, which is likely why beer companies have created their own hard seltzer products, including Bud Light Seltzer and Corona Seltzer.

The Hard Seltzer Competitive Landscape Becomes Increasingly Crowded

White Claw Reigns

In early 2018, there were 10 hard seltzer brands; a year later, the number had grown to 26. In 2020, there were over 65 brands. Still, White Claw, owned by Mark Anthony Brands, has maintained about half of sales, with Truly, owned by Boston Beer Company, coming in second.

According to NielsenIQ, hard seltzer off-premise sales hit $4.1 billion in 2020, up 160% from the previous year. Comparatively, beer sales totaled $40 billion in 2020, a nearly 15% increase over 2019, when off-premise sales hit $36.8 billion. Hard seltzer also increased its share of the beer/cider/flavored malt beverages (FMB) category from 2.43% in 2019 to 8.51% in 2020.

White Claw remains the top-selling hard seltzer brand, taking in 50% of sales. Truly took the second spot with 21.8% of sales. Smaller and independent hard seltzer companies took in roughly 6% of industry sales in 2020.

Nicholas Greeninger, CEO of Tolago Hard Seltzer, said he doesn’t expect the top two brands to fall from their positions but does anticipate smaller and independent companies to gain more sales in the future.

“These are strong, recognizable brands that people move towards typically,” Greeninger said. “They have the right price point and product expectations. What we’re trying to do differently is to be the hard seltzer that people turn to when they want something higher end and different.”

Greeninger said that the key to growth of the hard seltzer industry, as a whole and for smaller and independent makers, is to keep innovating and try to stay ahead of customer demands.

“One of the things we wanted to do is to create some unique flavor profiles that really shook things up and created some excitement from hard seltzer drinkers,” he said. “I think the key for companies like Tolago is to just continue to innovate and differentiate themselves from the middle-of-the-road big brands. You need to offer something that is noticeably different but offers some of the same points, like refreshment, that the people rely on and expect from the bigger brands.”

Hard Seltzer Industry Market Share, US (%)

Beer and Soft Drink Brands Enter the Market

Although White Claw and Truly have maintained their lead in the market, beer and soft drink brands have taken notice and entered the fray. In 2020, Constellation budgeted $40 million in marketing to launch Corona Seltzer while Molson Coors launched Vizzy Hard Seltzer along with Henry’s Hard Sparkling Water. Anheuser-Busch has invested several times over in launching Bon Viv, Natural Light Hard Seltzer, and, most recently, Michelob Ultra Seltzer. Additionally, local craft beer companies are increasingly producing their own versions of hard seltzer.

According to John Barley, founder of Solemn Oath Brewery, “If you look at hard seltzer right now, there are a lot of parallels to beer 15 to 20 years ago. You’ve got a few large producers that control the market and the small ones who think maybe we can do it better. We believe our customers deserve a local option to support, similar to what we do in beer. We think our product is different and we’re changing the narrative.”

Of course, not all craft breweries have jumped onto the hard seltzer bandwagon. Mary Izett, an owner and brewer at Fifth Hammer Brewing, in Long Island City, Queens bemoans hard seltzers as “the fast food of alcoholic beverages … the antithesis of what we do as beer, wine, or cider makers, where we strive to showcase our ingredients in our beverages.”.

Beer brands are not the only ones entering the market. Coca-Cola announced that it will start selling hard seltzer in 2021 under its popular Topo Chico brand in the US. In 2017, Coca-Cola acquired Topo Chico, a popular non-alcoholic seltzer popular in Texas—a “rising star” in Coca-Cola’s portfolio since. Coca-Cola as a parent company was hit particularly hard by the pandemic so perhaps adding a hard seltzer product will help its resiliency. The hard seltzer craze is hard to understate: Retailer Costco’s store brand of non-alcoholic seltzer, Kirkland, launched its own line of hard seltzers in September 2020.

Market Drivers

Healthier Alternative to Other Beverages

Hard seltzer has leaned into the health-consciousness of individuals today—millennials in particular. Most hard seltzers, which are gluten free, have about 100 calories and only two grams of carbohydrates, despite many being brewed with fermented sugars. This compares to about 150 calories and 15-30 grams of carbohydrates in an average beer. Hard seltzers are also gluten-free. Perhaps even more significantly, although hard seltzers such as White Claw are brewed with fermented sugars, the total added sugars are only 2 grams. For comparison, Mike’s Hard Lemonade contains 32 grams of sugar per bottle.

Casey O’Neill, a member of hard seltzer brand Truly’s innovation team, told the Baltimore Sun, “We have a culture of people who are looking for alternatives to what they’re currently consuming that fit more in balance with their lifestyles.”

In May 2020, White Claw released a line of 70-calorie hard seltzers in two flavors, branded as White Claw 70. The 4% alcohol content for White Claw 70 is slightly lower than the typical ABV of 5%. The launch of such products is a direct response to the current “sober curious” movement, in which individuals take breaks from drinking or quit altogether. A handful of studies have identified the benefits of abstinence from alcohol, including improvements in blood pressure, insulin sensitivity, and liver health, as well as better sleep, a sense of achievement, and weight loss.

Hard seltzers have, to some degree, benefited from the popularity of La Croix, a popular non-alcoholic seltzer brand. LaCroix is free of sugar, sodium, calories, artificial ingredients, and preservatives. LaCroix’s rise a few years ago came when Americans started to move away from soda. By 2017, non-alcoholic seltzer sales had risen by 42% over the previous five years. Similar to hard seltzers, LaCroix offered a wide variety of flavors.

LaCroix was also one of the first products to master social media marketing, partnering with social media influencers so consumers would associate flavored sparkling water with healthy choices and fun. The brand also strove to respond to 100% of comments about LaCroix. Similar to SpikedSeltzer, LaCroix lived on the bottom shelves of stores before its explosion in popularity in 2013. According to Alexander Esposito, a research analyst at Euromonitor International, “They were really the first large brand to go after millennials that way and target their health and wellness concerns.” LaCroix employed a strategy of engaging with Instagram users who tagged the brand, regardless of the user’s follower counts (including “microinfluencers”).

While LaCroix undoubtedly redefined the space, generating consumer demand proved to be insufficient to maintain the brand’s lead. By 2019, LaCroix’s parent company’s sales had dropped 62% due to increased competition and poor management decisions—both in the personal and business realms. However, non-alcoholic seltzer continues to be a staple in refrigerators around the world.

Hard Seltzers Have Broken the Glass Ceiling

Unlike previous alcoholic products that have attempted to appeal to men and women equally, hard seltzers have succeeded in breaking the glass ceiling. For decades, alcoholic brands and marketing normalized beer as a “manly man’s” drink and wine or wine derivatives as “mommy juice.” Alternatively, wine spritzers were depicted as something to alleviate the stress of women who were conscious of their figure, spurring brands such as Skinnygirl and Little Black Dress.

Instead of marketing to a specific sex, hard seltzer sells a lifestyle that is not gender-specific. Hard seltzer is healthy, convenient, fun, and compared to other malt liquor beverages in the same category, viewed as more upscale. White Claw’s ads and social media posts feature the product as the main focus. If men and women appear in the promotions, they are both portrayed as embarking on adventures outdoors. The female actors in the ads look fit and strong instead of relying on overt sex appeal.

The strategy has proven successful so far: A proprietary Bank of America Merrill Lynch study issued in August 2019 regarding millennial drinking preferences revealed a 50-50 split in popularity.

Susan Dobscha, a marketing professor at Bentley University, believes the broad appeal to be smart, especially in today’s modern world: “The alcohol industry keeps shooting itself in the foot. It’s shortsighted to genderize an entire product category. … You could see White Claw as the dawning of this post-gender world where millennials and Gen Z are comfortable with the idea of gender fluidity.”

Accessible Price Point

While different brands of hard seltzers charge slightly different prices, most remain in the $15-$25 range for 12-packs. This affordable price point is similar to most domestic light beers, with the higher end of $25 more comparable to craft beer. The low cost is a major draw and is also key to providing product access for younger consumers. Interestingly, despite hard seltzer’s lower price point, the product carries “a veneer of something a little bit fancy,” according to Vox’s Rebecca Jennings. That is, unlike some other overly saccharine flavored malt beverages such as the Mang-O-Rita or Four Loko (whose combination of 12% ABV, caffeine, and other stimulants led to the FDA labeling the product a “public health threat” in 2010), hard seltzers can seem relatively upscale—likely due to industry’s successful marketing.

The Convenience of Ready-to-drink Beverages

Although its price point is the leading purchase driver of hard seltzer, convenience is also a significant driver for its popularity. While drinkers used to have to go to a bar to consume their favorite cocktails, today hard seltzers provide consumers with freedom from such reliance—something the beer industry has provided to consumers for decades. The packaging of such products has also become increasingly innovative and important—whether the packaging is cans, boxes, or the tetra pack, consumers find portable options to be an important factor in purchasing.

Reasons Consumers Purchase Single-serve Ready-to-drink Cocktails: Convenience is King

COVID-19

With consumers drinking less frequently at restaurants and bars given the global pandemic, consumers are increasingly drinking at home and driving up sales at liquor stores, grocery stores, and other brick-and-mortar retailers. As Jenni Avins wrote for Quartz, “In the time of COVID-19 and social-distancing, it’s simpler, safer, and cheaper for outdoor drinkers to bring White Claws than to, say, mix up a pitcher of Aperol Spritz to be shared beyond one’s pod.” During the 14-week period from March 7 through June 6, 2020, in-store sales of domestic premium light beers increased more than 10% compared to the same period in 2019. Hard seltzer sales more than quadrupled during the same period. Of the hard seltzer sales, 44% were from first-time buyers who had never purchased hard seltzers prior to March 2020.

Hard seltzer retail sales have proven resilient within the alcoholic beverage industry, which has suffered from bar, restaurant, and tasting room closings during the pandemic. The cautious reopening of US businesses should also allow hard seltzer to leverage the momentum around at-home consumption and capitalize on consumption at establishments as well—especially given its portability.

The increase in total alcohol beverage sales for off-premise consumption was up 24% year over year during the period from March 1 to April 18, 2020, more than offsetting on-premise sales, suggesting that alcohol consumption has increased during the global pandemic. It is understandable why individuals might reach for alcoholic drinks during this period: they are frustrated, bored, cooped up, and anxious. However, the resilience of hard seltzers is not necessarily indicative of alcohol across the board: the US alcohol market needs to sustain 22% volume growth across all alcohol categories sold off-premise just to level off from the impact of closed bars and restaurants. With that said, meeting that volume threshold simply means that unit sales returns to similar pre-COVID-19 levels but the expectation is that total dollar spending on alcohol will decline.

Hard Seltzer is Here to Stay

While many speculated that hard seltzer was merely a summertime beverage and thus vulnerable to the ebbs and flows of seasonal products, it has proven to be a resilient category. Still, the popularity of hard seltzers presents both opportunities and new challenges. On the one hand, the explosion in the popularity of hard seltzer has pushed various alcohol brands to continue creating new offerings and blends: Consumers now have options among traditional hard seltzers, cider seltzer, wine seltzers, and more. On the other hand, brands will eventually need to contend with the difficulties associated with such additional choice: shelf space is limited in retail stores and consumers will be purchasing in a difficult economic climate. There is always a possibility that new brands will take away market share from existing volume—ultimately a zero-sum game— in which total industry does not actually grow. Therefore, manufacturers seeking to launch their own lines of hard seltzers will have to be innovative and diligent—in price point, flavoring, and marketing.

Understanding the basics

The global hard seltzer market size is expected to grow from $4.4 billion in 2019 to $14.5 billion by 2027 at a compound annual growth rate (CAGR) of 16%, according to Grand View Research.

White Claw had the largest hard seltzer market share in 2019 at 58%.

Hard seltzer’s popularity has grown due to it being considered a healthier alternative to other alcoholic beverages, having an accessible price point, and benefitting from convenient packaging.