Bale Breaker Brewing set up business in a rather beer-centric setting. In 2013, the brewery transformed three acres of hop fields at B.T. Loftus Ranches, a hop farm in Washington’s Yakima Valley, into a brewery specializing in fragrant pale ales and IPAs.
The hop-forward beers found a following, part of the rising national interest in IPAs. By the late 2010s, though, the company noted another trend: Hard seltzers were bubbling up and gobbling market share. It made sense to enter the category, hopefully finding new customers, but “we wanted to make sure that we had a seltzer that all of us would drink,” says Sara Gottleib, the marketing manager for Bale Breaker.
Releasing a carbon copy of White Claw held little appeal. Instead, the brewery created a cocktail-inspired seltzer flavored with agave and fruit juice. In summer of 2021, Bale Breaker released its YOXI Craft Hard Seltzer featuring a lime riff on the tequila-driven ranch water cocktail, a staple in Texas.
“Telling somebody that we have a hard seltzer does not define it whatsoever,” Gottlieb says. “We’re letting our flavors do the speaking.”
When hard seltzer first hit the market, its singular metrics—clear, 5 percent ABV, 100 calories, scant sugar and carbs—helped the fizzy upstart soar. National sales grew triple digits in 2019 and 2020, especially with customers eager to sip something new during pandemic disruptions. Boston Beer Company predicted the category would grow by some 70 percent in 2021. But according to NielsenIQ, the category only expanded by 16 percent, the sales slowdown leading Boston Beer to dump millions of cases of its Truly hard seltzer.
“We were very aggressive about adding capacity, adding inventory, buying raw materials, like cans and flavors, and, frankly, we overbought,” Boston Beer chairman Jim Koch told CNBC show Closing Bell.
As a category, hard seltzer isn’t flatlining. But with a crowded field and increased competition from ready-to-drink cocktails and better-for-you beverages, hard seltzer is no longer a bubbly upstart. The era of trial is over, and breweries and beverage companies need to try harder to attract fickle consumers.
Novel Flavors Can Attract a New Audience
Back in 2018, a black cherry hard seltzer was revelatory. Now it blends into the beverage shelf.
To stand out, companies are developing offbeat flavor combinations. This year, Austin, Texas, brand Mighty Swell released the “keep it weird” variety pack featuring flavors such as Tiger’s Blood, a blend of strawberry, coconut, and watermelon. The Quirk hard seltzers from Boulevard Brewing feature mashups such as cherry blossom and lime, and they’ve proven so popular that the brand should account for 25 percent of the brewery’s business in 2022.
Last year, AMASS launched botanical hard seltzers that incorporate turmeric, star anise, oak, and rose petals. The hard seltzers “deliver a nuanced flavor profile that’s a cut above the basic fruit flavors,” says Morgan McLachlan, a founder and the master distiller.
Looking beyond lemons can help companies reach new audiences. Nectar hard seltzers appeal to Asian American and Pacific Islander (AAPI) drinkers with fruits such as lychee and yuzu, as does the AAPI-owned Drunk Fruit hard seltzers that features a melon version inspired by Melona, a fruit-flavored ice cream bar from South Korea.
Sean Ro and Kevin Wong founded Lunar Hard Seltzer with a vision of creating “Asian Americana in a can.” That translates to sourcing Asian ingredients such as Taiwanese passion fruit purée and Korean plum syrup to make hard seltzers sold at Asian supermarkets such as H-Mart and Trader Joe’s alike.
Lunar is also sold at many Asian restaurants. The company deepens that connection with its Heritage Line of limited-edition hard seltzers that are created in conjunction with restaurants such as Bonnie’s, a “Cantonese American” destination in Brooklyn.
Chef Calvin Eng worked with Lunar to develop a take on a traditional Chinese cold remedy, mixing salted kumquats with tangerine and MSG for a hard seltzer that’s savory yet refreshing. “We can use this as a platform to tell stories about our heritage,” Ro says.
Channeling Cocktails Can Boost Sales
Ready-to-drink cocktails are red hot right now. Instead of conceding market share, companies are creating hard seltzers inspired by the flavors of favorite cocktails.
Short’s Brewing of Michigan makes its Beaches cocktail-style hard seltzers in Moscow mule and paloma flavors, and Denver brewery Great Divide offers its Whitewater hard seltzers in mimosa and mojito versions. King among cocktail-inspired hard seltzers is the margarita, including popular versions from Topo Chico and Truly. They thrive in their hybridized, category-blurring roles.
“It’s a hard seltzer, but it’s also a place in the canned cocktail space, and it provides a margarita drink…at a much reduced calorie count versus a traditional margarita,” David A. Burwick, the president, CEO, and director of Boston Beer, said during a February earnings call.
This spring, Truly teamed up with singer Dua Lipa to release the cocktail-inspired Poolside Party Pack with flavors including kiwi mojito. Like all Truly seltzers, the cocktail-style flavors contain alcohol fermented from cane sugar. That’s a matter of dollars and sense. Federal tax on malt-based products, such as beer or hard seltzer, is five cents per 12-ounce serving. The tax doubles to 10 cents for a wine base, then 13 cents for a spirit base.
Spirits may have higher taxes, but liquor can command premium pricing. Spirits-based hard seltzers such as the tequila-driven Onda retail for $14 per four-pack, while vodka-based High Noon costs around $10 per four-pack.
This year, Boston Beer will release a 110-calorie Truly Vodka Seltzer that will hopefully “compete in the high end of the hard seltzer category,” Burwick said in an April earnings call.
E&J Gallo Winery, the makers of the vodka-based High Noon, connected the dots early on. Prior to releasing High Noon in 2019, the company’s researchers asked consumers a question: What made hard seltzers, well, hard? The answer was often vodka. “If people already think it’s made of vodka, why not just give them vodka?” recalls Britt West, the senior vice president and general manager of spirit at Spirit of Gallo.
On-Premise Occasions Are Key for Growth
While growth is slowing for many brands, High Noon is going gangbusters. Sales increased 136 percent to $171 million in the 52 weeks ending June 12, according to IRI. Growth is driven by newfound on-premise success.
High Noon is finding a daytime home at bars showing sports such as soccer, West says. “People want to watch the game, enjoy a couple High Noons, and go on about their day.” High-end hotels are also stocking High Noon in minibars, and cans—perhaps from High Noon’s summery Pool Pack—are ideal for poolside bars. No glass, no problem. “It’s been surprising how diverse an on-premise occasion can be,” West says.
This summer, New Belgium is test-driving its Fruit Smash hard seltzers on draft with an eye toward mixed drinks. “We think Fruit Smash is uniquely suited for draft because its colorful liquid and bold flavor make it the perfect base for seltzer-based cocktails,” says Fruit Smash brand manager Astrid Moresco.
Convincing bars and restaurants to carry draft hard seltzer might be difficult. “When people have a pint on draft, they want a beer,” says Gottlieb of Bale Breaker. “And if they want to hard seltzer, they pretty much exclusively want it in a can.”
Hard seltzer companies are testing that concept by opening taprooms. In May, Truly opened a Los Angeles taproom serving hard seltzer on tap and “Trulixirs” modeled on cocktails such as the old-fashioned.
This summer, Two Robbers Seltzer Co. plans to open its first taproom in Philadelphia, giving the company a brick-and-mortar identity. “The thing that we always felt was missing is the ability to connect with our customers face-to-face,” says Vikram Nayar, a founder of the business that started in 2019. The 4,000-square-foot taproom will serve its Two Robbers and nitro-infused Happy Coffee hard seltzers, plus burgers, cocktails, and pilsners.
Instead of buying kegs from breweries, Two Robbers will make its own beers. A hard seltzer company producing beer! “We get to be creative in our own way and do things that wouldn’t make sense for other brands,” Nayar says.
Every beverage category undergoes growing pains as it navigates shifting consumer desire and competition, sometimes from unlikely sources. As recession fears loom, cost-conscious consumers are reembracing light lagers—the original low-calorie offering.
“I think it’s partially affordability, but it’s also partially the fact that light beer offers a lot of the same benefits that hard seltzers provide,” Burwick of Boston Beer said in a July earnings call.
For hard seltzer to continue to thrive, companies must find the sweet spot of innovation, flavor, and pricing. Maybe it’s Fruit Smash “super hard seltzer,” the alcohol by volume boosted to 8 percent, or a future version of Smooj, a highly fruited hard smoothie. Nonetheless, no variety pack can meet every need.
“There’s not one hard seltzer drinker who will try every single one and like them all,” Gottlieb says. “That doesn’t exist, just the same way that doesn’t exist with craft beer.”
By Josh Bernstein