Hard Seltzer is Definitely Dead
A bump in the road for Boston Beer and its national #2 brand of hard seltzer, Truly:
Boston Beer Company’s stock was down more than 23 percent when the markets opened Friday, after the company reported weak earnings and revenue results, citing fizzling demand for its Truly Hard Seltzer brand. Dave Burwick, the company’s president and chief executive, isn’t sure if hard seltzer sales will pick up this year, calling the company’s outlook “uncertain.”
Headline-writers were having a field day:
“The hard seltzer craze has come to an end.” (CNN)
“Boston Beer stock is crashing because the hard seltzer boom is basically over: (Yahoo)
“Hard seltzer craze is fading” (Bloomberg)
“Truly Hard Seltzer’s growth fizzled. Boston Beer’s stock did, too.” (Barron’s)
But is it dead? Really?
There’s little doubt Boston Beer screwed up. The company overestimated consumer demand, made too much seltzer, and is now suffering a temporary hit to its stock price because of the missed targets. Of course, none of that means seltzer as a category is trouble. I’ve been covering beer for a quarter century, and no new product category has ever been as remotely frothy as seltzer. It has seen triple-digit growth for years, which is absolutely staggering. The seltzer category has grown to a size that rivals all of craft beer, and it took craft beer forty years to reach its present size. There was no way on earth seltzer could continue the growth curve it was on—there just isn’t enough capacity in the beer segment—and so at some point that curve was going to slow.
Boston Beer’s Jim Koch was right to cite the inevitable headwinds that had to strike any segment that grew so explosively:
“Hard seltzer category growth was negatively impacted by several developments: (1) slowing growth in household penetration as the market matures and there is less new trial, (2) a gradual transition of volume to the On-Premise channel as hard seltzer becomes a more regular option in that channel, (3) new hard seltzer brands at retail that resulted in a proliferation of choices and consumer confusion, and (4) a challenging comparative period of significant pantry loading related to On-Premise restrictions in the second quarter of 2020.”
But the sky is not exactly falling. Boston Beer’s Q2 revenues enjoyed 25% growth year over year from 2020. Despite overestimating summer growth, Truly is still closing the gap with White Claw. And critically, seltzer is still the fastest-growing segment within beer. Slowing growth is a lot different than declining volume.
I’m also fascinated in the way the market is diversifying. If we analogize it to craft beer, we’re seeing a lot of the same patterns. Many small breweries are making their brands, and these nibble away at the overall volume. Mid-sized players like Stone and Brooklyn Brewing keep entering the market, and while many will fail, others will do enough business to dent Truly and White Claw. We’re seeing new variations of seltzer that we might even describe as “styles,” and that will create further growth opportunities. Hell, people are even staging seltzer festivals.
Personally, I plan to keep my seltzer obit in the drawer a little while longer. How about you? Did hard seltzer receive a terminal diagnosis on July 23, 2021, or does it deserve a second opinion? I’ll leave you with a little poll to see what you think.
Update, 4pm on July 23. I see you all agree that seltzer is definitely dead:
