Hard seltzer shakes up North Coast alcoholic beverage sector
The North Coast has carved out a venerable reputation in the alcohol craft beverage sector, whether its wine derived from organically grown grapes from the Russian River Valley, rye harvested in Petaluma for use in whiskey or the expertise of regional brewers.
But in the past year, the industry has been rocked by a decidedly noncraft product: hard seltzer. It’s a drink with low-alcohol content and filled with various fruit flavorings produced at interchangeable factories across the country. A customer can pick up a multipack of cans or bottles for less than $20.
It was initially derided as the second coming of Zima — the clear, flavorless alcoholic drink from the 1990s that later turned into a punchline for people like late night talk show host David Letterman. No one is laughing now after $3.2 billion worth of hard seltzer drinks were sold a year ago in retail outlets, according to Nielsen. It was a small but rapidly growing slice of $145.2 billion of total retail spending on alcoholic beverages last year.
During the pandemic, consumers have been buying even more hard seltzer. From March to August, U.S. sales have been $2 billion, more than double the total from the same period last year.
“We’re only at the beginning. I don’t think this is a fad at all,” said Jon Sebastiani, founder of the Sonoma Brands investment firm, which has a minority stake in Vintage Wine Estates and management oversight at Viansa winery.
Viansa plans early next year to release a wine/kombucha drink called Raye that will be produced with vineyard-designate grapes and be priced at a higher level than typical seltzers.
“I think for any manufacturer, particularly wine or beer, they just have to consider entry into the (hard seltzer) space,” Sebastiani said. “It’s already big and I think most people will believe it will be much bigger.”
Consumer excitement over hard seltzer is reverberating in area craft beer and wine sectors. Producers are paying attention and trying to figure out if there is an opportunity for them.
Barrel Brothers Brewing Co. of Windsor, known for its wide variety of craft beers from porters to various India pale ales, in April released a drink called Seltzer In Place. It started with a black raspberry flavor and now has a tropical lime hard seltzer for sale on its website. A seedless watermelon flavor is coming soon. The drinks are only 100 calories per can with 5% alcohol content.
A major lure for younger drinkers is the low calories, said Bart Watson, chief economist at the Brewers Association, which represents independent brewers. Hard seltzer now represents as much as 10% of the total value of the beer sold on U.S. retail shelves, he said.
“People want different attributes than they (previously) wanted. So things like gluten-free or low- or no-carb are more appealing to people,” Watson said.
Also, many drinkers are intrigued by having a new beverage to keep their interest, said Wesley Deal, co-founder and brewmaster at Barrel Brothers.
“It’s an add-on. You can have your beer and if there is someone in your party that doesn’t like beer, give seltzer a try,” Deal said. “It’s always going to be a nice plus one.”
The big challenge, he said, is whether consumers will pay more for a craft seltzer product like Barrel Brothers’ hard seltzer priced at $12 for a 12-ounce pack of four.
The U.S. hard seltzer drink market is dominated by two companies: White Claw, owned by Mark Anthony Brands, the maker of Mike’s Hard Lemonade, and Truly, owned by Boston Beer Co., maker of Samuel Adams beers. The two brands had a combined U.S. market share of over 75% in the latest data available, according to Nielsen.
Other regional and national beer and wine producers such as Corona, AB InBev and Gallo are entering the fray. In 2018, just 10 hard seltzer brands were on the market, according to Nielsen. That increased to 26 brands by the beginning of 2019, and to more than 65 by this summer.
Last month, iconic Coca Cola said it would take its popular Topo Chico mineral water brand from Mexico and make a hard seltzer version. The move was interesting to industry analysts who noted Coca Cola’s disastrous entry into the wine market in 1970s when it bought Taylor Wine, and exited a few years later.
“I wouldn’t put a big bet on Coke succeeding,” said Jon Moramarco, a wine industry analyst.
He said while Coca Cola may have distribution capabilities, it likely doesn’t have business partners that adequately understand the alcoholic beverage business.
Executives of alcohol beverage firms are trying to understand the seltzer market. Hard seltzer drinkers remind Moramarco of Baby Boomers in the late 1970s who latched onto white zinfandel and wine coolers, and he thinks they will eventually look to branch into more premium drinks.