How the Hell is White Claw Hard Seltzer Outselling Budweiser?
We examine the phenomenal growth of hard seltzer and predict its staying power.
Now that millennials have reportedly knocked off napkins, doorbells, and diamonds, beer looks to be the next victim on their hit list.
This is no joke. Millennials are drinking staggering amounts of hard seltzer instead of beer. In the most recent reported sales figures, White Claw outsold every craft beer brand. In July, White Claw claims it outsold Budweiser. Yes, Budweiser.
The category has been growing at a triple-digit annual rate since 2016, and is expected to grow by about 300 percent in 2019. Amazingly, even that number is limited to some extent by production capacity. In other words, if there was more White Claw available, people would buy it.
This is no passing fad, either. According to Sanjiv Gajiwala, senior vice president of marketing for Mark Anthony Brands, which owns White Claw and the Mike’s Hard line, after someone has purchased a can of their hard seltzer, “one in three people will buy it again. That’s pretty good.” Even with their impressive sales, he maintains there’s actually room for the brand to grow. While nearly every liquor store and supermarket carries White Claw, only 20 percent of bars and restaurants are currently selling it.
White Claw is the top-selling hard seltzer in the country with about 60 percent of the market and Truly is in second place with about 30 percent. “In 2016, we sold the same amount of Truly in an entire summer that we now sell in a week,” Boston Beer chief marketing officer Lesya Lysyj told me. “We are up 185 percent from this time last year.”
With 90 percent of the market, and the solid savvy of Mike’s Hard and Boston Beer behind them, White Claw and Truly are the story, and the other brands are playing catch up. (There’s one exception: Four Loko is about to enter the market with a 14-percent ABV “sour blue” seltzer, which should stir up the waters, at least in the shallow end.)
For most news outlets, these big numbers are the story. Okay, there was a piece in The Atlantic that let us know that drinking hard seltzer is a gloriously anti-intellectual decision, but you knew someone was going to say that.
But there are a lot of unanswered questions about the phenomenon. For instance, how is it that hard seltzer is outselling Budweiser, and yet lots of people still don’t know what it is? So, what the hell is “hard seltzer” anyway?
It’s not an easy answer. For one thing, the term “hard seltzer” has only become the preferred term in the past eight to 12 months; before that, “spiked seltzer” led Google searches. “Spiked” continues to be used in advertising and publicity for most brands, which blurs the details of what this stuff is. “Spiked” implies that alcohol has been added to seltzer, like when you “spike” a punch by pouring in liquor. But these beverages are all brewed, not formulated.
Gajiwala fielded the question cleanly. “We ferment gluten-free grains to create alcohol,” he said. “We then run it through our own proprietary Brewpure process to create colorless, flavorless liquid. We add carbonated water, flavors, and a little bit of cane sugar to bring out the flavor.” That’s as much detail as I found anywhere. What are the grains? What is the Brewpure process? That’s proprietary information, I was told.
Truly takes a different path. “The alcohol found in Truly is made from 100- percent all-natural cane sugar,” said Lysyj, “which is fermented during the brewing process, along with a hint of fruit. The result is a crisp and clean flavor profile, just like sparkling water—but spiked.” Like White Claw, this process gives Truly the ability to place the desirable “gluten-free” tag on its label.
All of the seltzers are brewed, not formulated. It’s an important distinction, because of the taxation regulations of the federal and state governments. If beverage alcohol is brewed, it is taxed at a much lower rate than beverage alcohol that is distilled after brewing. (Wine and cider are taxed at an intermediate rate.) If these seltzers were actually “spiked” with vodka or neutral grain spirits, they’d be significantly more expensive on the shelf thanks to higher taxes.
So that’s what hard seltzers are, but why are they happening now? And how long will this trend last? Smirnoff Ice blew up the flavored malt beverage category, along with Mike’s Hard Lemonade, but that settled down into a healthy niche. Cider keeps coming and going—it’s, unfortunately, in a “going” phase right now. Hard sodas, typified by Not Your Father’s Root Beer, saw huge growth followed by a quick drop, probably fed by the large amount of sugar in the drinks.
While none of these other drinks are exactly analogous, I do think these experiences helped hard seltzer to catch on, along with some other important trends and factors.
I have to, of course, mention the vodka-soda, which is the most frequent drink ordered at bars and nightclubs. Given its popularity, any bartender you meet will tell you that vodka-soda pays the bills. Hard seltzer is the canned (or draft, if you can find it) equivalent of a fizzy vodka-soda, with its crisp snap, “healthy” vibe, and light flavor.
Lysyj pointed out to me two other significant trends that helped the growth of hard seltzer, the “growth in the consumption of carbonated water in the U.S. and an overall interest in low-calorie alcoholic beverages.”
“We’d had products like hard seltzer in our pipeline for a while,” she said, “but we felt that this was the right time to bring them into the marketplace.”
So, will hard seltzer be around next summer or even this winter? “From everything we’ve seen,” Lysyj said, “hard seltzer has staying power. People are trying Truly as an alternative to vodka-soda, light beer, and wine, and they’re sticking around and buying more. It hits the rare sweet spot of flavor, refreshment and functional benefits that make it much more than a boom and bust.”
And Gajiwala pointed out that it’s still a pretty new thing. “I think there are a lot of people who haven’t tried it,” he said, and chuckled. “We’re going to go get them to try it.”
While I’m a bit more skeptical, when I look at hard seltzers, I see the creation of a new category—not an extension of flavored malt beverages. I also suspect that even after something else new comes along and steals the spotlight, there is still going to be a ton of hard seltzer sold. And to be sparkling clear, I don’t see anything on the horizon that could even come close to catching up to hard seltzer, let alone surpassing it.
So, hang on beer. Hard seltzers are just getting started.