There has been huge interest in hard seltzer category (also known as hard sparkling water, spiked seltzer, or alcoholic seltzer) over the past couple of years in the UK. This is hardly surprising in the light of the pandemic and lockdowns. Consumers could not get to bars, pubs and clubs and so they were drinking at home or taking drinks to the park, making ready-to-drink (RTD) alcoholic drinks when catch up with friends outdoors.
In addition, with beer sales declining breweries are looking to create new revenue streams, and hard seltzers are an easy option as they already have all the required facilities.
The flavour profile of hard seltzers is largely fruity, suiting the palates of those who don’t particularly like wine or beer and, with a relatively low Alcohol By Volume (ABV) and calorie content, they were initially marketed as a healthier choice of alcoholic drink, which they were believed to be. Remember, this was at a time when people were rethinking the importance of health and wellbeing in their lifestyle choices.
Market forecasts predicted massive growth in the sector. For example, a February 2021 report commission by DRTY said that by 2023 the UK hard seltzer market was expected to reach a value of £75m.
Yes, there was a short hard seltzer boom, and many people jumped on the bandwagon, but it was clear to us that this would be short lived. To take one example Boston Beer Company stock has dropped more than 12% in just the last month (source Forbes: https://www.forbes.com/sites/greatspeculations/2021/07/09/boston-beer-stock-affected-with-peak-inhard-seltzer-growth/).
So, it was for this reason that, as a drinks development and marketing company working with smaller and start-up brands, we were reluctant to take on any clients in this category, even when the sector appeared to be booming.
So why was it clear that the hard seltzer bubble was about to burst?
What brands can or can’t say
One of the obvious advantages to the consumer of drinking hard seltzers is that they contain fewer calories than other alcoholic beverages.
The majority of hard seltzers come in a 12oz can and contain around 100 calories (a 12oz serving of craft beer can contain as much as 350 calories) and, although the amount of sugar varies between brands, it tends to be less than 3grams of sugar per serving. So, a hard seltzer could be considered a healthy option, if compared to beer, wine or fruity cocktails.
For the growing number of health-conscious consumers, hard seltzers also tick a lot of boxes, being generally gluten-free, low-carb and lower alcohol.
But – and this is a big but – UK brands selling hard seltzers are not allowed to make any health claims about their drinks, by the simple fact that they contain alcohol. Indeed, there have been several complaints against hard seltzer brands upheld by the ASA (Advertising Standards Authority) for making stated and / or implied health claims, including Brewdog, High-Water, DRTY and Whisp.
So without being able to directly communicate the health ‘benefits’ as a reason why you should be buying their hard seltzer a lot of money needs to be spent to standout, money that small start-ups don’t have, but big already established brands do.
A lot of the projected success of the hard seltzer market in the UK has been based on the ongoing growth of the sector in the US.
And here comes another but: Often categories that boom in America flop in Britain. Take Energy Shots, which took off in the States and are still doing well but, after people jumped on the bandwagon in the UK, the wheels came off and the vast majority of energy shot brands vanished.
This is partly explained, as mentioned above, by the fact that in the UK we are far more limited as to what we can say about products. Hard seltzer advertising, in America on the other hand, referenced fitness and sports.
Of course, the UK population is far less familiar with what hard seltzers actually are and needs them to be explained and that is not easy when promoting alcoholic beverages has so many restrictions.
Therefore, consumers looking for ready-to-drink products are likely to buy canned or bottled beers, RTD cocktails or pre-mixed spirit and mixer cans, such as rum and coke or vodka and soda.
Consumers can get overwhelmed by too much choice
A few months ago, having seen several new hard seltzer launches weekly in the trade press, I laughingly suggested that there were more new offerings than there were consumers to drink them! This may be an exaggeration but more seriously, in my experience, too many brands in the same category confuse their target consumers. They end up so spoilt for choice that they don’t buy anything.
Kombucha is a great example of where drinks brands should learn from the past and not have too many products on the market. When consumers see an aisle in a supermarket with, say, 60 different choices they either pick a brand they already know or, very often, go elsewhere in the shop for something else that they already know they like.
When a start-up wants to launch a hard seltzer brand, my advice is the same as it would be to someone considering a kombucha or perhaps an energy drink: a fool and his money are easily parted.
The bigger players will dominate, because consumers turn to what they know, and the smaller brands have little opportunity to stand out.
Small vs large companies
As Forbes incisively put it: “The massive growth of the global hard seltzer market is a Pied Piper call to numerous large brewers and other companies searching for bottom line profits.”
Coors, Kopparberg and Smirnoff have all released their own hard seltzers. The big, well-known brands are dominating the market.
Small brands are facing big money competition. If they want to stand out they will need to spend around £100,000 just for marketing. This is an enormous amount of money to spend and potentially lose if you’re a start-up, but a drop in the ocean for established brands to invest to ensure they don’t lose market share.
I’m not suggesting that hard seltzers will completely disappear, rather it will be the small players who will suffer and ultimately wither, while the big boys take over and thrive. It is simply not worth it for small brands – they cannot compete.
Drink at home vs drinking out
For brands large and small alike, the RTD alcoholic drinks trend is going to change considerably now that bars, pubs, and clubs are reopening.
As life returns to normal, people are returning to their old drinking haunts and looking forward to the ‘experience’ that offers. They will not go to those places for a drink which is essentially ethanol with water and flavour and, even if they did, most bars don’t and won’t sell hard seltzers.
It’s like buying ready-to-drink coffee in a big chain like Costa. Consumers go to Costa for the experience as well as the coffee, they don’t want a RTD coffee, they want one that has been freshly made, to their specification, right in front of them. Likewise, people who enjoy a cocktail, want the experience of the cocktail. They want to order it and see it mixed and poured for them, not simply tipped from a can into a glass!
In my experience, brands often have to ‘incentivise’ an establishment to sell their product. I know a drinks brand that was told the manager would be happy to sell their products, but to gain approval from the owner and ensure the brand was listed, the owner insisted on receiving two first class tickets to New York, plus a stay in a swanky hotel while there!
Again, perhaps the big players can afford that, if they considered it worth the investment, but smaller brands certainly couldn’t and, even if they could, would still be unlikely to make profit from the result of that investment.
So, are hard seltzers an exciting development in the drinks market? Do they have a future ahead of them? I think not. That’s certainly my interpretation of the latest figures.
We saw this coming and haven’t touched the market. Of course, we are not telling entrepreneurs and start-ups not to look at launching an innovative new drinks brand; RTD or not, alcoholic or not; we are simply advising that jumping onto the hard seltzer bubble is jumping onto one that has already burst – and that isn’t a good place to be!