HARD SELTZER: SELTZER CONTINUES TO BUBBLE

Seltzer continues to bubble

After several years of extraordinary growth, can the seltzer category maintain its momentum? Seamus May spoke to leading producers to find out more.

There can be little doubt that over the past few years, hard seltzer has risen from niche product to retail mainstay. Analysis published in March of this year by GrandView Research tipped the global seltzer market to be worth nearly USD$60 billion by 2030, recording a CAGR of 22.9 per cent.

The Australian market has also recorded significant growth over the past 12 months, with IRI finding that seltzer had expanded by 24 per cent in the year to January 2022.

Yet, as with any rapidly expanding category, the question remains whether seltzer will be able to maintain its momentum. With an increasingly competitive market, how can brands continue to connect with consumers now the initial novelty of seltzers has worn off?

Original disruptor sharpens its claws

One of the earliest brands in this space is White Claw, originally established in the USA in 2016. White Claw has seen first-hand, and partly precipitated, the international rise of the seltzer category.

Collectively, the category needs to educate consumers as to what it isand that’ll ensure there’s more seltzer drinkers than ever.

-Wade Tiller, CEO Hard Fizz

Ed Jamison, Brand Director at White Claw’s Australian distributor, Lion, said: “The functional and emotional consumer needs which have largely driven the success of seltzer are here to stay – functionally we know a growing subset of consumers are actively looking for products with lower sugar, calories and carbohydrates.

“Some other categories aren’t seen as being as relevant particularly to younger consumers. As a result, we see the category continuing its success for a long time particularly with brands bringing new and exciting innovation to market.”

It’s this innovation that White Claw has identified as key for both retaining drinkers and reaching new markets, with the brand slated to launch two new flavours to its 6.5per cent ‘White Claw Surge’ range.

“It’s going to be a huge summer again this year for White Claw, with even more news to come in 2023,” Jamison hints.

Lion as a whole understands the importance of the hard seltzer market right now, with the company’s Byron Bay Brewery brand now moving into the category for the first time.

“We know we have a very special brand in the Byron Bay Brewery. It’s particularly attractive to consumers [aged] 18-30. We know that for this age group, beer doesn’t meet all of their occasions, so you will continue to see exciting innovation from the Byron Bay Brewery brand with seltzer just the beginning,” said Jamison.

Faye White, head of Brand and Marketing for Wayward Brewing Co’s W Seltzer, strikes a similar tone to Jamison.

“The category is in such huge demand because it plugs a gap in the market, catering for those that are looking for something that’s light, easy drinking and lower in calories and sugar than other alcoholic drinks out there,” White says.

“And of course the convenience of it…For those reasons alone I can’t see interest in the category losing momentum. I think new product development will help maintain interest in the category too.”

Innovation key for growing category

There’s no limit to innovation in the seltzer space right now, with the entrance of new flavours, brands and ranges helping drive the category’s momentum.

As White said: “We’ve seen huge innovation with craft beer in Australia over the past few years, it’s possible we could see the same for seltzer, as long as there’s an appetite for it.”

One such brand that is heavily into innovation is Hard Fizz, with CEO Wade Tiller identifying the company’s tactic to “innovate with purpose.”

“The category needs more market penetration. People are still walking into Fizz HQ [the brand’s brewery] who’ve never had a seltzer, so collectively, the category needs to educate consumers as to what it is and that’ll ensure there’s more seltzer drinkers than ever,” Tiller continued.

“The category needs to continually innovate if it wants to keep engaging consumers.”

Kieron Barton, Co-founder of Saintly Hard Seltzer, agrees with the need for innovation to boost consumer awareness.

“Consumers are still discovering the hard seltzer category. According to IWSR, less than 50 per cent of RTD drinkers are aware of the category in Australia; therefore, flavour innovation and exploration will continue to be vital to the category,” Barton said.

“With innovation at our heart and the ability to be nimble in response to changing consumer needs, we’ll continue to support consumers’ desire for new beverage experiences with market-leading innovation.”

That point about reacting to consumer demand is important, because according to Tiller, innovation is most impactful when aligned to the customer.

“In theory, we could make a new flavour every week if we wanted but there’s limited space in the market; so we innovate in a very deliberate way with a different occasion or consumer in mind,” Tiller says.

Hayden Quinn, Hard Fizz Ambassador

“This summer, for example, we’re releasing a Blueberry Lemonade and Piña Colada Hard Fizz to appeal to those with a sweeter palate.”

Co-founder and Director of Fellr, Will Morgan, highlights another opportune area for innovation, and said: “Higher ABV options will increasingly become more popular, with people looking to get that little more bang for your buck.”

White also hinted at some interesting innovation to come from W Seltzer, particularly in those that have a higher ABV.

Consolidation ahead?

Hard seltzer is certainly pulling its weight in the RTD category, as Tiller illustrates.

“Seltzer is responsible for about 25 per cent of the growth in RTDs,” he said.

With such strong momentum, it’s understandable that there has been such a proliferation of brands and products entering the space.

“Because Australia already had such an established RTD market, with a lot of heritage brands and sub-categories, we were always going to see blurring of category lines as everyone throws everything against the wall to see what’s next to stick and resonate with the audience,” Morgan said.

“Some brands have been successful as the space lends itself well to their core brand proposition, while others look particularly out of place in a category that doesn’t fit their brand.”

We’ve seen huge innovation with craft beer in Australia over the past few years, it’s possible we could see the same for seltzer, as long as there’s an appetite for it.

-Faye White, Brand and Marketing W Seltzer

Tiller agrees, suggesting a more streamlined category could be evident soon.

“I think it’ll consolidate in terms of number and breadth of brands…The category will mature into a mainstay in the RTD space but with fewer players- they need space, and there’s just not the space,” he said.

Tequila and cocktail seltzers a growing trend

The growth of cocktail-themed and tequila-based seltzers has been one of the key developments of the category over the past 12 months.

One brand that has made tequila its key selling point is Sydney-based Compa Drinks Co, as Cofounder, Nick Chappell, outlines.

“Compa Drinks Co sets itself apart from its competition with the use of 100 per cent agave premium blanco tequila sourced from ‘El Valle de Tequila’ Jalisco, Mexico,” Chappell says.

“The rise of both the agave space and the seltzer category has provided a massive demand for Compa Drinks Co.

“The key to a good seltzer is sessionability, fresh natural flavours and a clean finish. We have found that the use of tequila ticks all these boxes. We are also a big believer in the motto ‘if it looks good they’ll buy it once, if it tastes good they will keep buying it’.”

Similarly, Sam Carroll, Founder of seltzer brand, Golden Hour, is hoping his company can harness increased awareness of agave spirits.

“We wanted to create a drink that not only our friendship circle would enjoy, but the wider community. [Tequila bases] has been a gap in the Australian market for some time since the birth of seltzers so it was an opportunity we just had to grab,” Carroll noted.

Carroll says that when he was developing Golden Hour, many seltzers were vodka-based, but very few were making use of tequila.

“I believe currently at this time, there are only two or three other tequila seltzers on the market,” Carroll adds.

On the wider cocktail front, Saintly has seen great success with its line of cocktail-inspired seltzers and also its line of Saintly Spirits, which allow consumers to mix their favourite seltzers sustainably at home.

Barton said the cocktail-inspired seltzers “tapped into the growing seltzer and cocktail markets in one drink which has been brilliantly received.

“We’re also seeing signs of premiumisation across the RTD category and the emergence of spirit-based seltzers that offer differentiation with more complex or bold flavours, including tequila and agave.”

Jamison says great things can come in the cocktail space with seltzer, noting: “The potential scale of the cocktail opportunity is certainly very exciting and we should expect to see continued innovation and growth in this segment within the category.

“The possibilities are almost endless for this category due to the breadth of potential innovation in seltzer means the future is extremely exciting for the seltzer category!”

Brewed seltzers offer an interesting angle

Fellr, Hard Fizz, and W Seltzer are all intriguing in that they are ‘naturally’ brewed, offering a bridge between the seltzer and beer categories, and the opportunity to market strongly with traditional beer drinkers.

W Seltzer is small-batch brewed with all-natural ingredients and real fruit extract, while Hard Fizz is produced at the brand’s brewery and taphouse on the Gold Coast, which is open to visitors to view the process.

Fellr has taken the brewing technique into a new direction recently too, with the launch of a limited edition non-alcoholic beverage, Fellr Free.

“Our goal is to make it clear through our packaging, targeting and comms that this isn’t simply a flavoured soda, as we’re still fermenting and brewing this beverage with our custom method, with trace alcoholic levels similar to Kombucha,” Skora said.

Dovetailing retail and on-premise strategy

During the lockdown era, with outdoor socialising high on the agenda, seltzer brands benefited from the pick-up-and-go nature of the product. But what does this mean now that the on-premise is back operating as ‘normal’?

“We’ve adopted a ‘precinct strategy’, and by that I mean, where we activate well on-premise, we then give support to retailers in that area – if we can build brand loyalty on-premise, that drives them to retailers to transact,” Tiller said.

Fellr has adopted a similar tactic, as the brand’s Director and Co--founder, Andy Skora, explains.

“Retail and on-premise 100 per cent work hand-in-hand with each other. Our focus has been building our brand in the on premise around our key stores and then supporting the flowthrough into these retail partners,” Skora said.

“It gives us a lot more opportunity to activate and build the brand in exciting ways, and aids the awareness of the product when customers go in-store.”

This approach gives Morgan reason to feel bullish about the future of the brand and category, with Fellr recording 300 percent growth in FY22.

“From what we’ve seen, the seltzer category is still only gathering steam. While it’s been a breakout couple of years, it's predominantly been focused in key metro and coastal cities, so it hasn’t crossed over to mainstream markets as yet,” Morgan adds.

Chappell identified the off-premise as being incredibly important to the growth of the category, and said: “We are pushing the introduction of new flavours and limited release products, promoting off-premise activations and increasing tastings to drive momentum in the off-premise space.”