CHICAGO — Branding and image are often as important as flavor and ingredients when launching a new alcohol beverage. In today’s market, companies launching new products are embracing familiar consumer brands, spirits-influenced drinks and even NFTs (non-fungible tokens) to make an impression. At the same time, the packaged-beverage industry is expanding the definition of take-home drinks.
For example, the High Noon brand of ready-to-drink (RTD) cocktails, made by traditional wine company E. & J. Gallo Winery, has “hugely benefited from their partnership with Dave Portnoy in addition to being part of the [E. & J.] Gallo portfolio,” said Chris Long, category manager, age verified, for the Kum & Go convenience-store chain, Des Moines, Iowa. Long is referring to the founder of Barstool Sports, a New York-based sports and pop culture blog.
- Kum & Go is No. 18 on CSP’s 2022 Top 202 ranking of U.S. convenience-store chains by store count.
“It’s a testament to what can happen to a brand when someone of [Portnoy’s] influence ‘likes’ and gets behind a brand,” said Long. “And this is not bad news for the other brands, such as Nutrl and Cutwater Spirits, as the positive exposure brought to the segment might trickle down to benefit them.”
Spirited Efforts
Both beer and spirit-based seltzers have established compelling narratives. Just two years ago, the universe of RTD spirit and cocktail brands was a finite entity. Helped by the pandemic, which kept consumers home from bars and restaurants, the segment has grown substantially, expanding dollar sales in c-stores by 122.8%, making it a $68.9 million market, during the 52-week period ending July 10, 2022, according to Chicago-based IRI.
Packaging seems to have had a hand in the growth, as well, as more RTD drinks embrace cans over bottles, increasing convenience and design opportunities.
Leading brand High Noon saw a 189% dollar-sales increase over the year period, and with Top 5 brand competition coming from Monoco, Nutrl, Cutwater Spirits and Canteen.
“For the seltzer category as a whole, data is showing that customers are really moving to the top few brands.”
One new style in the market is ranch water, a tequila and sparkling water-based cocktail; some are malt-based, others are made with real tequila.
“It’s very strong in the Southwest and still building elsewhere,” said Long.
Lone River Beverage Co.’s Texas Ranch Water, acquired by Diageo in 2021, registered 700% growth from 2020 to mid-2022, while Sauza Agave Cocktails, an RTD Mexican-inspired cocktail from Beam Suntory crafted with agave nectar and real fruit, is making a mark at the retail level. Others that have joined the field include several craft brands and entries from Modelo, Topo Chico and Dos Equis by Heineken USA. The product type, said Hannah Dray, brand director for Dos Equis Ranch Water, is poised to be “the next big opportunity within the seltzer category. It offers something unique within a category that’s quickly becoming oversaturated.”
“For the seltzer category as a whole, data is showing that customers are really moving to the top few brands, and all of the others are mostly losing volume,” Lang said. “I expect a lot of them to lose space in the fall and especially the spring 2023 resets.”
Segment Sorting
While RTD canned cocktails are growing, category followers remind that the segment still represents less than 1% share of sales in convenience stores. And sustaining growth will require attention to price, promotion, display and keeping on top of trends.
Meanwhile, Anheuser-Busch is counting on simple taste and easy drinking to drive its recent entry, Nutrl. We’re “hoping to win over fans by offering unpretentious and uncomplicated low-calorie, low-alcohol drinks made with just vodka, seltzer and real fruit juice,” A-B’s Beyond Beer team said in a statement, adding, “There’s nothing particularly unique about the product line.”
Other new products getting a foot in the door: Happy Dad Hard Seltzer, Bang Mixx from Quash Seltzer LLC and Topo Chico Hard Seltzer, a partnership between Molson Coors and Coca-Cola Co.
The Topo Chico Hard Seltzer brand family led the leading seltzer SKUs with 485% dollar growth over the past year, while Lone River from Diageo cracked the top 10, clocking in with 343% dollar growth, IRI reported.
“Whenever a brand is that big and successful, it’s bound to take hits from the competition.”
Topo Chico has shown itself to be “White Claw-esque,” Long said, citing an appeal to younger legal-aged drinkers. “Topo leverages a hugely popular [sparkling-water] brand among the Hispanic demographic, especially in the Southwest, and the VPOs (vendor purchase orders) continue to hold up in both dollars and units this year. Topo is one of our top seltzer brands currently,” he said.
Mark Anthony Brands’ White Claw, arguably the back upon which the hard-seltzer segment was built, is seeing growth slow due to the newer competition. In Long’s words, it’s an example of a “brand coming back down to earth after a couple robust years.”
Still, it far and away leads the segment.
“Whenever a brand is that big and successful, it’s bound to take hits from the competition, which absolutely affected White Claw to some degree,” Long said. “It also became a ‘mature’ brand and had to cycle all of those massive comps.”
White Claw’s 2022 “Surf and Surge” promotion has performed very well at Kum & Go’s more than 400 stores. “Similar to Bud Light Seltzer Hard Soda—one of our top-performing new items in 2022—the White Claw program helped the brand turn the corner and resume growth for us as the summer wound down,” he said.
Beer Back
Packaging decisions are top of mind for retailers seeking to maintain and grow traditional beer sales, mainly holding up on the strength of Modelo Especial (18.6% c-store dollar growth) and Corona Extra (8.6% growth).
“Domestic beer is down, specifically premium and value [and] popular plus budget,” said Long. “But premium is still the largest beer segment, and value is not far behind. That’s a lot of dollars and customers, and we still find that promotions on the leading brands in these segments move the needle quite a bit.”
About working with key retailers on preferred package strategies, suppliers are realizing growth and volume boosts via several avenues; one effective one is the 7-ounce bottle format in 24-packs.
“Bottles of Heineken and Dos Equis in 24-packs overindex with the Hispanic and millennial consumer, making them a key opportunity package in this [c-store] channel,” said Wesley Jaramillo, commercial marketing channel director-off-premise for White Plains, N.Y.-based Heineken USA. “Additionally, single-serve has been our other major growth driver in convenience.”
“Premium is still the largest beer segment, and value is not far behind.”
Jenny Odom, vice president of national accounts for Victor, N.Y.-based Constellation Brands, said although 12-packs are “at the top of the list for Modelo and Corona, the six-, 18- and 24-packs all off er growth opportunity across the portfolio. Our singles portfolio also continues to drive significant growth, as we have three SKUs in the top 10”: Modelo Especial 24-ounce cans, Corona Extra 24-ounce bottle and Modelo Chelada Especial.
At Kum & Go, space is always “a hot commodity in our stores. We have more of a clean floor approach with fewer displays across all categories, beer or not,” said Long. “If you look at the data, cold beer still sells best, so we’ve dedicated two large display areas in our beer caves to feature promotions and as holding power on key large packs.”
Turning a Corner
As the alcohol landscape continues to change, and traditional beer and wine segments are seeking an innovation spark. Hard seltzers are enjoying a one-two punch that’s proving formidable, with the potential to be a basket-filler, where one customer might buy a favorite malt- or beer-based seltzer with a spirit-based seltzer during a single shopping occasion.
“Cold beer still sells best, so we’ve dedicated two large display areas in our beer caves to feature promotions and as holding power on key large packs.”
“I’d say customers didn’t really differentiate as much between malt-based and spirits-based a short time ago, but the growth of RTDs now says otherwise,” says Long. “One key driver has been smart, innovative packaging. Moving to eight-packs allows them to be on the shelf next to their malt-based peers with similar pricing, making it easier for consumers to give them a try versus the old days when High Noon was in 12-packs and more expensive than other seltzers.”
From a category management perspective, Long says he “follow[s] the data. I’ve always said the customers give us feedback every day about how they spend their dollars; all we have to do is listen. Similar to what happened with seltzers, they’ll let us know by purchasing those brands that really resonate.
Collaborative Spirit
Just as Coca-Cola Co. partnered with Molson Coors to create Topo Chico Hard Seltzer, other brands and companies are working together. Here are two recent alcohol collaborations to watch …
In June, retailer Wawa Inc. teamed with Cape May Brewing Co., Rio Grande, N.J., to launch Wawa’s first-ever Peach Hard Iced Tea (4.5% ABV). The drink aimed to “capture the aroma and flavors of biting into a freshly picked peach at the height of ripeness,” Michael McLaughlin, senior manager of concept development for Wawa, Pa.-based Wawa Inc., said at the time. “It pairs perfectly with the caramel tones of our Signature Black Iced Tea.”
- Wawa is No. 9 on CSP’s 2022 Top 202 ranking of c-store chains by store count.
In 2023, Diageo will launch Vita Coco Spiked with Captain Morgan rum. Debra Crew, president of Diageo North America, New York, says such partnerships set a tone of investment in the RTD category. “As we continue expanding our ready-to-drink portfolio, we consider ways to elevate the category. It made sense to marry together two premium brands,” she said in July. Added Mike Kirban, executive chairman and co-founder of Vita Coco Co., New York: “Now that coconut water is becoming a household staple across the United States, we wanted to make creating a delicious cocktail a few steps easier.”
Recent Dollar Growth of the Top 5 Brands in …
Beer
$24.0 billion market in c-stores, down 1.0% for the 52-weeks ending July 10, 2022
Brand PCYA*
- Bud Light: (8.2%)
- Modelo Especial: 18.6%
- Michelob Ultra: 7.9%
- Corona Extra: 8.6%
- Coors Light; (3.5%)
Spirits
$2.3 billion market in c-stores, up 9.1% for the 52-weeks ending July 10, 2022
Brand PCYA*
- Fireball: 32.2%
- Crown Royal: 6.9%
- Tito’s Vodka: 15.5%
- Jack Daniels: (4.7%)
- Smirnoff Vodka: (2.4%)
Malt/Beer-Based Hard Seltzers
$2.0 billion market in c-stores, up 0.5% for the 52-weeks ending July 10, 2022
Brand PCYA*
- White Claw (Mark Anthony Brands): (0.4%)
- Truly (Boston Beer Co.): 6.1%
- Bud Light Seltzer (Anheuser-Busch): (12.3%)
- Topo Chico (Molson Coors): 485.0%
- Vizzy Hard Seltzer (Molson Coors): 10.2%
Table Wine
$1.1 billion market in c-stores, down 5.4% for the 52-weeks ending July 10, 2022
Brand PCYA*
- Sutter Home: (0.9%)
- Barefoot: (9.7%)
- Vendange Box Premium: 1.2%
- Woodbridge by Robert Mondavi: (17.5%)
- Yellow Tail: 9.6%
Sparkling Wine/Champagne
$95.4 million market in c-stores, down 4.3% for the 52-weeks ending July 10, 2022
Brand PCYA*
- La Marca: 23.0%
- Andre: (9.2%)
- Korbel: (1.3%)
- Cooks: (9.9%)
- Stella Rosa: (5.6%)
Spirit-Based Hard Seltzers
$68.9 million market in c-stores, up 122.8% for the 52-weeks ending July 10, 2022
Brand PCYA*
- High Noon (E & J Gallo Winery): 189.1%
- Monoco (Atomic Brands): 6.5%
- Nutrl (A-B Inbev): >1,000%
- Cutwater Spirits (A-B Inbev): 36.6%
- Canteen (Canteen Spirits): 13.0%
Source: IRI
*Percent change from a year ago