What will be the next hard seltzer? That is the multi-billion-dollar question for alcohol producers.
It’s hard to imagine now, but if you’d posed that question this time last year, many in the alcohol industry might have assumed you were asking for the next flash-in-the-pan “innovation.” Now, with sales still surging, it’s overwhelmingly clear hard seltzer is no fad. As the wave of its enormous success crescendos, multiple producers are betting on the next competitor: hard tea, a ready-to-drink spiked beverage flavored in still and sparkling form.
Hard tea is not a nascent subcategory by any means. According to Nielsen data, hard tea sales reached $436 million in 2019, and they’re continuing to grow this year. In the 18 weeks leading up to July 4, hard tea sales surpassed $200 million — almost half of 2019’s total.
This remarkable growth has almost entirely come from two market leaders, Boston Beer’s Twisted Tea (launched in 2001) and Molson Coors’ Arnold Palmer Spiked (launched in 2018), but neither of these brands align with the formula that’s seen so many flock to hard seltzer. Each contains more than 200 calories and over 20 grams of sugar per 12-ounce serving; that’s double the amount of calories of the average hard seltzer, and between 10 to 20 times more sugar.
Many alcohol brands see this as an opportunity — a “better-for-you” beverage in the already-established hard tea subcategory that mimics hard seltzer’s low-calorie, low-sugar formula. With multiple such products already released this year, could this signal that the summer of hard tea is brewing?
Hard Tea: A Hard Seltzer Alternative?
Producers wishing to appeal to health-conscious drinkers currently have two options: compete in the now-saturated hard seltzer space or differentiate. With well-established brands like White Claw and Truly already dominating hard seltzer sales, many producers may feel that offering a hard seltzer alternative is the easier route to success.
“When seltzer became this big story and everybody said ‘the future of alcohol is seltzer,’ we felt as though we were seeing something different,” says Daniel Goodfellow, chief marketing officer at Crook & Marker. “We thought that seltzer was just getting the party started, demonstrating there is such a thing as an alcoholic beverage that consumers can drink and not feel guilty about. But as in every other beverage category, flavor is what’s going to pull them through.”
Goodfellow makes an important point: For regular drinkers of products like LaCroix, hard seltzer’s flavor profile is a familiar one. But for others seeking low-calorie booze, subtle hints of fruit may not be sufficient on the flavor front. If hard seltzer is the alternative to beer, then hard tea is an alternative to hard seltzer.
Crook & Marker currently offers five lines of low-calorie alcoholic beverages brewed from ancient grains, such as quinoa and amaranth. One of its lines, Spiked & Sparkling, closely resembles a hard seltzer (and bears striking resemblance to Truly’s original brand name). The other four — Spiked Tea, Spiked Lemonade, Spiked Coconut, and Spiked Soda — have bolder flavor profiles. The brand’s teas, lemonades, and coconut beverages have been the main drivers of the company’s 300-percent retail sales growth over the past year, Goodfellow says.
Other brands are betting on bolder flavor profiles as a hard seltzer alternative as well. In February, AB-InBev’s craft beer unit, Brewers Collective, launched a new line of products called LQD. Described as Brewers Collective’s “first craft beyond beer platform,” LQD debuted with four spiked products: two flavored green teas, a hibiscus lemonade, and an agave limeade.
Brewers Collective devised these products after in-house market research showed consumers were seeking hard seltzer alternatives at its on-premise locations. “Across the country, consumers were coming into our craft breweries and brewpubs and asking for seltzers, but also asking for different types of beverages,” says Lindsey Willey, director of beyond beer for Brewers Collective. LQD’s teas, lemonade, and limeade have low-calorie, low-alcohol qualities akin to hard seltzers, but offer “a more flavorful or fruit-forward option,” she says.
In June, Rhode Island’s Narragansett Beer launched its own hard tea in collaboration with local lemonade brand Del’s. Narragansett’s CEO, Mark Hellendrung, says the decision to launch a hard tea rather than a hard seltzer came from not wanting to become another “me too” offering in the seltzer space. Hellendrung describes the initial consumer response to Del’s Rhode Island Hard Tea as exceeding the company’s “wildest expectations.” (Narragansett’s Del’s Shandy, a half-lemonade, half-beer is also made with the local brand.)
“Right now, because it’s doing so well, we’ve had to really restrict where we’ve shipped it,” Hellendrung says. (Del’s Rhode Island Hard Tea is currently distributed in nine states, with more markets soon to follow.) “We’re producing a lot more in August and September and we’ll be able to release it full-throttle in September,” Hellendrung adds.
Learning from Non-Alcoholic Beverage Preferences
Tea is not the only non-alcoholic beverage to receive the spiked treatment in the wake of hard seltzer’s success. Many producers have also turned to lemonade and limeade (such as Crook & Marker and LQD), while others are instead adding ABV to coffee and kombucha.
A skeptical take on this trend could be that these brands are hoping for success by virtue of the now- recognizable “hard” moniker. But many producers say there’s strong evidence in the non-alcoholic RTD space to suggest that tea is a particularly potent candidate for spiking.
In July, Pabst Blue Ribbon (PBR) introduced a 100-calorie, peach-flavored hard tea following in-depth consumer research and over a year of development. “The non-alcoholic iced tea category gives us some clues about consumer preferences,” says John Newhouse, PBR’s brand manager. “In our research, we learned that over one-third of millennial and Gen Z consumers would be interested in trying a sparkling tea drink, especially if it contained a lot less sugar than the best-selling teas on the market.”
Newhouse continues: “The hard seltzer segment is obviously booming and here to stay, so better-for-you alcoholic drinks are proving to have a lasting place in the market. Compiling all of these data points gave us confidence that our lower-calorie, bubbly hard tea could gain traction.”
New York-based entrepreneur Kyle Cooke was also inspired by the popularity of non-alcoholic iced teas when starting his hard tea and spritz cocktail brand Loverboy in 2018. “For me, there’s a huge opportunity for hard tea because if you go into a supermarket or a grocery store, there’s an entire cooler dedicated to ready-to-drink, non-alcoholic tea products,” Cooke says. In contrast, when you browse the alcohol section, there’s “basically one [tea] option,” he adds.
“Twisted Tea has 93 percent of the hard tea market share and it’s gone uncontested for 20 years,” Cooke says. Not only does this prove that tea can succeed as an alcoholic beverage, it also offers a previously untapped opportunity.
Given Twisted Tea’s high-calorie and high-sugar formula, it’s safe to assume that it’s not traditional hard seltzer drinkers who have driven hard tea’s growth in recent years. But with an increasing number of low-calorie options in the segment, such as Loverboy, LQD, and PBR, hard seltzer drinkers could be tempted to switch to hard tea. And with consumers’ healthy perception of tea, a spiked version could perhaps be even better placed than hard seltzer to succeed as a “better-for-you” alcoholic beverage. “That was really the genesis of Loverboy,” Cooke says.
The Future of the “Beyond Beer” Space
The combination of hard tea’s stronger flavors, the popularity of non-alcoholic iced teas, and our perception of tea as “healthy,” make it a compelling contender to compete with hard seltzer. But with the former’s head start in the market, can hard tea ever approach the status of spiked sparkling water, or incite the cultural phenomenon that spawned viral memes and YouTube videos? Some producers say, yes.
“Sparkling water is a $22 billion category right now. Iced tea is a $24.5 billion category,” says Jennie Rips, co-founder of Owl’s Brew, a New York-based company partially funded by AB InBev’s venture capital arm, ZX Ventures. Owl’s Brew offers low-calorie canned “boozy teas,” as well as tea-based, non-alcoholic cocktail mixers. “If you look at that, and look at where spiked seltzer is now, I believe [hard tea] will be a major, major category,” she says.
Owl’s Brew co-founder Maria Littlefield adds, “Over the years, we’ve seen a lot of trends that started non-alc transfer over to alcohol four or five years later.”
For Crook & Marker’s Goodfellow, the question is not whether hard tea can compete with hard seltzer, but whether a range of “better-for-you” spiked drinks — seltzer, tea, lemonade, and low-alcohol canned cocktails — can one day compete as a combined category.
“I truly believe that when the history books are written, 2019 will be the year that everybody woke up to the emerging ‘better-for-you’ alcohol category,” he says. “But 2020 [will be] the beginning of its true maturation into a multifaceted category. Just like any mature category, such as beer, there’s room for everyone in that scenario.”
Published: July 20, 2020