Two weeks ago the Boston Beer Company (NYSE: SAM) reported brutal Q2 numbers during its quarterly earnings summary. The beverage alcohol company and maker of Truly Hard Seltzer reported missing analysts’ projections for both its top and bottom lines. SAM also fell well below analysts’ predictions in terms of profit and missed its revenue expectations by nearly $50 million.

The poor performance to expectations sent its stock hurtling down an additional 20% in after hours trading and caused Boston Beer’s CEO, Dave Burwick, to proclaim “we overestimated the growth of the hard seltzer category.” Mainstream media took hold of the story and ran with it. Articles began to pop up almost immediately claiming the hard seltzer trend had come to an end.

But is hard seltzer’s run on the market really over? Andrew Serwer, the Editor in Chief of Yahoo Finance, does not think so. He believes the category is still growing. In a Yahoo Finance newsletter Serwer published on Saturday titled, “Why hard seltzer is still America’s ‘it’ drink,” the journalist and former managing editor of Fortune explained why he is confident the beverage category is not another dying trend.

Serwer quoted an observation by Nik Modi, an RBC Capital analyst, “What drove the segment to begin with is health and wellness and convenience — that’s still relevant. And that hasn’t gone away,” stated Modi. “The reality is the seltzer category is still growing very nicely off of some pretty tough compares. The beer industry is underperforming quite dramatically. There’s significant market share seltzer is taking from beer. We think the category can grow double digits for the next couple years.”

Serwer pointed out that the category experienced rapid growth in 2019 and then again during the height of the pandemic when consumers were quarantined to their homes. Consumers were shopping for their beverages in grocery stores, alcohol retail locations and via delivery services instead of in on premise venues and they were choosing hard seltzers at an overwhelming rate.

Now, according to Serwer, the seltzer category is up against its own unprecedented numbers from the past two years. The category is still performing impressively and has appeared to carve out a permanent niche for itself in the market. He explained in a subsequent Yahoo Finance interview, “…the market share and the growth and the way it’s eroded beer sales is here to stay.”

The finance journalist also pointed to hard seltzer’s global potential as a key factor in its continued popularity. While here in the US it is beginning to feel like the past several years have been one long “seltzer season,” in other parts of the world the category is just beginning to gain traction.

“For one thing, the hard seltzer trend has room to grow overseas. White Claw, for instance, has just announced plans for international expansion,” Serwer mentioned in his newsletter.

From the looks of the global seltzer market, he is not mistaken. Major beverage companies are aggressively expanding their seltzer portfolios internationally. Molson Coors has seltzer brands performing well across Europe, and just recently invested $100 million into its Canadian seltzer portfolio. Anheuser-Busch pointed out in its latest earnings summary that Mike’s Hard Lemonade and Mike’s Hard Seltzer are slated to be in 20 markets internationally by the end of 2021. AB InBev also praised the success of Michelob Ultra Hard Seltzer in Mexico, where it has quickly become a leader in its segment.

In addition, Serwer touched on something Boston Beer’s founder, Jim Koch, mentioned after the company’s abysmal earnings report. Koch claimed the saturation of hard seltzer brands on the market were creating “consumer confusion.”

During his Yahoo Finance interview Serwer echoed a similar sentiment, “The testing, the shelf space…it’s just crazy what’s going on out there. [If] you’re going to a store and you’re looking [at] what to buy…scratching your head does not even begin to describe what many consumers are going through right now.”

He did clarify, however, that the saturation and brand testing the seltzer market is seeing is not necessarily negative. Rather it is the redefining of the category as a broader mixture of many alcohol beverage categories. Seltzers are hitting shelves featuring gin, whisky, rum and vodka.

Seltzers made with tea, real juice, cocktail-inspired flavors and more are becoming available. The category is no longer just White Claw and Truly, it is growing and morphing as new brands enter the market. Serwer said, “…in a way it is a unique and discrete category but on the other hand it really speaks to this blending of all beverages…everything is getting all mixed up…”

In his newsletter Serwer quoted the vice president of the alcoholic beverage practice for NielsenIQ, Danelle Kosmal,“[H]ard lemonade seltzer, hard tea seltzer, agave-based seltzers and tequila-inspired [drinks]…” Kosmal continues, “…We’ll continue to see those. The blurring of the lines continues to increase to the point where most consumers don’t know or care what the alcohol base is — they’re going after what tastes the best.”

Serwer also brings Christopher Lombardo of IBISWorld into the conversation. Lombardo believes the acquisition of hard seltzer companies by larger alcohol beverage companies will continue to be a way for larger companies to stay competitive in the seltzer world, “with the purchasing power that the biggest alcohol production companies have, I’d be surprised if at least one of them wasn’t acquired at some point.”

Serwer’s analysis suggests the hard seltzer category is not losing steam, rather it is transforming as a result of the saturated market, consumer habits and international expansion.

Serwer and his colleagues all agree hard seltzer is still a growing category with significant market potential.

Shirani Jayasuriya
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