Hard seltzers are a boon to the U.S. alcoholic beverage industry at large, and that's shaking up the competitive landscape across the bar and restaurant scene. But while it's hard to ignore the pace at which hard seltzers have uppended the landscape, the growth has the potential to boost other alcoholic beverages as well.
In looking at the alcoholic beverage landscape, seltzers have created a massive disruption. According to findings from US-based Nielsen CGA, the number of consumers drinking hard seltzers at bars and restaurants increased by 73% between the spring and fall of 2019: That's equivalent to around 7.5 million new drinkers. And while some of the increase reflects the entrance of consumers who recently turned 21, most new hard seltzer drinkers are switching from other alcoholic beverages.
Hard seltzers have disrupted the U.S. on-premise (bars and restaurants) space so dramatically that weekly sales now surpass those of the entire pale ale beer category. Of the consumers who identify as hard seltzer drinkers, more than half (51%) said they are actively choosing seltzers over their normal drink of choice when they're out of the house, with 52% selecting hard seltzer instead of beer and 40% doing so instead of cocktails.
Bars and Restaurants Bet Big on Hard Seltzer in the U.S.
It’s a well-known fact that hard seltzers have begun to dominate supermarket and liquor store shelves. High-profile Super Bowl advertisements and social media moments have framed these beverages through the lens of buying in-store and drinking at home, by the pool or at the beach.
Yet while the $1.55 billion (as of year-end 2019) U.S. off-premise hard seltzer category works to maintain its 212.6% growth rate, hard seltzers have been under-examined in a key space: bars and restaurants.
While the image of a patron sipping a hard seltzer by the bar hasn’t cracked the general psyche, this light, refreshing beverage has already made a significant sales dent in the on-premise space. In fact, hard seltzer generated $1.2 billion in sales in U.S. on-premise venues during 2019—with 462% dollar sales growth (exceeding growth in the off-premise space), and volume sales increased by the equivalent of 182 million 12oz cans.
And the hard seltzer market in bars and restaurants is far from saturated; plenty of untapped opportunity remains—particularly through the effect on other alcoholic beverages.
Hard Seltzer Is the Great Replacer and Supplementer
The number of consumers drinking hard seltzers in on-premise venues has risen by 73%—equivalent to around 7.5 million new drinkers between the spring and fall of 2019. And while some of these are new drinkers entirely (e.g. those turning 21), most are doing so at the expense of other alcoholic beverages that they used to commit to during out-of-home drinking occasions.
Alcoholic seltzer has disrupted the U.S. on-premise space so dramatically that weekly sales now surpass the entire pale ale beer category. Of the consumers who identify as hard seltzer drinkers, more than half (51%) said they are actively choosing seltzers over their normal drink of choice when they’re out of the house—with 52% selecting hard seltzer instead of beer and 40% doing so instead of cocktails. And expect the appetite for hard seltzers in bars and restaurants to continue to grow; nearly three quarters (72%) of hard seltzer drinkers in the U.S. on-premise think they will become even more popular in the future, while fewer than a fifth (18%) view them as a fad.
Yet while hard seltzer is cannibalizing sales of other alcoholic beverages in one sense, through another lens, a rising tide lifts other (perhaps not all) boats. As such a flexible drink virtually unaffected by seasonality (82% say it’s suitable for all four seasons), the hard seltzer category lends itself to a draft and mixer format. More than a third (36%) of consumers said they would drink it on draft—and within that population, 46% would enjoy it on its own, 35% would use it as a mixer in a cocktail and 33% would use it as a mixer with a spirit.
This spells a big opportunity for spirit suppliers who could benefit from the growth of the hard-seltzer-as-a-mixer trend. When asked which spirit they’d pair with a hard seltzer, 69% of consumers said vodka, followed by 53% for rum, 52% for tequila and 45% for liqueurs and cordials. The consumer demand is there, but the right approach and strategies from retailers, suppliers and distributors is key.
Whether in the U.S. on-premise or off-premise, hard seltzer is not going away. For drinking establishments and manufacturers of other beverages, the path forward is to find ways to work with this carbonated beverage, and to bring new spirit, beer and wine-based seltzer brands to the market.
Commenting on the massive impact of Hard Seltzers in the On-Premise, NCGA’s client solutions director Matthew Crompton said, “It’s a well-known fact that Hard Seltzers have begun to dominate supermarket shelves but up until now we haven’t really been able to quantify the effect this phenomenon has had on the nation’s bars and restaurants, with just over half of hard seltzer drinkers drinking them instead of what they normally drink when they’re out. Our newly released report shows just how wild bar visitors have gone for all things seltzer. The category is having an impact on the whole industry, with both traditional beer and cocktails being switched out for hard seltzers."
Currently, seltzers are dominated by two or three big players but with suppliers all wanting a piece of the action, competition is going to get intense very fast."
Having a solid draft offering may end up being the differentiator in winning in the On-Premise. To do this itself though will pose many challenges - retailers will need to work closely with suppliers and distributors to ensure quality, theatre of serve and correct placement.”
With Nielsen CGA’s Hard Seltzer Report, on-premise businesses and brands can not only understand the full scale of the opportunity in the category but dive into a deep analysis of sales trends, consumers’ attitudes and essential forecasts for the future. The report sets out ways for retailers, drinks brands and suppliers to take advantage of the new opportunities in Hard Seltzers. Questions? Contact Matthew Crompton for details.