IRI believes the potential for hard seltzer sales in Australia could be as high as $300million by 2025.
However, the data analytics and market research company cautions that suppliers and retailers can’t expect to “lift and shift from the US” and see overnight success.
IRI consultants Jarna McLean, Delphine Lambert and Lachlan Cameron led a recent virtual panel event that explored the factors driving hard seltzer’s growth and provided advice on how to maximise the opportunity in Australia.
The category is worth $2billion in the United States and is continuing to grow astronomically, with sales up 350% in 2019. There are currently almost 240 different seltzer products on shelf there, with one brand dominating – White Claw.
At the end of 2019, White Claw had a 76.2% dollar share of total seltzer, which IRI attributes to its health conscious image, broad appeal and wide reach on social media. The brand debuted in Australia at Dan Murphy’s earlier this month and is being distributed by Lion.
Lion MD James Brindley is bullish about the brand’s potential.
“Since the launch of White Claw in mid-October, we have seen unprecedented demand, which has surpassed all our expectations for the brand and delivered over $4 million in retail sales value in its first week,” he told 9Honey.
“We believe seltzers will become a significant category here in Australia as they have in the US.”
While the US has a much bigger population than Australia, its liquor market is only four times greater than ours. So, what does that mean for the future of White Claw – and the hard seltzer segment – here?
The impediments to hard seltzer growth
Hard seltzer faces an initial awareness battle in Australia. Both “hard” (meaning alcoholic) and “seltzer” (meaning sparkling water) are well-known terms in the US, but they currently don’t resonate with local buyers.
An IRI shopper panel survey in July found only 5% of respondents knew what hard seltzer was, while 55% had never heard of it.
Lambert noted this had a big impact on sales of Australia’s first alcoholic seltzer, Quincy. The brand experienced $2.1million in sales in its first 10 months, compared to Goat beer, which had $13.9 million.
There is also a lack of uniformity in the location of hard seltzers in Australian liquor stores. In the US they are available in the premium alcohol section of supermarkets, near more expensive craft beer, which is driving purchase.
In Australia they are either ranged near RTDs or ciders. However, cider sales are $0.5billion and RTDs are $2.9billion, while beer is a massive $7.2billion.
Higher prices also make hard selzters a more difficult sell to local consumers. Cameron noted that the cost of Big Mac in the US is around $7.70 Australian dollars, while a hard seltzer 12-pack is $23. In Australia, a Big Mac is $6.65 and a seltzer 12-pack would be around $50.
The RTD market in the US is also very small compared to Australia. Here it has a 15% share of the market, which means there’s greater competition for a piece of the pie.
“Market dynamics are really quite different between Australia and the US,” Lambert added.
The premium price point could be a major drawback for selzter’s prime market, as 13% of Millennials report they have stopped buying alcohol because it doesn’t fit into their budget any more. Additionally, 20% are buying cheaper products.
Some retailers have expressed concern that seltzers are too expensive.
One noted: “It’s cheaper and easier to make your own mixed spirit drinks with a $50 bottle of vodka or gin.”
However, Brindley believes seltzer’s great taste will overwhelm any budget concerns and lead to repeat purchase.
“It has cult status and what we’re seeing is a natural curiosity from consumers,” he said. “People want to understand what the hype is all about — and when they try it they love it!”
Education & trial are crucial
Cameron said that despite the impediments to growth, IRI was “optimistic about the segment”.
He believes hard seltzer’s appeal lies in its health and wellness profile, the convenience of its slimeline cans, the fact it usually contain less than 100 calories and generally has a lower ABV at around 4-5%, so it’s highly sessionable.
He also noted that variety has been a key driver of growth in both the US and Australia, with four out of six top growth SKUs being mixed flavour packs. Variety packs, for example, have been a big winner locally for Vodka Cruiser.
As for whether big brands or independents will dominate, Cameron believes “both will rely on each other”. Big brands such as Smirnoff, which recently ran a TVC campaign for its Seltzer, will help to establish the category. However, audiences will be attracted to different offerings.
“Craft beer consumers are likely to be drawn to craft seltzer brands, while RTD consumers may be more likely to go for big brands,” he concluded. “It will be interesting to keep an eye on.”