Big alcohol brands are following, not leading. And where they are headed is alternative-drink categories, many of them "hard" versions of nonalcoholic beverages.
Hard seltzer surpassed $500 million in sales in 2019 according to media- and consumer-research firm Nielsen, growing more than 200% in 2019. It took a bite out of light-beer sales and contributed to a decline in the volume of wine purchases in the United States, the first drop since 1994. For the Super Bowl, Bud Light debuted Bud Light Seltzer commercials, a 5% alcohol beverage offered in four fruity flavors. California wine giant Barefoot has made the biggest investment in its 55-year history to launch four white wine-based seltzers in the first quarter of this year.
While beer sales slumped 4.6% between October 2018 and October 2019, according to Nielsen, the winners have been in low-alcohol near-beer; "hard" kombucha, coffee and tea; mocktails and other low- and no-alcohol beverage categories. Millennial and Generation Z's interest in health, wellness and a sober lifestyle has been well documented, and they are one part of why this trend will continue.
Ross Colbert, managing director and global leader for beverages for KPMG Corporate Finance, argues that big beverage companies have been slow to realize that millennials don't trust big brands to manufacture authentic, transparent, sustainable products, particularly in beverage categories.
"Big brands did not recognize these behaviors," Colbert says, "and it enabled a whole ecosystem of craft-brand owners to emerge. It wasn't until those artisan players started nibbling at the heels of the leaders that they said: 'we have a big problem.' "
Big food and beverage companies have started to get it right, he said, acquiring more authentic brands and products, supplementing their research and development teams and adding on venture capital-like capabilities to build up their ability to screen, evaluate and invest in smaller, faster-growing craft brands and businesses.
"They are playing catch-up and it's working," he says. "Big brands are starting to get back on their front foot to deliver what a consumer is looking for."
And what they are looking for is something that didn't exist just a few years ago. They are mashups, beverages that cross categories and boundaries, even blurring distinctions between energy drinks, recovery drinks, boozy beverages and those with "functional" benefits and health halos.
"The real interesting place to be is where these categories overlap or bump up against each other. Things get very blurry," Colbert said.
While these hard versions made their entry into the alcohol-based beverages market fairly recently, LatentView Analytics, a digital-analytics firm concluded that hard versions of health drinks are here to stay.
"Consumers seem to prefer these beverages because they are organic [which] helps them believe that it is still part of a 'healthy lifestyle,' a term that is not ordinarily associated with alcohol consumption," said LatentView's Midwest director Shalabh Shalabh.
Some of these new mash-ups represent collaborations between brands. In September MillerCoors teamed up with ready-to-drink cult coffee favorite La Colombe to debut La Colombe Hard Cold Brew Coffee. It doesn't always work seamlessly, said Caleb Bryant, associate director of food and drink reports for market-research firm Mintel, pointing to Pabst Blue Ribbon, which in July launched an 8% alcohol hard-coffee version of its signature beer, which experts like Bryant said might confuse the brand's identity: PBR experienced a dramatic renaissance between 2005 and 2010 for appealing to hipsters with its "retro chic."
The hard seltzers, he said, are unusual because they appeal to all ages and genders.
"You don't see that anymore, products that have near-universal appeal," Bryant said. "Growth in this area is only going to accelerate because it touches on the core consumer interest and unmet needs, especially with beer. There is this trend toward lower alcohol by volume, flavorful but lighter."
He said a third of Generation Z spirits drinkers said they have taken an extended break from alcohol in the past six months, and that underage drinking has fallen dramatically from previous years.