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Why the hard seltzer craze is here to stay

Andy Serwer joins Myles Udland and Brian Sozzi to discuss why the hard seltzer trend is here to stay after experiencing significant growth during the pandemic and carving out space for itself due to its help in eroding beer sales.

Video Transcript

MYLES UDLAND: Certainly, no beverage defines the summer more than a hard seltzer. Now, that industry has hit some rough times, let's say, after a stern warning on growth there from Boston Beer a couple of weeks ago. But Yahoo Finance Editor-in-Chief Andy Serwer in his latest newsletter explored whether this beverage remains the it drink, Andy, of the summer. And I think maybe you're a little more constructive than some investors have been on where exactly hard seltzer stands today.

ANDY SERWER: Yeah, I mean, I guess it's a question of degree, Myles. Because after that Boston Beer earnings report, which was a week ago last Friday, you know, immediately, headlines came out saying, oh, the hard seltzer trend is over. Well, it's very much not over. I mean, first of all, you're just going against, like, incredibly sick comps, right? I mean, 2019 was the hard seltzer summer, the White Claw summer, of course, and then last year as well because it became part of the stay-at-home trade. And when restaurants and bars shut down, people went to convenience stores and picked up a pack of hard seltzer and brought it home. So I mean, the growth was just off the charts.

And so now you're getting comps of, like, 4%, and people are crying all doom and gloom. And plus, you have all kinds of saturation going on. So you got a lot of new products. You can see some of them there on the screen. And the thinking was-- is that as people went back to work, yeah, there is going to be less consumption of this drink, and people are going to go to bars and they're not going to be drinking these so much. And there is some of that. But the market share and the growth and the way it's eroded beer sales is here to stay.

BRIAN SOZZI: Yeah, this stuff is great, Andy. It tastes pretty good. I mean, one carb in some of this? I mean, this is really tailor-made to all of us. But you also looked at White Claw, its founder. Really, he has been-- he's been a force in this industry.

ANDY SERWER: Yeah, it's just a fascinating story there, Brian, a guy named Anthony Von Mandl from British Columbia who got his start with high-end wineries. Then his first brainstorm was Mike's Hard Lemonade. And that thing, of course, took off, made him rich. But White Claw made him mega-rich.

I mean, he only started it five years ago, but basically, you know, it's defined this entire category. At one point, they had in excess of 60% market share in the United States. It's come down a little bit, but they're still far and away the number one drink in the category. Truly, which is the Boston Beer product, is number two. That's sort of the Coke and Pepsi, if you will, of this business. But you know, he's kind of a little bit reclusive and apparently an expert marketer. And he's known up there as Tony Boloney for his gift of gab.

MYLES UDLAND: I mean, there's nothing this story needs more than a guy named Tony Baloney to jump in at this point in the proceedings. Andy, I guess, the, really, question here for hard seltzer, and I think this is where the Street disliked Boston Beer's conversations so much, is is it a full new category, or is it a complement to beer? Is it a complement to mixed drinks, a complement to spirits? I think people want it to be a fully-formed fourth category, but you know, Mike's Hard came up, Smirnoff Ice came up. And--


MYLES UDLAND: --you don't really hear about-- right? You hear about that on college campuses for jokes sometimes, but they kind of came and went. And I still think it's a very open question whether hard seltzer becomes entrenched as this fourth, you know, spirits category.

ANDY SERWER: You're probably too young to remember Zima, Myles--


ANDY SERWER: --coming from Coors. Remember that stuff? Oh my gosh, that was something. So, but you raise an excellent point, and that is that in a way, it is a unique and discrete category. But on the other hand, it really speaks to this blending of all beverages. Because what you're looking at is, you know, tequila-infused hard tea with seltzer and peach-flavored agave vodka with, you know, donut-flavored vodka. I saw it. I was like, come on, man. That's something only Brian Sozzi could love-- or a waffle-flavored one.

You know, so everything is getting all mixed up. And you know, the testing, the shelf space-- and Brian, I know you've written about this-- it's just crazy what's going on out there. And if you go to a store and you're looking what to buy, I mean, scratching your head does not even begin to describe what many consumers are going through right now.

BRIAN SOZZI: It's really two ends of the market here, Andy. You have so much strength that is still in that top end of the hard seltzer market. We just had-- we just talked to Diageo's CEO last week, and they're seeing a booming business in tequila. It's pretty fascinating to see.

ANDY SERWER: Yeah, and you know, sure, there's all kinds of things like that. I mean, there's bespoke and boutique and, you know, $3,000 gins all over the place. And at the same time, though, the legacy brands, the sort of generics are tough.

I mean, you know, I cited in the story-- this was a discovery to me, you guys-- Bud is not a top-five beer brand anymore, which is just shocking to me. I mean, most of my life, it was number one. Then slowly, you know, the light beers took over. But now, you know, there's Corona and other things that have gotten into that top group. So it is a category that used to be staid that is anything but right now.

MYLES UDLAND: Yeah, well, I mean, I had a couple Buds this weekend. It was fine.


MYLES UDLAND: I had a Bud Light, as well. Everything was fine. Andy, I mean, we must ask, what has been your beverage of choice this summer?

ANDY SERWER: You know, it is all over the place. I have to say, I'm not a big hard seltzer fan. I like seltzer, I like liquor, but I don't like combining them.


ANDY SERWER: I know. My kids are like, OK, boomer. You know--


ANDY SERWER: If there ever was an OK boomer moment, that was it. But I do like old fashions. I've been drinking-- you know, I've been experimenting with Scottish ales. I'm like every-- I seem them, I buy them, and it's a new thing.


ANDY SERWER: I'm fickle, too, now. I really am.

MYLES UDLAND: Yeah, but I was going to say, if I had to guess, you know, I would have put you down for bourbon and seltzer, so it sounds like that's-- sounds like we're in the same-- it sounds like we haven't changed too much up there.


MYLES UDLAND: And hopefully someday soon, we'll have one in person. All right, Yahoo Finance Editor-in-Chief Andy Serwer, thanks for stopping by.