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Coronavirus takes shine off hard seltzer's moment in the sun - comment

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It was supposed to be the summer of seltzer. But, the coronavirus outbreak in the US has put paid to what analysts estimated would be a 270% increase in sales this year for one of the hottest categories in alcoholic drinks.

The leading hard seltzer brand in the US, Mark Anthony Brands White Claw, was gearing up for increased sales this year

The leading hard seltzer brand in the US, Mark Anthony Brands' White Claw, was gearing up for increased sales this year

Lockdown measures across the country will mean the cancellation of hundreds of thousands of outdoor picnics, tail-gate barbecues and beach festivals - not to mention TV parties for summer sports events such as the now-postponed Tokyo Olympics. In the space of less than a month, the outdoor hard seltzer consumption occasion has all but disappeared.

Here at just-drinks, we were expecting a hard seltzer showdown as the two runaway category leaders - Mark Anthony Brands' White Claw and The Boston Beer Co's Truly - were joined by some of the world's biggest beer brands looking for fresh growth. Anheuser-Busch InBev was perhaps the most invested of the new entrants, with a huge advertising push thrown behind Bud Light Seltzer and even a Super Bowl ad for an overhauled Bon & Viv Spiked Seltzer. Constellation Brands was also set to join the fray with the (in hindsight unfortunately named) Corona Seltzer. In Europe, A-B InBev had been looking to export the hard seltzer craze under a different name through the launch of Mike's Hard Sparkling Water in the UK.

Meanwhile, the incumbents had invested heavily to safeguard their positions and match soaring consumer demand. Mark Anthony Brands sunk at least US$250m in expanding its White Claw production footprint, while Boston Beer was already making gains on its competitors in US grocery because of its exposure to hard seltzer, according to Nielsen figures out this week.

Of course, none of this is anybody's fault. In light of our current circumstances, however, those marketing and production spends now look optimistic.

"The present environment is very unfavourable for hard seltzers," says Neil Saunders, MD of retail at GlobalData. "They are not a product that people are stocking up on in large volumes and they're also a product that people most associate with the outdoors. Given that the outdoor events and occasions are now off-limits for the vast majority of people, that's an unfortunate backdrop against which brands can promote and market themselves."

Saunders warns the real danger is if the coronavirus crisis lasts until the early summer. "That would have a very damaging impact on sales volumes," the analyst says.

When retail will return to normalcy is a topic of hot debate, and one that companies including A-B InBev sidestepped in trading updates rushed out in the wake of the coronavirus's spread from China into Europe and North America.

But, if assumptions are based on the sporting and cultural events cancelled because of COVID-19, the disease's effects will linger for some time. The Olympics, due to be held in late-July, has been shifted to 2021. Elsewhere, Wimbledon was cancelled yesterday for the first time since the Second World War - the UK tennis grand slam event had been scheduled to start at the end of June.

The coronavirus is affecting more than just prime TV consumption occasions for hard seltzer. Unemployment in the US has skyrocketed, with young people most exposed to changes in the job market. Those young people are a core consumer for hard seltzer.

Hard seltzer brands will now have to pivot their upcoming marketing campaigns to react to people spending a lot more time at home. Alcohol companies across all categories are already launching creative marketing activations that turn the lockdown measures into an opportunity to reach consumers in their living rooms. Heineken, for example, announced today the launch of live-streamed DJ sets in a new campaign for its Desperados brand. Over in spirits, Edinburgh Gin is hosting lockdown movie nights through Netflix.

Hard seltzer can do the same, with an idiosyncratic twist - maybe, we can expect the upcoming launch of a Bud Light indoor beach activation or White Claw hosting a virtual beer pong tournament. Meanwhile, the spread of video-chat apps has allowed friends separated by social distancing to get together for a drink, giving brands the ideal opportunity to insert themselves into home consumption.

Consumers may not be raising bottles of hard seltzer in the great outdoors this summer, but that doesn't mean the category will be completely in the shade.

Hard seltzer movement is here to stay - Click here for a GlobalData comment


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