High-Octane FMBs Are a Double-Edged Sword for the Beer Industry
An ongoing point of frustration within the contemporary American brewing industry is the vast chasm between what drinkers say they want, and what they actually buy. For example: sessionable alcohol-by-volume beers. Even though stroller dads get their Vuoris in a bunch lamenting the lack of broad availability of full-flavored, mid-ABV craft beers, the sales data suggest that they simply don’t buy those beers in meaningful volumes.
My colleague Kate Bernot has reported extensively on this phenomenon of beer market polarization, wherein the poles are stovepipes of nonalcoholic beer on one end, and 9.5 percent double IPA on the other. The other day I forwarded her a pitch I’d received for a beer brand based on the premise that there was an army of thirsty drinkers out there desperate for 2 to 4 percent-ABV beers. I could practically hear her scoff through the screen. It’s a nice idea, but there’s no there there.
The “beyond beer” market — into which I will lump NA beer, flavored malt beverages, and other malt-based, non-core beer alcoholic drinks — has bucked traditional beer trends in many ways, and when it comes to ABV polarization, it is charting a similar course. Which is to say, NA beer and high-powered hard seltzers are going gangbusters. “Beer appears to have a ‘Stuck in the Middle’ issue,” proclaimed Bump Williams in a memo to clients of Bump Williams Consulting earlier this month, citing the “momentum of the extremes” that continues to stratify fermented adult beverages by strength. The firm’s analysis of NielsenIQ scan data from all U.S. off-premise outlets through Oct. 12 shows this realignment on both ends of the ABV spectrum, and you’ve already heard plenty about how NA beer is one of the stodgy segment’s hottest growth opportunities. The growth trend clustering around the high-ABV pole is much more interesting, though. It’s a bit of a double-edged sword — for more reasons than you might think
We’ve talked before about the opportunity for craft brewers that can turn out big, honking juice bombs with bang-for-buck value propositions, and why the 19.2-ounce package and convenience store channel are great fits for that type of product. Voodoo Ranger’s magic may be wearing off, but it remains an incredibly lucrative and illustrative testament to the demand for flavor-forward sledgehammers. So it is in BWC’s latest scan-alysis (just go with it). The volumes of high-ABV beer (8 percent and up) brand families in the aforementioned NIQ slice grew 7.4 percent year-over-year, compared to 6 percent volume growth for low- and nonalcoholic beers, and collective single-digit declines for beers at dosages in between. Moreover, these beers offer serious value to seller, not just buyer — more than twice as many incremental sales dollars as low/no beer, according to Williams’ report. “[Y]et, ironically,” he wrote, “there doesn’t seem to be as much industry buzz about high-ABV beer’s sales and growth contributions at this collective level.”
Maybe that’s because brands currently winning business at the top of the malt-based potency ladder would rather keep the opportunity to themselves. After all, it’s getting pretty crowded, and craft breweries that pioneered the previous wave of fruity f*ck-you-uppers are getting elbowed out by interlopers on the new wave. While the FMB and craft segments together compose some three-quarters of the high-ABV beer market in NIQ-scanned dollars, it’s not an even split, BWC found. Hard seltzers, hard ciders, and FMBs are more than two-thirds of that share — and they’re coming for more. “In fact, hard seltzer and cider have gained the most share of high-ABV dollars since 2022 … as these segments start to lean a bit more into these elevated tiers over recent years,” wrote Williams, putting the gains at 1.2 percent and 2.2 percent, respectively. The heavy-hitters cooler at your local gas station was never craft beer’s exclusive domain, but it was a great “growth story” for the segment, to borrow some industry jargon. Now, that story has gotten more complicated.
In this era of total beverage, a few craft brewers are already making some of the beyond-beer products leading the way in this tranche. Boston Beer Company’s portfolio has a lot of problems, but Twisted Tea’s recently introduced 8 percent Extreme line extension is showing “high repeat rates” (per a Q3 overview from Bernstein’s Nadine Sarwat), and the also 8 percent Truly Unruly is basically the only aspect of the ailing hard seltzer brand showing meaningful promise right now. New Belgium Brewery (NBB) has Hardcharged Tea at 7 percent ABV to complement the rest of the Voodoo Ranger family. Molson Coors, maker of downmarket workhorse Steel Reserve (8.1 percent), is even less a craft brewer now than it was a few months ago, but that won’t stop it from working this evolving high-ABV opportunity from both angles. Earlier this year, it announced plans for Blue Moon Extra, Topo Chico Max, and Simply Spiked Bold, all in large-format cans and clocking in at 8 percent apiece. Don’t take your eye off Anheuser-Busch InBev, either: It’s quietly built The Ritas (8 percent) into a single-serve behemoth, not to mention Elysian Space Dust IPA (8.2 percent). The blueprint is there; others will follow.
Category lines blur in this slice of the market more than elsewhere, and not to smaller brewers’ benefit. Non-traditional brewers with deep pockets become head-to-head competitors. Mark Anthony Brands’ White Claw Surge and Mike’s Harder Lemonade (both 8 percent; sensing a pattern?) have helped make the firm a dominant force in high-ABV fermentables, but there are other major players that want a piece, including Sazerac (Fireball X, 8 percent) and Diageo (Smirnoff Ice Smash, 8 percent). Worse still for traditional brewers, drinkers seeking these higher-ABV beverages don’t care much about the provenance of the alcohol within. Hence why BeatBox and BuzzBallz, wine-based single-serve brands with products in the range in question, have had so much recent success carving into placements that always used to go to beer and other like beverages.
As these various beverages mix and match in America’s c-stores, craft brewers’ value proposition of local, high-quality beer will likely get lost in the sauce. (I wager it already has. How many Voodoo Ranger fans know that it’s made by NBB? How many of them know that NBB isn’t actually a Brewers Association-defined craft brewery because it’s owned by a subsidiary of Kirin? How many care?) That’s a disadvantage for those craft brewers trying to differentiate in the space, but then again, nobody promised a rose garden.
A broader concern is the long-game regulatory implications of the popularity of base-agnostic, flavor-forward high-ABV beverages. Since Prohibition, brewers have enjoyed a categorical tax advantage over their distilling counterparts as makers of the supposed “drink of moderation.” But the argument that an 8 percent hard tea is more “moderate” when it’s made with malt liquor than liquor-liquor is a very thin reed. Too thin, I think, to hold back the cumulative force of an American liquor lobby desperate to achieve equivalent taxation and placement for its deep-pocketed constituents’ liquor-based canned cocktails.
The more that fruit-punch DIPAs, cane-based turbo lemonades, and other high-ABV fermented beverages flood the c-store to compete with one another, the more prominent examples distillers can (and already do) point to belying the importance of keeping spirits-based stuff handicapped on the grounds of civic hygiene or public health. The battles for equivalency happen at the statehouse level, and they’re slow going, but they are going. The polarization of the FMB market doesn’t bode well for beer-industry operators counting on preserving their special status in the halls of power. It’s a nice idea that brewers’ high-ABV beers are inherently more deserving of favorable treatment than liquor-based canned cocktails, but there’s less distance than ever between the two. The growth of big, boozy FMBs that drink like both is filling in the gaps fast.
🤯 Hop-ocalypse Now
The 2024 election is over, and Republicans are headed back to the White House early next year with control of the Supreme Court and the Senate in hand (and maybe the House of Representatives, too, by the time you read this). What one thing is certain: Future Vice-President JD Vance has an absolutely bizarre relationship with malt-based beverage alcohol. Just a couple months removed from his sweaty reception of a Happy Dad hard seltzer 12-pack from YouTube’s NELK Boys on the campaign trail, on the Monday prior to Election Day, he posted a video calling the perfectly normal Old Style Lager in his hands “a 6-pack under the leadership of Kamala Harris,” and compared it unfavorably to the multi-story fermentors painted with the Old Style logo nearby. Those structures, he said, constituted “a 6-pack under the leadership of Donald J. Trump.” The f*ck are you even talking about, man?
📈 Ups…
It’s a Massachusetts craft brewing merger with Lord Hobo Brewing and Lone Pine Brewing tying up in a new, private equity-backed “platform”… It’s an Iowa craft brewing merger (ish?) with Back Pocket Brewing acquiring Peace Tree Brewing’s intellectual property… Congratulations to Salt Lake City [checks notes], yes, the one in Utah, for boasting the cheapest average airport beer price in the country…
📉 …and downs
Anheuser-Busch InBev laid off 40 workers across two Wicked Weed facilities in Asheville, N.C. citing Hurricane Helene-related challenges in a brief email earlier this month… Revolution Brewing will close its original brewpub location in Chicago after 15 years, affecting jobs of 44 full- and part-time workers… After 30-plus years of ownership, Molson Coors abruptly announced plans to close Wisconsin’s original Leinenkugel plant where Teamster workers struck for 51 days last year…
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