Note_011: White Claw Winter

White Claw sales as an economic indicator

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People really enjoy White Claw and the myriad other hard seltzers out there.

I personally don't much care for them. I mean, they taste fine, but why would I drink that over a vodka and pamplemousse La Croix (tax reasons for hard seltzer aside)?

But people love it, and so do Wall Street analysts. Goldman Sachs said today that they think hard seltzer could be a $20B category by 2025, which would equal to a 23% CAGR from the $3.5B of sales today.

Based on the number of hard seltzer cans I see lying on the ground in my neighborhood (I live near lots of 20-somethings/a college campus), I don't doubt that.

But that's also a MASSIVE growth projection. Especially for something like alcohol, where preferences can turn on a dime.

I'd also argue that seltzers are a bull market beverage. Low unemployment, rising wages, booming stock market? Bring on the White Claw. For reference, a 12-pack White Claw sampler runs $17.99 at my local liquor store. That's $1.50 a can.

Or, you can get a 24-pack of Miller Lite at Costco for $11.79. That’s less than $0.50 a beer.

Bear beer

If White Claw is a bull market beverage, cheap mass-produced beer is definitely a bear market choice. We’ve already seen that playing out. CNN:

And the black-horse brew in this era of drinking at home appears to be good old fashioned domestic American beer. Before the lockdown, beer sales were struggling as seltzers and spirits became all the rage. (Remember White Claw summer?)

But one Anheuser-Busch director says sales of Busch Light, Miller Lite and Natural Light are bouncing back for two reasons: affordability and familiarity. These are your dad's beers, the old standbys, the unfussy comfort beers of the working class.

And New York Post:

Since the coronavirus lockdowns kicked off in March, booze deliveries have been through the roof — rising as much as 600 percent at one point, according to delivery company Drizly. But retailers specializing in upscale wines and liquors say the uptick hasn’t translated to higher profits, because customers are also gravitating toward cheaper products to protect against growing economic uncertainty.

Economists are projecting the unemployment rate to hold near 10% by the end of the year - better than it is now, but still extremely weak. Those who have jobs won't see much in the way of pay increases. Consumer behavior will certainly change given the economic circumstances - which is good for your Hamm's and Icehouse's of the world.

I could see a scenario where White Claw continues to grab market share from beer as people go out to bars less, even despite the weak economy. After all, a 12er of White Claw is cheaper than a round of drinks at the local bar.

But that’s still a tall order to ask people to pay a 3x premium to drink hard seltzer over your ol’ fashioned American yellow beer.

The takeaway:

Hard seltzer is definitely a thing that is going to be around for awhile. But consider me extremely skeptical it’s a 25% CAGR thing.


Previous notes

Note_010: The great rationalization of physical retail (June 10, 2020)

Note_009: The J-Curve is real, and it's spectacular (May 20, 2020)

Note_008: What if apparel, fashion, and luxury never bounce back? (May 18, 2020)

Note_007: Wayfair and Peloton show we're getting ready to hunker down indoors for the long-run (May 7, 2020)

Note_006: Retail may be dying, but it won't take cities down with it (Apr 29, 2020)

Note_005: Retail's ecomm first future is now - Amazon, Shopify, and the future of Neiman Marcus (Apr 28, 2020)

Note_004: Companies are advertising... just not with ads (Apr 22, 2020)

Note_003: The $5,000 dollar jacket that is the light at the end of the tunnel (Apr 19, 2020) (Apr 19, 2020)

Note_002: Patek Philippe watches and Thursday Night Football - What changes in the post-coronavirus world (Apr 16, 2020)

Note_001: Will New York and Chicago become permanent ghost towns post-Coronavirus? Um, no. (Apr 14, 2020)