Cider Craft

By Chris Furnari

There’s an old Irish proverb that goes something like “when the apple is ripe, it will fall.”

If recent statistics are any indication, the time is ripe for U.S cider makers, and a hail of apples is on the way.

Sales of U.S. hard cider tripled over the five-year period from 2007-2012, reaching about $600 million, according to market-analyst firm IBISWorld. While that’s a fraction of the $10.2 billion in craft beer sales from 2012 – craft beer being the obvious analogue to cider – many of the dynamics are the same for the category and it’s starting to get even more attention, particularly as it gathers momentum among consumers.

David Sipes, a senior brewing manager and cider maker at Boston Beer Company – which produces and markets the Angry Orchard line of hard ciders – said that craft beer drinkers and cider drinkers share many of the same qualities.

“Much like craft beer drinkers, cider drinkers are interested in exploring new flavors and are looking for beverages crafted with care, integrity and high quality ingredients to please their adventurous palates,” he said. “We’ve found that fans of Angry Orchard are looking for an alternative to wine and beer and enjoy Angry Orchard on its own or even as a cocktail ingredient.”

Since rolling out nationwide last April, Angry Orchard has grown to become the second-biggest cider brand in the U.S., behind Woodchuck Hard Cider, owned by the Vermont Hard Cider Company. That company was bought by the Irish cider company C&C group for $305 million late last year – a payday that indicates the attention the category is getting.

While Woodchuck has been around more than 20 years, Angry Orchard is fast taking advantage of its parent company’s distribution network and reputation. The brand now makes up about 38 percent of total U.S. cider sales.

Vermont Hard Cider CEO Bret Williams said he isn’t too concerned about the competition’s growth, attributing it to category expansion.

“They are driving a lot of awareness for cider and putting it on draft in places we haven’t been able to before” he said. “In the short term, there are some pain points, but for the long term, it is great for the category.”

Case in point, sales of the 22-year-old Woodchuck brand were also up in 2012, to the tune of 24 percent. The company paced the cider category with 2.8 million cases sold, and growth was consistent with what is happening category-wide. Symphony IRI numbers for the 52-week period ending March 24 peg total dollar sales in U.S. multi outlets and convenience stores at $122.5 million for the top 20 cider brands, up 97 percent over a year ago.

So why is cider growing?

Williams said that craft beer and cider share many similarities: Small batch sizes, innovative product offerings, go-to-market strategies, familiar package sizes and access to retailers through a well-trained beer wholesaler network have helped the category grow alongside craft.

And while those factors have contributed to the surge in sales, both Williams and Sipes believe there is plenty of room for even more growth.

“We’ve found that hard cider is relatively unknown – some people don’t know what hard cider is, how it’s made, whether it’s carbonated or not, or even if it’s actually a beer,” said Sipes. “There’s a lot of room to educate drinkers and retailers about the history of cider, the cider making process, and different styles.”

That education process should get easier as giant global companies like Anheuser-Busch InBev (AB-InBev) and MillerCoors begin their own forays into cider with offerings like Stella Artois Cidre and Crispin. They’re also pushing further into the larger “apple space,” with hybrid beer offerings like Shock Top Crisp Apple and Redd’s Apple Ale, products that could help draw even more mainstream attention to cider.

“I think it can be very big,” Paul Chibe, the vice president of U.S. marketing for AB-InBev, said during a recent industry conference. “I would look at how much can we get from white wine. It is drunk for refreshment and we have an opportunity to serve that consumer occasion and need.”

Chibe wasn’t the only presenter to bring up the category, either. At the same event, Michael Binstein, the CEO of retailer Binny’s Beverage, peered into his crystal ball, advising attendees not to “take their eye off the cider category.”

“It is a sleeper,” he said. “It is growing and I think it is a healthy sub category because it casts a wider net of customers.”

That’s why more craft beer companies like Boston Beer Company, Stevens Point Brewery – which produces and markets Ciderboys Cider Co. products – and Craft Brew Alliance – which recently launched Square Mile Cider Company and also markets the Redhook, Kona and Widmer Brothers beer brands – are jumping on the bandwagon.

There are some headwinds: there’s a confusing tax code issue for cider producers that can inhibit some innovation, as its beer and wine-like attributes cause it to float between various regulations. When the alcohol-by-volume of cider exceeds 7 percent, it’s taxed like wine, which carries a higher penalty than beer. And to complicate things further, when carbonation levels in the beverage reach a certain level, a ‘champagne-like’ luxury tax is also enforced. Smaller, innovative cider makers experimenting with the same types of barrel-aging techniques popularized in the craft beer space are pushing for legislation that would change the law and allow them the flexibility to make 8.5 percent ABV offerings without the additional penalty. Proponents of the CIDER Act say that would encourage more variety.

Beyond that, the growth of cider is still taking place largely in the shadow of craft beer, and it is fighting for many of the same tap handles against a 2500-sku Hydra of craft beer brands. Beer Marketer’s INSIGHTS estimates that total cider volume in the U.S. is about 7.5 million cases, while total beer is about 2.7 billion cases.

Still, as consumers try to fight their way through the many new beer styles and concentrations, the idea of a nice, dry cider might be just the ticket. It’s certainly been that way in Europe for many years, where cider represents a much more significant portion of the beer market.

And just as craft brewers looked to Europe in developing a “better beer” category that has seized so much of the share of premium brands in recent years, Williams thinks that cider will continue to grow to parallel European tastes as well.

“It’s all about education,” he said. “Cider is, in a lot of ways, where craft beer was 20 years ago. It has to evolve over time and there is no magic bullet. I think one of our biggest challenges will be convincing on-premise retailers to carry more than one cider option. There is so much upside potential to earning one or two draft handles, could you imagine if [cider] had 10 in some accounts?”