The First Drop: The White Claw Treatment

With the arrival of a brand of spiked seltzer that promises to increase mental acuity, I think it’s fair to say that the silly season has arrived at the Gold Rush.

It was one thing when White Claw became a runaway hit and, through quick copycatting and M&A, Truly (Boston Brewing) and Boathouse (AB-InBev, but they went in a different direction, see below) followed fast. As of now, there’s a runaway peloton, with White Claw and Truly accounting for about 3/4 of the category, and although there have been some successful launches recently, like Vizzy (Molson Coors), it’s been hard to carve out space beyond the top two. I’d argue that it’s not because the big beer companies haven’t reacted well — I’d argue that they have. Rather than getting bled by a million cuts, as happened when craft beer opened up as a category, the big beer companies have a single target to chase with a product that lends itself to duplication rather than nuance.

It’s not just the beer companies, though. Everyone’s getting into the act. Even Coke jumped into the game via a spiked Topo Chico. High-end fruited seltzer Spindrift went spiked; Sparkling Ice got spiked, so is Polar’s Arctic Chill. I’m not worried about these companies. Like the beer brands, they’re thinking if there’s grist out there for their brands, they might as well mill it.

What I’m concerned about is the entrepreneurial energy going into the space — the work and money and time — when there isn’t a lot of room to innovate toward a point of difference. Again, you’re chasing a single target, with a product that lends itself to duplication rather than nuance. Mental acuity would seem to be a claim that could be better associated with products that aren’t intoxicating, but that and other oddball characteristics seem to come out of the woodwork when there’s a breakout brand.

I’d like to pull back for a second from the rush to join the spiked seltzer brigades to a time when there was another breakout new category: energy drinks. Around about the time that your parents started to learn there was a drink called Red Bull, the floodgates had already opened. Both the CEOs of the big soda companies (i.e. your parents) and a new class of copycat entrepreneurs began piling into the market, hoping to get rich off someone else’s idea. Very few of them lasted; about 15 years after Red Bull, Monster, and Rockstar took off with the category, it remained largely dominated by Red Bull, Monster, and Rockstar.

In fact, it wasn’t until the past couple of years — well after those leading brands had shown themselves to be as smart from an execution standpoint as they were from innovation — that any kind of crack in the hierarchy appeared in the form of Bang and a cohort of “fitness-oriented” zero sugar, high-caffeine-and-aminos workout variants. As for the Old Glories and Grenades and WhoopAsses of the early energy period, it was clear that aggressive naming conventions weren’t enough of a point of difference to take on the first movers, and when big soda went after them, they weren’t willing to risk the franchise. After all, we didn’t see Coca-Cola Energy until 2019.

Which brings us back to spiked seltzer, and why it’s so toxic for new entrepreneurs: the big brands aren’t waiting around to try to create their own products — they’ve instead decided to extend brand equity to launch into a product category whose main strengths (fewer calories, refreshing, neutral flavor, lighter alcohol) are easily repeatable. So we’re seeing Bud Light Seltzer, Corona Hard Seltzer, Natural Light, Michelob, Smirnoff, and more: the beer guys, in other words, aren’t ready to lose their hard-won cooler space yet, not when they can still leverage pricing and marketing power to at least thin the herd of independents to just the original breakout brand, White Claw.

The next phase is going to be interesting, as the reopening of the country and the demand for a hard seltzer as a product will give on-premise operators decisions about tap handles and cooler space. Do they offer an assortment, or just stock a few? This is, after all, a product class whose top seller is the White Claw Variety Pack — and whose second place seller is White Claw Variety Pack No. 2. Will fine dining establishments draw their seltzer choice from a craft brewer? Will they hide the Mark Anthony trucks on the way in? Will bars rotate taps between flavors, or just stock black cherry like so much Bud Light? When an insurgent gets so far out in front as the face of the category, the call brand is often the product type: what happens in the bar when a Corona Hard Seltzer gets handed to a patron who requests a White Claw? You can bet the Mark Anthony lawyers are gearing up for that fight.

But when it comes to the ability of entrepreneurial brands to crack the code, I’m not sure that there’s enough mental acuity formula in the world to allow a clear path forward for startups. Nothing is absolute — Bang did make an impact, as did Harmless Harvest, which was able to get headway in coconut water after Vita Coco, Zico, and ONE were thought to have pretty much covered the category waterfront. But those upstarts rode into town years later, with a clear intent to be different, not the idea that they could win by acting the same.

So what’s surprising in some sense isn’t the fact that so many brands are being launched around spiked seltzer, it’s the fact that so many existing brands are quickly trying to extend into it.

And that’s where I start to think that, at least when it comes to booze, the big companies never, ever want to lose control of the market again.

In recent months we’ve seen another big breakout category in the guise of ready-to-drink, pre-mixed cocktails. These are higher-octane, more heavily crafted versions of your run-of-the-mill canned beverage and they, too, are poised for a breakout.

On-premise — even on tap — what will happen?