Hard teas and ciders also burst on the scene a few years ago, also seemingly out of nowhere. While there's a long historical tradition of hard cider, it was Boston Beer's Angry Orchard that really set the category on fire, virtually stealing most of the market from one-time industry leader, Woodchuck Hard Cider.
Part of the appeal of hard cider was its ability to bring new drinkers to the market. Two years ago, the analysts at Rabobank reported that the industry had grown by half over the previous decade, with more than half of those drinking it being women. Euromonitor was looking for domestic cider sales to grow 10.6% annually through 2016, compared with a 1% decline in beer sales.
Brewing up trouble?
The 6% increase in depletions Boston Beer has recorded over the past three and nine-month periods has been the direct result of growth in its Angry Orchard portfolio, supplemented by its Twisted Tea brand of hard iced tea. Hard soda could very well be a new, successful portfolio expansion.
But there are still risks, namely that it's soda. As the tobacco industry found out when it started using cartoon images such as Joe Camel in its advertising, it quickly was accused of trying to lure kids into smoking. A similar argument could easily be made with the addition of alcohol to soda.
It has certainly been the case with energy drinks that were infused with alcohol, such as Torque and Four Loko. The challenges these caffeine-infused drinks produced, particularly around college campuses, caused them to come under regulator scrutiny, and they've all but disappeared from the market. Four Loko, which is owned by Phusion Projects, changed its formulation to keep it on store shelves. Phusion is also reportedly a contract bottler for Small Town's hard soda.
Boston Beer has had some early success with its Coney Island brand, which is why it has expanded the flavors to now include ginger ale and orange cream ale. But as the craft-beer industry is discovering, the proliferation of so many breweries has watered down the results for the industry's leaders. The danger for Boston Beer is that hard soda will also dilute the strength of its hard cider, a trend that could cause profits to go as flat as a can of open beer.
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The article Does Boston Beer Co Inc Have to Worry About Hard Soda? originally appeared on Fool.com.
Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Boston Beer. The Motley Fool recommends Anheuser-Busch InBev NV. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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