As hard kombucha continues to top “best of” lists for 2020’s most popular alcoholic drink, brewers must find ways to differentiate themselves in a crowded marketplace.
“If you’re thinking about coming into hard kombucha, my main point to you would be you’re not in the kombucha business anymore, you’re in the alcohol beverage business now,” says Bart Watson, chief economist for the Brewers Association (a trade group for small craft brewers). “You have to think about this competition more holistically than just within hard kombucha because, as we’ve seen in recent years, customers don’t think in neat categories as they used to.”
The percent of Americans who drink alcohol has remained fairly static over the years (Gallup polls indicate between 60-70%), but what they’re drinking has changed. Beer is losing favor with consumers, and other hard, fermented drinks — like kombucha, cider and mead — are now climbing in the craft brewing market.
“If (people) are drinking more of one thing, they’re drinking less of another,” Watson says. “You’re not going to add to the drinking, you’re just going to have to take from someone.”
Watson shared this data during the “Trajectory of Craft Brewing” panel at the Kombucha Brewers International (KBI) Virtual KombuchaKon 2020. Hannah Crum, president of KBI, said kombucha is a craft beverage, too. She added: “Hard beer has paved the way for hard kombucha. It’s opened up people’s idea to the concept of craft, and kombucha can thankfully take advantage of people’s knowledge of craft.”
Watson suggests four lessons from the craft beer world that hard kombucha brands can use to grow.
1. Consumers Crave Experiences
If you want to succeed in the hard kombucha industry, you must have on-premise sales.
Sales of craft beer are about 25% on-premise, and are especially strong in experiential channels — tasting rooms, music festivals, sporting events or even ax-throwing clubs. These are entertainment-driven settings where people can experience an event while drinking (but watch those axes!).
“This means they’re not just going to drink, but going to do something and drinking while doing it,” Watson says. “Many of the reasons that people say they go (to a brewery) is less about the product and more about the experience you provide.”
Over 50% of craft drinkers purchased more of a product after visiting the tap room, driven by having had a good experience.
“Kombucha tap rooms are going to be part of that experience that helps build the market and educate consumers about the product,” he adds. “This has been a challenge for a lot of distributors, but I actually think this is an opportunity for a smaller segment like kombucha.”
2. Go Where the Consumers Are
Craft brewers are most successful in bigger cities where there’s already a base of craft drinkers. The growth in the craft beer industry is coming from these concentrated geographic areas.
The craft beer market has steadily expanded over the last 10 years, but growth has been strongest in the West. Kombucha has followed a similar pattern..
“The West is still the strongest place for growth, even if it’s in the highest market share,” Watson says. “Most of the growth has continued to come from the densest market.”
3. Consumers Trade Up
Craft hard kombucha will sell better than a value version. Over the last 30 years, consumers have been purchasing more craft, imported and super premium beer compared to simply premium or value versions. Drinkers are “upcycling” their preferred brands.
“This is true in a lot of industries right now, where they’re not necessarily drinking more product, they’re drinking better,” Watson says.
In the overall beer market in 2015, craft beer makes up over 40% of the dollar volume, while premium beer (like a BudLite or Miller Coors product) are 35% and value brands are 20%.. Compare that to the 1980s, when premium beer peaked at over 60% of the volume, value beer was around 30% and craft was under 10%.
4. Go High or Low with ABV
When making a hard kombucha brand, think about your alcohol levels. Alcoholic beverages with higher or lower alcohol levels sell better, what Watson called “a hollowing of the middle.”
Sales are higher for drinks below 5% ABV or above 7% ABV. This is part of the reason hard kombucha, cider and mead have climbed in sales, since the drinks traditionally have higher alcohol levels.
“This is a market that’s competitive and getting more and more competitive, but at the same time, there’s more and more niches popping up as the consumer base diversifies and more people look for a specific product,” Watson says.