Is Cider Tapped Out Already?
Brewers have been juicing revenues and their bottom lines with hard-cider sales, but some are suggesting there are signs the market may be overripening. However, I remain confident in the potential for hard cider's continued growth.
Boston Beer has the top-selling brand with its Angry Orchard cider, which was primarily responsible for the 21% increase in shipment volumes it enjoyed last quarter, along with a 24% jump in depletions, or sales by wholesalers to retailers. Overall revenues were up 23%, generating a 37% rise in operating earnings.
Analysts anticipate that Angry Orchard, which launched in 2011, will grow volumes another 65% this year, making it the fastest-growing hard-cider brand, ahead of C&C Group's Vermont Hard Cider's Woodchuck brand, which is expected to see only an additional 5% growth this year. C&C's other cider, Hornsby's, is a distant third and has experienced substantial declines in volumes (down 9% in 2012), though that's expected to change this time around.
The market researchers at Rabobank anticipate those growth trends will continue, particularly because cider attracts women drinkers more than men. Women have historically been just a small subset of the beer market, but lately have been branching out into the so-called "whites" and "browns," such as vodka that's been infused with flavors as well as whisky and bourbon, which are also having a dalliance with flavor variations. The introduction of hard cider and teas finds women comprising about 55% of the market.
Yet as strong as that growth is, mirroring as it does the rise of craft brews -- not surprising, then, that Boston Beer sits atop the cask -- analysts at Canadean say this could lead to changes in expectations. Where they see cider growth rates remaining in the double-digit range, they also say they expect to see market growth itself to slow as the initial excitement over the drink flags.
I'm not so sure. This is a market niche still in its infancy, and while apple cider is the leading flavor, the folks at Mintel say pear varieties in the U.K. are making significant inroads, imbibed by 37% of those surveyed, which bodes well for this new flavor of Anheuser-Busch InBev's Stella Artois Cidre and Heineken's Strongbow brand. Cider drinkers seem interested in exploring new flavors and, like the self-described "snobs" of the craft-brew industry, are looking for drinks crafted with care.
In addition to flavors, there's also growth with premium and super-premium ciders, such as Stella Artois and Crispin, from SABMiller and Molson Coors' joint venture, MillerCoors. There's also the perception it's healthier, and as gluten-free diets grow, cider's appeal will, too.
While there's still the potential for cider to be a fad of sorts, the growth its achieved and the shelf space it's gathering indicates this niche drink is still fermenting. It may only equal about 1% of beer sales at the moment, but like the brewers who nurtured craft beer's ascendancy, we'll find the apple doesn't fall far from the tree when it comes to cider.
Getting to the core of the issue
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The article Is Cider Tapped Out Already? originally appeared on Fool.com.Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Boston Beer and Molson Coors Brewing. The Motley Fool owns shares of Boston Beer. 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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