Dive Brief:
- AB InBev’s Anheuser-Busch is planning to invest $50 million in its St. Louis campus, which will include the addition of a new dedicated seltzer building.
- The company said it will upgrade one of its can lines and provide the new seltzer building with systems and equipment for making popular products such as Bud Light Seltzer and Michelob Ultra Organic Seltzer. The brewery also is being outfitted with equipment that “allows for the streamlined addition of flavors to the seltzer liquid.”
- The building spend is part of an announcement made by Anheuser-Busch in early 2021 to invest $1 billion during two years in its facilities
Dive Insight:
As consumers trends evolve, food and beverage giants are preparing for the future by expanding existing facilities or building new ones in order to meet the growing demand for their most popular products.
Nestlé recently announced plans to spend $675 million on a factory in Arizona to make creamers. Mondelēz International said in November it would invest $122.5 million over three years to boost capacity at a Virginia facility where it makes Oreos. And J.M. Smucker said that same month it is spending $1.1 billion to build a new manufacturing facility and distribution center in Alabama to produce its Smucker’s Uncrustables sandwiches.
For hard seltzer, the category has faced a rough awakening after posting triple-digit growth for several years.
Boston Beer saw billions wiped off its market cap last year after it admitted to overestimating demand in the category. Constellation Brands CEO William Newlands said in October that the hard seltzer landscape “has shifted considerably,” prompting the maker of Corona Hard Seltzer to lower growth expectations for the product and record a “sizable obsolescence charge” of $80 million. And Molson Coors announced in July it was discontinuing Coors Hard Seltzer in the U.S. to focus on more promising offerings.
Despite the slowdown in sales, there is no sign hard seltzers are going away anytime soon. The category remains a lucrative one for beer giants such as AB InBev searching for growth.
Last summer, Boston Beer CEO Dave Burwick noted there were more than 200 seltzer brands on the market. With the pace of growth slowing, brands on the periphery are likely to disappear with other prospective products forgoing a launch altogether, leaving a few top offerings to dominate the marketplace.
The fact that Anheuser-Busch is willing to spend $50 million in part to expand and improve its seltzer production shows the company’s confidence in the segment and that it expects to be a force around to battle industry leaders like White Claw and Boston Beer’s Truly.
As of early last year, Bud Light Seltzer was in third place in the category with a 9.7% market share, with no other seltzer brand above 3%, according to Evercore ISI. Bud Light Seltzer has quickly grown into a formidable market player since its launch two years ago, and the company wants to make sure it can keep up with demand for the offering and the other beverages it sells in the space like Michelob Ultra Organic Seltzer.
One telling point Anheuser-Busch makes in its announcement is that the company is investing money to make sure it can easily incorporate new flavors into its product line. This could indicate that more than other categories, consumers who partake in hard seltzers demand new flavors to keep them coming back. Last fall, for example, Anheuser-Busch sold a Fall Flannel variety pack that features three new flavors — Pumpkin Spice, Maple Pear and Toasted Marshmallow — and fan-favorite Apple Crisp.