White Claw, Truly and other hard seltzers could take a hit from Sober September

September could be a long, difficult month for hard seltzer brands if young consumers make good on their intentions to participate in Sober September, say UBS analysts.

Hard seltzers, sparkling water spiked with alcohol, have had a busy summer, with recent media reports of a shortage of the popular White Claw brand.

Sober September, a month-long abstinence from alcohol, could put an end to the good times if all of the respondents to the latest UBS Evidence Lab survey make good on their plans to start autumn off with a dry spell.

UBS polled 1,055 U.S. alcohol drinkers, with more than a third (34%) saying they were “very likely” to participate in Sober September this year. Another 19% said they were “somewhat likely” to participate.

Last year, a quarter of respondents said they participated. Four percent said they had “partial participation.”

While UBS acknowledges that respondents’ claims of past participation don’t necessarily predict behavior this month, “the sober-curious movement appears to be gaining steam among U.S. drinkers and could impact beverage alcohol demand.”

Demographically, those who say they will participate skew male, which analysts found surprising. Less so was the fact that many with intent to participate are younger and in the Northeast or on the West Coast.

“In the context of categories, we believe that the age and regional exposures present a modest risk to the explosive growth trajectory of hard seltzer, given the category’s younger skew and relative strength on the coasts,” UBS analysts led by Sean King wrote.

Truly, a hot hard seltzer that launched in May 2016, is a Boston Beer Co. SAM, -4.05%  brand. Other brands in the company’s portfolio are Sam Adams beer, Twisted Tea, spiked iced tea, and Angry Orchard, a brand of hard cider.

MarketWatch reached out to Boston Beer for comment but didn’t get a response by press time.

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Boston Beer stock is down 3.7% in Tuesday trading, but up nearly 60% for the year to date. The S&P 500 index SPX, -0.13%  has rallied 18% for 2019 so far.

“While it is difficult to predict the impact on a category growing at healthy triple digits, we see incremental risk for Boston Beer given its +30% sales exposure to hard seltzer and the company’s legacy Northeast regional stronghold,” the UBS report said.

Boston Beer was downgraded to underperform from hold at Jefferies last week, not based on Sober September, but rather on greater competition in the spiked seltzer category, which analysts forecast will grow to $3 billion to $4.5 billion over the next two to five years.

“[L]ow brand loyalty, coupled with a wave of new entrants, suggests an increasingly competitive landscape,” Jefferies said.

The note puts brand loyalty at about 36%, with the willingness to try new brands at about 90%. Natural Light, an Anheuser Busch BUD, -1.58%  brand, has launched its version of a hard seltzer along with Pabst Blue Ribbon and many other brands.

Jefferies also cut its price target to $332 from $360.

The Distilled Spirits Council, which represents marketers and producers of beverages like rum, tequila and bourbon, say that consumers are drinking higher-end beverages, not necessarily more of them.

“Whether it’s April Alcohol Awareness Month or Sober September, we have always encouraged adult consumers who choose to drink to take some time to reflect on their alcohol consumption to ensure that they are staying within moderate drinking guidelines,” the group said in a statement sent to MarketWatch.

“Alcohol can be enjoyed as part of a balanced adult lifestyle, but responsible drinking and moderation are essential.”

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