Market Watch - Top Cider Brands Decline As Craft Labels Accelerate

But things aren’t quite as robust elsewhere in the hard cider category, which saw its growth slow markedly last year after a half-decade of torrid expansion. Shipments of cider in the U.S. market rose by a modest 2.5 percent to 27 million (2.25-gallon) cases in 2015, according to Impact Databank. In the previous year, volumes had soared by 64 percent, with The Boston Beer Co.’s category-leading Angry Orchard advancing 81 percent to 14.5 million cases.

The big national brands that previously dominated the segment suddenly began to suffer last year. Anheuser-Busch InBev’s Johnny Appleseed brand saw sales reach 1.5 million cases in its debut year of 2014. But in 2015, volume slipped 13 percent to 1.31 million cases. The fall-off was even more precipitous for Vermont Hard Cider Co.’s Woodchuck brand, which dropped by 14.5 percent to 1.93 million cases. Angry Orchard eked out a 3-percent gain to 14.95 million cases last year, but the days of exponential growth appear to be behind it. Yet while the major brands are slumping, most craft cider makers say their sales remain strong, held back only by supply considerations. Most are producing as much cider as they can, with much of their volume sold at farmers markets, specialty shops and craft-friendly pubs.

Nelson of Citizen Cider believes the larger category trend misses the picture. “Nielsen and IRI gather sales data from grocery stores and they’re correct in showing the national brands flattening out,” he says. “But companies like ours do a lot of business with smaller independent merchants and on draft at restaurants. Our numbers and those of many other craft producers don’t show up in the retail scans. We’re now in eight states, and we’re getting ready to enter Maine. So we feel very good about growth opportunities in this category.”

One pioneering craft brand that’s joined the ranks of the top-selling labels is California Cider Co.’s Ace, which saw sales jump 39 percent last year to 555,000 cases. Ace’s success is attributed to its willingness to shun the bittersweet apples favored by many craft producers seeking to emulate extra-dry English styles. Instead, the company prefers the same culinary and dessert apples used by the national brands, which have a sweet flavor profile that gives them broader appeal.

But Ace’s growth is also due to its expanding flavor portfolio. The line includes nine ciders, and its best-sellers currently are Ace Pineapple and the pear-enhanced Ace Perry (both $10 to $11 a six-pack of 12-ounce bottles). California Cider owner Jeffrey House suggests that the category has been leveling off for one reason. “Straight-up apple ciders can be one-dimensional in taste,” he explains. “People can get tired of them. They want more flavors—a wider variety of fruits.” Ace also has blood orange and pumpkin variants, and House has begun offering a vintage-dated apple cider aged in Chardonnay casks called Black Jack 21 ($16 a 750-ml. bottle).

Category Challenges

When Boston Beer reported disappointing first quarter results in April, chairman Jim Koch cited declines for Angry Orchard as part of the problem. The company sees the issues as temporary. “We’re developing programs to reverse the cider category decline that began in late 2015 after several years of high growth,” says CEO Martin Roper. “We believe the recent declines are not indicative of the category’s long-term potential.”

Ryan Burk, Angry Orchard’s lead cidermaker, sees some benefit in the slowdown. Boston Beer has invested in a cidery and orchard on 60 acres in upstate New York, and the company is redoubling its research and development efforts. “The rocket-ship growth we were all experiencing was pretty crazy,” Burk says. “To some people, hard cider appeared to be a fad. Now the category is stabilizing. People are solidifying their brands and deciding that cider is a real, long-term category.”

Angry Orchard ($9 to $11 a six-pack of 12-ounce bottles) hasn’t been resting on its laurels. In recent years, the brand launched flavors like Knotty Pear, which contains cardamom and is aged in white oak, and the hops-infused extension Hop’n Mad Apple. Burk notes that hopped ciders have become a trend. “We’ve found that the hops can balance the sweetness of the apples, while also driving beer drinkers into the cider category.”

Cider’s slumping growth hasn’t dampened the big brewers’ enthusiasm for the category. Greg Hall, who served as brewmaster at Goose Island Brewery before its sale to Anheuser-Busch InBev in 2011, sold his Virtue Cider Co. to the same company in fall 2015. And last December, Pabst Brewing Co. struck a deal to take over U.S. distribution for Vermont Hard Cider. Pabst also took a future option to acquire the company from current Ireland-based owner C&C Group.

Vermont Hard Cider president Terry Hopper says a distribution alliance with a big brewer was inevitable. “Large brewers entered the category with new brands and spent millions on above-the-line marketing,” he says. “Suddenly we were a smaller company, punching above our weight. It’s been a tough couple of years for us.” Pabst vice president of business development Rich Pascucci notes that the move complements the company’s beer portfolio. “It’s synergistic,” he explains. “Cider is like a flavored craft beer, and we’ll make sure it gets on the right shelves.”

Cider’s volume is currently equal to around 1 percent of the beer category in the United States, compared to a 10-percent share in some U.K. markets. Pascucci predicts that cider can eventually attain 3 percent to 5 percent of U.S. beer volume. “In a typical pub with 20 tap handles, there isn’t any reason that three to five of them couldn’t be devoted to cider,” he says.

Beyond Apples

With consumers eager for new flavors, cider’s fruit combinations will likely continue to multiply. Blackduck Cidery owner John Reynolds grows not just apples, but also plums, raspberries, blackcurrants and gooseberries on his 40-acre farm in Ovid, New York. He’s currently fermenting blackcurrants and apples together to produce a carbonated cider ($14 a 750-ml. bottle).

New federal legislation called the CIDER (Cider Industry Deserves Equal Recognition) Act, which was passed last year, lowered taxes on higher-proof and carbonated ciders. The law is expected to help cider sales. Lee Larson, cofounder and CEO of 2 Towns Ciderhouse in Corvallis, Oregon, launched his company in 2010 and has since seen business double annually, reaching 11,000 barrels last year. He’s projecting 20,000 barrels in 2016 and is busy plotting a third expansion of production facilities.

Larson believes American palates will come around to appreciate the dry styles he produces from heirloom and bitter apples. “We have 15 ciders in our taproom, some with flavors like marionberry and rhubarb,” he explains. “The driest cider made by Angry Orchard is still far sweeter than our sweetest cider. People will eventually discover the difference.”