On this episode of the “VinePair Podcast,” hosts Adam Teeter, Joanna Sciarrino, and Zach Geballe dive into some of the surprising success stories behind the rise of vodka-based hard seltzers. In particular, the three ponder the curious fact that two of the most successful brands on the market are owned by a beer giant and a wine giant, not any of the big spirits multinationals. Tune in for more.
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Adam Teeter: From VinePair’s New York City headquarters, I’m Adam Teeter.
Joanna Sciarrino: I’m Joanna Sciarrino.
Zach Geballe: In Seattle Washington, I’m Zach Geballe.
A: This is the VinePair podcast. Joanna, what have you been drinking?
J: That’s so funny. We, I say we here, haven’t had much in the past week — nothing too much to speak of. I did have a Ghia Lime & Salt that I liked, and I got through the office.
A: The thing is Lime & Salt? That’s what it’s called?
J: It’s their Le Spritz, but the flavor is Lime & Salt. I think it’s meant to be inspired by a Margarita. It’s pretty tasty. I don’t know, man. There’s a lot of really terrible N/A products out there. It’s nice when you have one that isn’t.
A: Having not tried any of the Ghia stuff, can you give it some sort of context for me? What are we talking about? It’s not just a seltzer, right? There’s something else going on there?
Z: They have a bunch of stuff.
J: They have a bunch of stuff now. They have their, like, main spirit or whatever, I guess it’s called, and it’s quite bitter. Then they took that and made a line of spritzes — canned spritzes. They have the original one and then they have a ginger one, which has a good fresh ginger flavor, and then this lime and salt one, which has a little bit more sweetness that I like compared to the original flavor.
A: That’s good. It hasn’t been for me, but it’s probably one of the more well-known ones, and it’s all over the place. You see it everywhere. Naomi’s liked it every once in a while when she’s had it. I think it’s the one to try, out of the big brands, I think. It’s not even a big brand. It’s just small and well known.
J: I honestly don’t know at this point. I don’t really remember when they launched, but I feel like it’s been around for a while compared to some of these other brands.
A: True. I think they’ve just done social media really well — very well.
J: It’s very social media-friendly.
A: What about you, Zach? Totally.
J: Sorry, go ahead — Some more interesting drinks, please.
A: That’s true. It’s like, “Moving away from Ghia.” Come on, Zach.
Z: First, to speak on a follow-up as to something that Joanna was talking about, the fine folks at Fever-Tree sent me some product samples, including the pink grapefruit that Joanna raved about, and I can agree, it’s delicious.
J: Us too.
Z: Also, my son is very obsessed with the Sicilian Lemonade. He drank all of it that they’d sent us, which to be fair, wasn’t very much, and now he’s like, “When can we get more?”
A: Oh, that’s cool. I have to try that then.
J: They’re at the office. They’re very good.
Z: You say that, but will you want to be buying your child a $4 6-ounce bottle of lemonade? I don’t.
A: Hey, man, he’s bougie. He’s bougie.
J: We all know Saul has the most expensive taste of all.
A: I thought you palate-trained him.
Z: That’s true. I am reaping what I have sowed.
A: That’s true. What are you trying to say now? It is what it is. If there were more Country Time-
Z: Yes, I know. Minute Maid, get the f*ck out. Then I was just recently, as mentioned on the last podcast, down in Portland, just for a brief evening. I was teaching a wine class down there-
J: Oh, nice.
Z: Which was cool. I got to do some fun side-by-sides of some current vintages of some wines and some older bottles. It was a chance to talk about how wines change as they age, and explore that with the attendees, which was fun. Those weren’t too great, but actually, I think, to me — the interesting things that happened to me on the trip. I got to go pop into the Multnomah Whiskey Library, which I had not been to in a number of years. I had gone, not that long after it opened, and then I wasn’t even fully aware that it had changed hands. It was under a new management. While it still very much has the same vibe, which if you think of a place that calls itself a whiskey library, you’re probably picturing about the right deal if you haven’t been there — really tall shelves with lots of bottles and one of those library-esque or stacks-esque ladders that rolls around, et cetera. I was impressed and intrigued by the relative — It was less dark and “you must be deeply contemplative of your drink at all times,” which was the vibe the last time I was there. It was a little lighter, not bright or anything, but a little lighter. It felt a little more lively. Not everyone was speaking in hushed tones, which was nice. It was cool. I had a fun cocktail, which, me being a dad, I could not resist what I thought was the best pun on the cocktail list, which was the Fennel Countdown. It was a fennel-infused, I think a rye base. It was a Whiskey Sour with the fennel note in particular.
J: That sounds good.
Z: Yes, it was good — some little fennel pollen sprinkled on top. Nice. It was made with an egg white as a proper whiskey sour is, and then with the fennel pollen sprinkled on top, which was cool. It was a tasty drink. I had a nice time. Yes, I was just going to say, though — We don’t have to have a long conversation about this, but I was really struck. It’s been striking to me when I’ve been in downtown Seattle recently, but it was striking to me getting off the train in Portland and walking from the train station to my hotel, which is about a 10-minute walk. It’s just like, there was so little going on at 1:30 p.m. on a, whatever, Wednesday afternoon. There’s very few people out and about. It was quiet. A lot of the storefronts were shuttered, like things had closed and not reopened. I was thinking about how — We’ve talked about some of this on the pod, but I think we only grasp it in some ways. I suspect that for you guys, being in New York has blinded some of this, like, so much of the effects of Covid and how it’s shifted where people live, where people work, and how they spend their time. A lot of these mid-sized cities have not. Their downtowns have not rebounded, especially in a place like Portland, in a place like Seattle, where in certain ways the cities — and I think for good reason and with well-intentioned — We’re working to make it more difficult to drive and park in their downtown cores. It’s made it even less appealing for people who don’t live right downtown to come into downtown, whether it’s to dine or to go to shows or to shop or whatever. It was just really striking and it’s sad. It is just what happens. These downtown areas tend to have, especially in mid-size cities, boom- and-bust periods as things get more expensive and people are driven away by various things, and then suddenly it becomes an underpriced part of the city and people might move back both their business or they might live there. It is a thing that happens. It’s a little depressing. I can’t lie. It was a little hard to see so many just things closed up, and places I had been in the past, or just seeing like, you’re here where I am in the main hub of downtown Portland and every few, certainly every few storefronts you’re like, “Here’s a place that’s not open.” It’s not because it’s not open at that moment, there’s just no active business in this storefront.
A: Again, this is a totally different conversation, but I do think one of the things that I’ve noticed about it is that it’s really shown to me — I guess I’ll use this as a segue to talk about what I drank this week, because I saw this in Miami, too, actually. It’s really shown to me how bad our commuter infrastructure is. Basically, what I was learning from people that I’m — so I was in Miami for the majority of last week for meetings with some of our partners who have their offices down there, and a lot of the employees had decided, “Oh, this is the time to move 50 minutes up the coast and get a really nice house with a pool and whatever that’s a lot cheaper than the surrounding area of Miami.” So they’re moving to — I don’t know, places like Delray Beach and stuff like that. I met one woman who literally moved to Orlando and then there’s — not the Orlando person, but in Delray Beach it’s like, “but the traffic really sucks.” It’s totally unpredictable. There are certain days where the commute that’s 50 miles could take an hour, and there are certain days where that commute could take two and a half hours. Whereas, like, at least in New York, for example, right? If you move out to the suburbs, you can rely on the Long Island Rail Road or New Jersey Transit, or whatever, to bring you back in the city at a very reliable pace and time, et cetera. I think a lot of people have used how unreliable their commutes have become now to be like, “Well, I’m not going to come into the office.” That’s been a real bargaining point for a lot of employers it sounds like to me. It’s like, “Yes, I guess we can’t now ask you to sell your house and come back into the city and we also — It is going to be super frustrating if you miss a meeting at 10 a.m. because there was a lot of traffic on the freeway. It is probably better if you just join on Zoom on time.” I’m definitely hearing that. I think there will be some springback. We were saying that we think it’s going to be, like, in five or six years. I think the generation that’s going to get completely f*cked is this Gen Z generation because a lot of them are not working in offices. I think it’s going to really mess with their careers. There’s going to be issues about this and think pieces about it for the next 10 years, about what happened to this group of people that ended college in Covid and then moved into the workforce and didn’t build professional networks because they were working from home. People just don’t have the same time to mentor and things like that on Zoom. The mentorship time a lot of us got in our careers was that coffee that your boss had a quick moment to grab with you, or the lunch you tagged along on, or just walking to the subway together or something. Those informal meetings are really powerful and they’re not happening anymore because no one’s going in. I think that’s going to be really interesting to see, but Miami — I don’t know if I like Miami. I really don’t. The weather was great. I know we said on the podcast last week that the Major Food Group-ification of restaurants is coming. This is, like, to the thousandth level.
J: Oh, it’s there.
A: I went to a restaurant where there were dancers during the restaurant — in the restaurant. Yet, they’re also selling bottles of Screaming Eagles and DRs. It was a really weird place. I did go to one really amazing restaurant that was recommended to me called Macchialina that was really tasty Italian in a little house, or something. They didn’t have the “Untz, untz, untz” vibe that I think a lot of Miami restaurants–
J: The opulence.
A: They had an amazing, amazing wine list. I had a Champagne Charbaut, which I love, which was a lot cheaper than it is here, which was nice, so I can see the appeal. Then the thing that’s really interesting that’s happening in Miami is a lot of places are doing Tiny Teenies. They have these — I saw it at four different places — this little section and it’s, like, “Tiny Teenies,” and they’re $8 to $10. Let me tell y’all, they’re serving them in Nick & Nora glasses that New York restaurant bars are serving them in that are the same size. I’m like, “We just don’t call it a Tiny Teeny in New York. We just charge $18 for it and in Miami, because it’s in a Nick & Nora, it’s like this is a Tiny Teeny, and it’s $8.” That was really interesting, but I did have one very weird experience in Miami and that was when we went to a bar — it’s pretty famous — and we ordered drinks. We asked for a specific spirit to be used in those drinks, and the bartender was just really rude about it and was questioning us as to why we would want this spirit and asking if we were sure. Why did we want this specific drink? It was just very, very strange and off-putting. I get that it’s a bar that, I think, has this reputation of being the coolest place ever. I think that’s maybe the attitude that people have who work there. Yes, it just wasn’t fun. I think that’s, again — it just reminded me of the treatment you can get sometimes when you order wine, too. It’s these things that really turn people off. It’s like, “Great. I’m so excited to go to this bar that’s won all these awards and blah, blah, blah,” and here I am, asking for a cocktail that I like with a specific spirit, and I’m being questioned.
Z: That’s so weird.
A: I’m made to feel like my decision is bad. Also, I see the spirit on your back bar.
Z: Yes. I’m assuming it wasn’t like you were calling the cheapest possible–
Z: -version of that spirit.
Z: I could see if someone was like “I want a really nice Martini and I’d like you to make it with–”
Z: “-the cheapest gin possible.” That I might expect a bartender to raise an eyebrow at.
A: It was weird. Anyways–
Z: Wait, I have a Miami question real quick. I’m curious about this. I’ve spent very little time in Miami, but I am wondering, is Miami the city in the continental U.S. that feels the least like the U.S.?
A: I think you could make the argument, maybe, for New York, too, in terms of just the European-esque attitudes of New York.
Z: Get out of here.
A: No. It does not feel like you’re in the U.S. in a lot of ways.
J: Where does it feel like you are?
A: It feels like you’re in South America.
Z: Yes, you’re right. It’s very weird because I think, if you’re in — at least in my experience, Southern California has a vibe that is distinct to Southern California, but it feels connected to the vibe of America. Miami just feels it is a Caribbean Island, except not.
A: Yes, you are–
Z: It’s accidentally stuck to the main continent somehow.
A: Yes. 100 percent. The dominant cuisines are all Latin, Spanish-inspired all over the city. Most of the top restaurants have that bend.
J: Or fusion.
A: That’s the culture. There’s lots of Cuban coffee everywhere. Yes, I do think that. The thing about Miami that’s also crazy is just the amount of construction and things going up is insane. You can see that this really was a city that did benefit from Covid. There is a ton of clearly new people who moved there, because it was one of the cities that did not shut down, and bought houses in that area and in the surrounding area. In just all of the different suburbs and stuff you see that. There’ve been a ton of restaurants that have opened. I was at this bar one night, and I was talking to the bartender. We went after dinner for a nightcap, and she was telling me that the group that she works for had one restaurant pre-Covid, and now out of Covid they have seven. She’s like, “We’re not unique.” So many restaurant entrepreneurs in that city, specifically, just had opened tons of things because there’s just so much more demand than there ever has been before.
Z: Interesting. It feels like a lot of that inflow of people was from the Northeast. There’s a lot of people who were from New York and otherwise who maybe had long been thinking about getting out. I think even a lot of restaurant people maybe-
A: Totally. I think there are. There are definitely a lot of restaurant people. What we want to talk about today is this crazy phenomenon of the fact that the two largest spirits-based RTD brands in the country are not owned by who you would normally think of as owning those brands. That’s not to say that the people that own them don’t — I think the weirder one to be honest is ABI because it’s truly a beer brand. I think Gallo owning High Noon — They do have a spirits portfolio, so they’re there, but still, everyone knows of them primarily as the largest wine company in the country.
J: It’s unexpected.
A: It’s unexpected. Why that is and who might challenge them in the future — will there be challenges from the actual big spirits companies or are these two companies just too far ahead at this point? I don’t know. What do you guys think?
J: We have a really good article about this from Jake Emon that was published a few weeks ago as well for people to dig into. I think these are two very, very specific cases. I think that, in both instances, they got in at a very good time. High Noon launched in 2019. I think that was just excellent business acumen on their part. Also, to launch with a vodka-based hard seltzer in the first place versus malt-based, which we saw obviously from White Claw — Then, I think another smart thing that they did was their 2020 partnership with Barstool, which I’m so sorry to say it, but I think it-
Z: I loathe this part of the story being a success story, but yes.
J: It is. It really set it on the growth path that it currently enjoys. We know that there’s such tremendous brand loyalty for Barstool sports that, to have a product like this, I think it was just such a smart partnership on their part.
A: It was actually a very brilliant partnership. But yes, I loathe that part of the story, too.
J: I know.
Z: See, I, a little bit disagree with your take, Joanna, in the sense of — I don’t think it’s necessarily that it is an isolated situation, that it’s just fluky that these two brands, High Noon and then Cutwater, are owned by these — a wine and a beer company, respectively, or principally a wine and a beer company. I actually think that the origins of this have to do with the fact that your more classically spirits-focused big companies were hesitant to get into the seltzer game with spirits-based seltzers for two reasons. One, because it was unclear what the market would be for that. Part of hard seltzer’s initial success was because it was considered beer, and was therefore easier to put on store shelves. The excise taxes were lower. It just wasn’t as constrained as a spirits-based product is. And because those big spirits companies, I think, were hesitant to associate their well-known spirits brands with the category four years ago. Now, they’re not. Obviously, they’re all now jumping in, trying to get into this market, whether it’s seltzers or other RTDs. Back when seltzer was seen as a — “Is this just a fluke? Is this just a fad? Does it just have a limited audience? Is it only going to succeed if it’s White Claw or Truly and it has its black cherry-flavored, or whatever?” You can understand these existing spirits companies not being interested in putting their highly valuable vodka brands, in particular, on the can, or on the packaging, or in the product. Of course, in a way, that maybe kept them out of the market too long. I think it’s actually the fact that in neither case is there a clear, well-known brand of the spirit that is associated. We have guesses about what Gallo was using, but even New Amsterdam isn’t exactly a premium vodka. It was easier for them to get into the space with a vodka-based seltzer because they didn’t have a vodka brand to put at risk.
J: I agree with you, Zach. I don’t disagree.
A: I also think, though, to build on what you’re saying, one of the reasons I think that is, is because if you look at the majority of the other companies, the traditional spirits companies, they are much more likely to innovate through brand extension than a new brand unless they purchase the brand. They’ll purchase a brand that’s growing and they’ll throw it into their formula, and they’ll grow it even further. They’re not willing to launch a new brand and put a lot of money behind that brand that doesn’t say what the liquid is because they’re so proud of these liquids. It’s like, but ABI and Gallo both have a lot of experience launching new brands — both of them, and they do it a lot. I think that that was also why they’ve been so successful because Gallo doesn’t — like, yes, it could be New Amsterdam vodka, it could be something else, but they don’t care. It’s High Noon. That’s something they’re very good at. Same with ABI. ABI launches so many new products, and some of them are brand extensions and some of them aren’t. They were totally fine to create Cutwater and things like that. They knew what they were doing in a different way and had the ability to understand how much that would cost and what that looks like. I think a lot of the bigger companies — When they create these new brands, they treat them like craft startups, and so they don’t put as much behind them because like, “Oh, let’s see if it lives or dies basically.” Whereas, these two companies — My impression is they understand what it takes in the beginning. They both really promoted them and they inked these big deals with partners and things like that that really help the brands grow right out of the gate.
J: Even in the instance of Cutwater, though, they were distilling from the beginning. They were the distillery extension of Ballast Point.
A: Ballast Point, yes.
J: Then AB, Anheuser-Busch, acquired them a few years later. This was their first acquisition in the spirit space for the, obviously, largest beer company. They were already — To Zach’s point, they were already using their spirits in their products and they just happened to be very good. I think that was very smart on ABI’s part to acquire this brand. I think it also helps that both of the products are very good.
J: I think that’s a big part of it, too. They taste good.
A: They are, and these are both companies that — Not to say that no one else is good at this, but I think they’re both companies that are very good with flavor. The High Noons, for example, taste the way you think a grapefruit seltzer should taste or the way you think that a watermelon seltzer should taste. Same with the Cutwaters — They taste good, as you’re saying, because they understand flavors, which I think is really unique. I also think the other thing with this is that, with some of these other brands — I think the benefit of these, of a Cutwater or a High Noon, you can do whatever flavors you want. Whereas with these other brands, there’s very specific things, and in terms of cocktails, I think, that you associate with that liquid. It’d be very hard to do a canned cocktail, let’s say, with Crown Royal in it that’s like watermelon and grapefruit, or things like that. What works is Crown and Coke because people like to drink a Crown and Coke. You’re not surprised by seeing that. Same with putting, I don’t know, a specific vodka — Like, a Martini makes sense for some people to see if it’s a Martini vodka that people are used to, but to say, “Oh great, now all of the Belvedere that I drink is going into flavored RTDs.” The brand also doesn’t want to take that risk because people are like, “Well isn’t Belvedere premium?” If it’s premium, should it be flavored with green apple? How does that work? It really turns people off. I think what we will see in the near future is some of these spirits brands going into RTD or RTS — More, I think, RTS actually and trying to keep it to very premium cocktails, like bottled Negronis, bottled Old Fashioneds, things like that — Espresso Martinis with their liquid in it, like on the rocks, which is — what Beam is doing with on the rocks is really interesting — and then saying what liquid is inside as the main ingredient for that cocktail. That’s a very different idea. I think that’s still — I think to a lot of people, that seems super premium rather than a canned drink that’s delicious but less than 5 percent alcohol. It’s a totally different thing.
Z: I also wonder — A thing that struck me in reading the piece that Jake wrote is — It’s also probably relevant here that as we’re talking a lot about seltzer, talking about a canned product, that AB in particular, but even Gallo, I think has a lot more experience with canned products than a lot of the other spirits brands because it wasn’t something that spirits brands had, or spirits companies had to think about because essentially no meaningful spirits products went into cans until very recently. It’s not just the infrastructure — enormous canning lines — which are obviously a huge part of getting a large amount of product on the shelves. It’s even the ways of handling it, of transporting it around the country of, again, shelf placements, things like that. All this stuff is really — It seems like, we would think — maybe not us because we know this stuff — but some listeners might think like, “Oh, well, if a well-known spirits company releases their own version of a vodka-based hard seltzer, that getting shelf space shouldn’t be hard.” It actually is hard because these things are done way in advance. They’re often in large grocery chains handled, perhaps, at the national level. You’re not just walking into your local grocery store being like, “Hey, I’ve got the aforementioned Belvedere Seltzer. Can you throw some on the shelf for me?” It is a much bigger process and a much harder, or at least, more complicated set of negotiations and art discussions about price, and availability, and exclusivity, and all these things. I just think part of it is the spirits companies, in addition to not believing or not knowing that this category would have a lot of growth potential in it and a bigger audience than maybe they thought, also just weren’t positioned to have those kinds of negotiations because in many cases they were dealing with different people with these big companies. The person you talked to get a bottle of your vodka on the shelf in a Kroger is different than the person you talked to get your seltzer on the shelf. It’s just how these things work. At companies of this scale, they have multiple people who are involved in each of those departments and you don’t just say like, “Oh, hey Jen. I’ve got a different product this week. Can you throw that on the shelf for me?” It just doesn’t work that way. I think the specifics of the canned beverage alcohol model also gave AB in particular, but even Gallo, a leg up because they were just more used to working in that space.
J: I also just think that at this point, when a lot of these bigger spirits brands are coming to RTDs, it’s just a much more saturated market, and that’s where I think Cutwater and High Noon getting in when they did is also a huge part of why they’re so successful now.
A: Look, I do think the other thing about this that’s interesting — I just thought of this as you were talking, Zach — is I also think that both of these companies just understand, in a clearer way, the occasion for this type of product and how you market that at this level of alcohol. It’s a very different way to market spirits — pure spirits — and then it’s a lot about explaining to the consumer how to use it, and “here are recipes that are good with it.” A lot of those moments and occasions are not chilling by the beach with a cooler full of High Noons. That is a lot of easy pop-and-pour wines and that is a lot of beer. They just knew how to very easily just take the same model they used to market a lot of their other products, and dump in these products instead and do it very effectively. Again, then they don’t have to worry about this product cannibalizing an already successful brand, which I think is the other fear in a lot of the spirits brands of, “Well, what if this somehow hurts the main brand in some way?” That’s why I think you’ve seen more hesitancy than we would expect because of that — really interesting. Let us know your thoughts, and if you’re a fan of either of these two RTDs, hit us up. [email protected]. Joanna and Zach, it’s always a pleasure. I will talk to you guys on Friday.
J: Yes. I hope you guys have a nice week.
Z: Sounds great.
Thanks so much for listening to the VinePair Podcast, the flagship podcast of the VinePair Podcast Network. If you love listening to this show or even if you don’t, but I really hope that you do, as much as we really do love making it, then please drop us a review or a rating wherever it is that you get your podcast. Whether that be iTunes, Spotify, Stitcher, anywhere.
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Thank you as well to the entire VinePair staff and everyone who’s been involved in making VinePair as special as it’s become. Thanks again for listening and we’ll see you next week.