Diageo acquires maker of premium hard seltzer Lone River Ranch Water

Source: fooddive.com

Dive Brief:

  • Diageo has acquired Far West Spirits LLC, which owns hard seltzer brand Lone River Ranch Water, according to a press release. Katie Beal Brown, who founded Lone River in 2019, will retain a minority interest and continue to lead it as CEO of the brand. 
  • The brand draws its inspiration from the Texan “Ranch Water” cocktail, which is a tequila drink made with lime juice and sparkling water. Lone River incorporates West Texas-inspired ingredients like agave and lime juice in its three flavor offerings: Original, Spicy and Rio Red Grapefruit.
  • Diageo’s latest acquisition is part of its current M&A strategy, which involves adding more premium brands to its portfolio as it sees consumers seeking quality over quantity.

Dive Insight:

The addition of Lone River Ranch Water marks the first premium label to Diageo’s hard seltzer stable. It already produces a hard seltzer under its Smirnoff vodka label and offers a hard seltzer inspired beverage called Smirnoff Ice Zero Sugar. 

There is plenty of data to support Diageo’s pursuit of premium beverages. Consumers are drinking more during the pandemic and opting for more premium options in the process, according to a 2020 Economic Briefing from the Distilled Spirits Council of the United States (DISCUS). Many are finding premium alcohol to be a tangible luxury during a time when shelter-in-place orders and other pandemic-related headaches present an ongoing proverbial buzzkill.

Consumers have welcomed the hard seltzer trend with open arms as the category offers something new and interesting to add to their alcohol experience. The global hard seltzer market was valued at $4.4 billion in 2019, according to Grand View Research, and is growing at a CAGR of 16.2% between 2020 and 2027. 

Beverage manufacturers are scrambling to pounce on the increasing demand and launching a growing list of hard seltzer products. Unlike other beverage companies that are opting for developing in-house hard seltzer lines, like AB InBev and its Bud Light Corona, Diageo is also taking the M&A path. 

The company has already demonstrated this with its entry into the emerging low- and no-alcohol beverages category, where sales jumped roughly 32% between 2018 and 2022, according to IWSR data reported by Bon Appetit. In 2019, Diageo acquired a majority stake in Seedlip, which claims to be the world’s first distilled nonalcoholic spirits brand.

With Ranch Water’s brand recognition and cult following, purchasing Far West Spirits provides Diageo with a quick way to catch up on hard seltzer sales while also adding a premium product. Competition in the hard seltzer space is fierce. Leading the hard seltzer charge are Mark Anthony Brands’ White Claw and Boston Beer’s Truly. Combined, these two brands claim three-quarters of the total market share for hard seltzer products, according to Nielsen. 

This market dominance hasn’t stopped other beverage manufacturers from vying for a share of consumers’ thirst for hard seltzer. Heineken is partnering with Hornell Brewing Company, which is affiliated with Arizona Beverages, to launch Arizona Sunrise Hard Seltzer in the first quarter of 2021. Heineken is also working on a premium line of Mexican-inspired hard seltzers called Canijilla and an IPA-style hard seltzer brand called Bask. AB InBev also debuted a line of cocktail-inspired hard seltzers last year called Social Club Seltzer.

Also in 2020, Molson Coors became the exclusive manufacturer of Coca-Cola’s Topo Chico Hard Seltzer in the U.S., which is slated to launch in 2021. Constellation Brands and AB InBev are also entering the space.

With all the new hard seltzers entering the market, questions are bubbling up regarding whether consumers will soon find themselves suffering from decision fatigue. But as the pandemic slogs on and quarantine protocols stay in place, an ever-growing list of hard seltzer options could help quench their boredom.