The Alcohol Industry Looks to Kombucha, Category Growing Fast

Alcohol Looks to Kombucha, Category Growing Fast

If further confirmation was needed of the kombucha category’s explosive growth, it arrived in June with the announcement that multi-national beer corporation Molson Coors had acquired Clearly Kombucha. The deal is another indication that alcohol industry leaders are taking a serious look at this emerging category, a trend that is likely to continue and that could potentially create an unusual dynamic where alcohol conglomerates find themselves in direct competition with non-alc brands.

According to Fazal, an investor in and board member of Revive Kombucha, the interest in the category from major beer players, as well as CSD companies, may stem from stagnant and declining sales. The growing kombucha market can offer a way to draw in new consumer demographics.

“I think them [alcohol companies] thinking about kombucha is another validation point around the fact that these types of beverages are here to stay, that consumers desire them, and that we are going to see more big beverage players have at least one brand, but likely multiple,” Fazal said. “My sort of stretch guess is that as this category grows and evolves the bigs will have a couple brands positioned differently within the category, much like they’ve done in CSD and much like they’ve done in beer.”

Strumwasser is also enthusiastic about kombucha’s growth, noting that kombucha has “a natural adjacency to beer” in that both are brewed and fermented. And like big soda, he said, beer companies are, as a trend, using free cash flow to acquire emerging brands and diversify their portfolios and kombucha is a target with huge potential. In particular, he said, AB InBev is making a major push to grow its non-alcoholic business.

However, he noted that any alcohol company will need to prepare for the necessity of cold chain distribution — a requirement for kombucha, but uncommon for beer.

According to Burgmaier, the category is experiencing rapid growth and investments are likely to keep flowing into it. However, brands will need to show they have carved out a unique space and offer an accessible taste and strong brand profile within the category, while also proving gains and velocity.

“There are several out there that are ready to be larger, national brands,” he said. “And I think we’re going to see a couple of those deals done in the next six to 12 months. It’s just such a unique category that I think some of the smaller brands justify investment as opposed to the smaller brands in other categories…. It’s like this moment in time where kombucha has caught fire and it’s not going to stop. We don’t see it stopping at all, it’s just started.”