The story of hard seltzer is a rare opportunity to witness how a “dominant design” got chosen in a category.
As I wrote before, economist Paul Geroski’s book The Evolution of New Markets is perhaps the best study of how categories behave over time. One of Geroski’s insights is that, when a new category emerges, usually only one or two companies are in it. They are the inventors of that product or service. As soon as it seems like the category will be important, a whole lot of competitors pile in, many of them with different versions of that product or service.
The companies rushing into the category, Geroski says, all compete to become the dominant design – the version of the product or service that the public decides is best. Once a dominant design gets chosen, it defines the category. If a company is not on board with the dominant design, in time its version of the category’s product or service will likely fade away. (See: Betamax, Blackberry, MySpace...)
The company that defines the dominant design usually wins the category, taking most of the market share and profits. It becomes difficult to ever wrest leadership from the dominant design company. Apple won the dominant design in smartphones. Uber in ride-sharing. Slack in team messaging. Everyone else in those markets has had to, essentially, copy them. Notice that every ride-sharing app works exactly like Uber’s.
But Geroski left a riddle. He could not pinpoint a reason a dominant design gets chosen. It seems to be different in every category. Sometimes the best product becomes the dominant design, but not always. It’s not always the first to market, either – nor is it always the company that invests the most, or has the best advertising, or the most aggressive pricing. Sometimes, Geroski concluded, it can be just plain luck, and then taking advantage of that luck.
And that somewhat explains how White Claw won the hard seltzer category.
A Vancouver company, Mark Anthony Group, was originally founded by Anthony von Mandl to sell imported wines. In 1996, the company introduced its own drink, Mike’s Hard Lemonade – essentially carbonated vodka and lemonade in a can. The quirky drink won a following among young people. It wasn’t until 20 years later, in 2016, that Mark Anthony Group introduced another new alcoholic beverage: a light, flavored alcoholic seltzer in a can that it called White Claw.
By then, social media had arisen as a marketing force, driven largely by independent influencers. Millennials started posting testimonials and funny bits about White Claw, creating a hashtag, #ClawLife. A few other hard seltzers had been around for a few years before White Claw, but none got such traction on social sites, and hard seltzer in general remained a tiny category among alcoholic beverages.
The dominant design moment happened in 2019, around six years after the category was born. A YouTube comedian, Trevor Wallace, made a video in which he proclaimed a “White Claw summer” and used the phrase, “Ain’t no laws when you’re drinking Claws.” The original video quickly racked up several million views. Suddenly, a young audience seemed to wake up to hard seltzer and focused on White Claw as the category leader. Sales of White Claw quadrupled, going from $155 million in 2018 to $627 million in 2019, according to Bloomberg. Mark Anthony Group had to race to build up production capacity.
Today, White Claw leads a booming category. From mid-2020 to mid-2021, hard seltzer sales hit $4.5 billion. White Claw maintains about a 58% share of the market, according to NielsenIQ data.
A decade ago, grocery stores didn’t devote any shelf space to hard seltzer. Now, most stores have cleared out a section that used to be for beer and are selling numerous hard seltzer brands – a tangible sign of the birth of a new category. In fact, beer companies from AB InBev to Pabst Blue Ribbon have launched hard seltzer brands. Yet none have been able to unseat White Claw. Once a product wins the dominant design of a category, it’s very difficult to dislodge it.
Of course, Mark Anthony Group couldn’t have planned to have won the category this way. A series of events it didn’t control contributed to White Claw becoming dominant in hard seltzers. But any company that believes it has a category it can win must be ready for the moment the dominant design gets chosen – however it might happen. The key is to always drive to become the dominant design, recognize the moment it happens, and capitalize on it to secure the category for the long run.