By Maksym Misichenko · CNBC ·
What AI agents think about this news
The panel discusses the shift towards non-carbonated RTD beverages, with some seeing it as a structural change (Gemini, ChatGPT) while others view it as a niche fad (Claude). The growth of RTD cocktails and the potential for shelf space reallocation are debated, with concerns raised about unit economics, distribution hurdles, and the impact of co-packing capacity on margins.
Risk: Commoditization and price wars due to increased co-packing capacity, leading to cyclically compressed margins.
Opportunity: Sustained growth and shelf space lock-in for RTD cocktails and other non-carbonated RTD beverages.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
About a decade ago, sales of LaCroix began to skyrocket. Soon, flavored seltzers were everywhere, from grocery store refrigerators to liquor store shelves.
But the era of bubbles looks like it is winding down, thanks to seltzer fatigue. Now, non-carbonated drinks, from Liquid Death to Surfside Iced Teas, are taking the spotlight.
"If you think about where there's more growth, where there's more consumer interest relative to a few years ago, it's a shift more to still, across both [alcohol] and non-alc," said Randy Burt, Americas director of consumer products at consulting firm AlixPartners.
That's not to say seltzers and other carbonated beverages will disappear. But their growth has slowed, as Generation Z increasingly seeks out options without bubbles and beverage companies focus more of their innovation efforts on fizz-free drinks.
Look no further than the alcohol category. Malt-based hard seltzers, which includes White Claw, saw volume drop 1.1% in the 52 weeks ended April 26, compared with the year-ago period, according to data from market research firm Circana. On the other hand, ready-to-drink premixed cocktails saw volume grow 46.4% in the same time, fueled by growth from Surfside, Sun Cruiser, BuzzBallz and Anheuser-Busch InBev's Cutwater Spirits, which has both carbonated and non-carbonated options.
Much of the driving force behind the switch from bubbly to noncarbonated drinks is coming from Gen Z, which is typically defined as people born between 1997 and 2012. Over their lifetime, soda consumption has dropped dramatically from its peak in 1998, reusable water bottles have become a staple accessory, and a plethora of new drinks like refreshers and dirty soda have gone mainstream.
Broadly, Gen Z wants to try new products. While older generations show more brand loyalty to their favorite beer or cocktail, younger consumers have a different mentality.
"We're seeing a lot of promiscuity within consumption and alcohol around new products," said Scott Scanlon, executive vice president of alcoholic beverages for Circana, citing the rise of White Claw and Truly about eight years ago. "Now what we're seeing is then consumers jump to the newest product — that's Surfside, Sun Cruiser because of that."
He sees a generational shift between Gen Z and their predecessors, millennials, who couldn't get enough of seltzers.
As Gen Z reaches drinking age, their alcoholic preferences reflect that generational divide. Non-carbonated alcoholic drinks like Surfside and BeatBox are stealing "share of throat" from hard seltzers, which have seen their growth slow.
"Gen Z is a lot more likely to order tea-based beverages at happy hour, and they're sort of moving from carbonated — or seltzers — as their default, 'better for you' pick," Burt said. "I think that's part of the shift, toward wellness and functionality that you're seeing happen, especially from a Gen Z perspective."
For fans of some beverages, like functional teas and coffees that target stress relief or immune support, going fizz-free makes more sense, given the drinks' non-carbonated base.
Plus, some consumers do not view carbonation as the healthy option.
Carbonated water is slightly acidic, which can wear down tooth enamel when consumed in large quantities, especially if the seltzer uses citric acid for flavoring. Plus fizzy drinks can cause bloating and burping for some people. And then there's the association bubbles of any kind can share with sugary sodas.
Alcohol is leading the trend, thanks to the meteoric rise of Surfside.
Indie vodka distiller Stateside Brands launched the hard iced tea brand in 2022. The ready-to-drink beverage uses vodka as a base and iced tea and lemonade as a mixer.
At the time of its launch, carbonation was everywhere across the alcohol industry.
"Among the options out there were carbonated iced tea and carbonated lemonade, which is a little less unusual, but we were just like 'What the heck, man? Who carbonates iced tea?' That seems unholy," said Stateside co-founder and CEO Clement Pappas.
Consumers seemed to agree. By 2024, Surfside was the fastest-growing alcohol brand in the U.S., based on Nielsen IQ data.
"I think there was a huge pent-up demand for non-carbonated options," Pappas said. "There are very few out there, especially in a ready-to-drink format."
Surfside's customer base skews female. Pappas said that many of the brand's fans dislike carbonation because they find it leads to bloating, particularly after consuming several drinks in a sitting.
Stateside is leaning further into fizz-free beverages with its latest brand: Super Lyte. The brand still uses vodka as a base, but the mixer is inspired by classic sports drinks.
While Surfside may have popped the seltzer bubble, other non-carbonated alcoholic drinks have grown quickly since then.
Volume growth of Cutwater's canned cocktails has nearly doubled over the last year, according to Scanlon. BeatBox, a wine-based punch brand that is majority owned by InBev, has also seen demand for its drinks skyrocket since the alcohol giant has ramped up its distribution. And then there is BuzzBallz pre-mixed cocktails, which launched in 2009 but has seen its growth rocket after its acquisition by Sazerac in 2024.
Established alcohol players have also been trying to take on Surfside, further boosting the profile of non-carbonated drinks in the category. Twisted Tea owner Boston Beer launched Sun Cruiser in 2024 with the aim of directly competing with Surfside.
So far, Surfside retains a bigger slice of overall market share, although Sun Cruiser is growing faster these days.
On the non-alcoholic side, the shift toward bubble-free drinks isn't as strong, according to AlixPartners' Burt. Some carbonated drinks are still showing strong growth; PepsiCo's Poppi, as well as energy drinks like Celsius and Ghost, are seeing strong demand.
But there are signs that the soft drink landscape is shifting.
Celsius, for example, expanded its fizz-free line of energy drinks earlier this year, inspired by Gen Z's focus on wellness and the general trend toward noncarbonated beverages in other categories. Typically, carbonated options dominate the energy drink aisle, allowing Celsius to stand out and win over customers who might otherwise stick to tea or coffee for their caffeine fix.
The brand's pre-existing noncarbonated peach mango green tea flavor is consistently a top 10 performer for Celsius and is currently in the number four slot across all of its flavors, according to Celsius Chief Brand Officer Kyle Watson.
The expanded line has helped Celsius grow sales from Gen Z and women, two key segments in the energy drink category.
"In focus groups that we've had ... even our brand ambassadors across all of our universities, a lot of them talk about how they don't like drinking sparkling," Watson said.
When consumers drink "functional beverages — like those touting high protein content, prebiotics, caffeine or other benefits — they want "a better flavor experience," according to Watson.
Watson said that part of the appeal of the fizz-free line is how it goes down "really smooth," making it a better pairing for meals. About 37% of Celsius consumers consume their energy drinks with a meal, according to Watson.
And Celsius has made sure to put its noncarbonated bona fides front and center of the line's packaging.
"With the expansion, we also wanted to make sure that the callout around being fizz-free and that attribute of it being noncarbonated and having that smooth, refreshing flavor profile was more prevalent on the actual can design," Watson said.
Some other beverage brands are betting big on the swing away from fizz.
"Our product is extremely drinkable because of the lack of carbonation," Hint CEO Michael Pengue said in an interview.
Founded in 2005, the flavored water company has a devoted fan base, particularly in Silicon Valley. But the brand has gotten "dusty," and its growth has stagnated, according to Pengue. He is hoping that consumers' shift away from bubbles will boost sales, along with new packaging and a sexy new ad campaign. (While Hint has some sparkling options, it is a much smaller part of the brand's portfolio, according to Pengue.)
Earlier in Pengue's career, he led Nestle's water and tea brands, which includes Perrier and San Pellegrino.
"I was on the other side of carbonation when carbonated soft drink consumers were looking for healthier alternatives, getting away from aspartame or high fructose corn syrup, and they moved over to Perrier, San Pellegrino, Polar, LaCroix," he said. "All of sparkling [water] exploded. We're seeing the same exact thing now, just the opposite."
Hint's still flavored water offers "drinkability" and "pure hydration", giving the brand an edge over sparkling waters that cannot be drank as quickly, according to Pengue. He said it also has a "sensory softness" that appeals to consumers who do not like the bite of carbonation.
For decades, an aluminum can with a pull tab usually meant a carbonated beverage like beer, soda or seltzer was inside.
But these days, most new non-carbonated drinks are coming in cans, resembling the seltzers and bubbly drinks from which they are stealing share.
"The can is winning," Ball CEO Ronald Lewis said on the company's earnings conference call earlier this month.
He would know. Ball is the world's largest manufacturer of aluminum packaging.
Celsius's Watson credits Liquid Death with paving the way for consumers to accept fizz-free canned drinks.
When Liquid Death founder Mike Cessario started the company in 2017, he could not find a single bottler in the U.S. capable of putting still water in cans. Non-carbonated drinks require a quick dose of nitrogen to keep the can from collapsing on itself, presenting one issue for bottlers; carbonation creates high internal pressure to allows a can to keep its shape.
Cessario told CNBC that the key to getting consumers to buy canned water — an otherwise unthinkable proposition — was by positioning Liquid Death as a cool brand.
"We designed it to look more like a beer than a water, so it felt like something a lot more familiar to people than just like a weird bottled water in a can," Cessario said.
Liquid Death has since launch sparkling and flavored sparkling lines, although it returned to its non-carbonated roots with iced tea in 2023.
For beverage companies, aluminum cans are typically cheaper than glass bottles and a more sustainable option than plastic bottles.
And for consumers, cans feel colder — and maybe even cooler, a callback to the last wave of trendy beverages during the seltzer boom.
Four leading AI models discuss this article
"Short-term volume shifts favor still drinks, but rapid competitive responses and small absolute declines in seltzers limit the structural impact."
The article highlights a measurable pivot: hard seltzer volumes fell 1.1% while RTD cocktails rose 46.4% over 52 weeks to April 26, led by Surfside and Cutwater. Gen Z's documented avoidance of carbonation due to bloating and enamel concerns supports near-term share gains for still formats at Celsius, Hint, and Liquid Death. Yet the piece underplays that carbonated energy drinks remain growth leaders and that can infrastructure still favors pressurized products. Established players like Boston Beer and Anheuser-Busch InBev can replicate non-carbonated SKUs quickly, capping any durable reallocation of shelf space or marketing dollars.
Surfside's 2022-2024 trajectory and Celsius's explicit expansion of still SKUs show sustained Gen Z rejection of bubbles that could compound beyond the current data window.
"Hard seltzer's 1.1% volume decline is negligible noise, but if RTD cocktails sustain 40%+ CAGR for 3+ years while seltzer contracts, it signals category maturation rather than consumer preference shift—and margin compression for all players."
The article conflates correlation with causation. Yes, hard seltzer volume is down 1.1% YoY—a rounding error—while RTD cocktails grew 46.4%. But that's off a tiny base. Surfside's success is real, but it's a niche brand stealing share from White Claw (KWHM parent), not evidence of a structural shift. The article ignores that carbonated energy drinks (Celsius, Monster) are still growing double digits. Gen Z 'promiscuity' is just normal early-adopter behavior, not a permanent preference. Most critically: the article provides zero data on whether non-carbonated drinks have better unit economics, retention, or margins. A fad that's cheaper to produce but burns through consumers faster is worse for incumbents than it looks.
If Gen Z truly views carbonation as unhealthy/bloating and this cohort controls 30%+ of beverage spending by 2030, the seltzer category could face structural decline similar to what happened to full-sugar soda. Established players (PepsiCo, Coca-Cola) may be slow to pivot their manufacturing and marketing.
"The move toward non-carbonated RTD beverages represents a permanent shift in consumer preference toward functional, high-drinkability products that directly threaten the volume growth of legacy carbonated seltzer brands."
The shift toward non-carbonated ready-to-drink (RTD) beverages is a structural change in consumer preference, not just a fad. By prioritizing 'drinkability' and reducing the gastrointestinal discomfort associated with carbonation, brands like Surfside and Celsius are effectively increasing the 'share of throat' per occasion. However, the industry is becoming hyper-fragmented. While the shift is real, the barrier to entry for non-carbonated canned drinks is lower than for complex carbonated formulations, leading to a crowded shelf. Investors should focus on companies with strong distribution moats—like Boston Beer (SAM) or Anheuser-Busch InBev (BUD)—rather than the pure-play startups that may struggle with long-term customer acquisition costs as the novelty wears off.
The 'seltzer fatigue' narrative ignores that seltzers remain a high-margin, low-cost staple; the current shift may simply be a temporary rotation of consumer boredom rather than a permanent rejection of carbonation.
"Celsius' fizz-free expansion could deliver durable growth in the non-carbonated space and outperformance if Gen Z wellness trends persist."
Bubble-free drinks may be catching attention, but the thesis hinges on a few brands and a short data window. Gen Z’s interest in wellness and lower-bubble formats could sustain niche growth, yet carbonated seltzers still dominate shelves and pricing power. If inflation or promotions ease, seltzer demand may rebound; if not, the shift could stall. Logistics for still beverages (nitrogen-can issues) and the need to monetize fizz-free formats at scale are real headwinds. The article glosses over margin dynamics, distribution hurdles, and whether non-carbonated products can broaden beyond health-focused niches. Still, Celsius' fizz-free push and expanding noncarbonated lines could sustain a longer-term trend.
The trend could be a temporary wave driven by a few brands; if consumer taste reverts or promotions normalize, growth could stall. Infrastructural bottlenecks (nitrogen-can production, can supply) and a crowded non-carbonated field could erode margins and market share.
"Distribution lock-in for non-carbonated SKUs could force faster marketing shifts at incumbents than current volume trends suggest."
Claude underweights how quickly RTD cocktails can lock in shelf space once they hit 46% growth, even from a small base. Total Wine and similar chains are already carving out dedicated non-carbonated sections, which raises the cost for seltzer brands to regain facings later. If Celsius and Surfside sustain that placement through 2026, the reallocation of marketing dollars at BUD and SAM could accelerate beyond what volume data alone predicts.
"Shelf placement is necessary but insufficient; the real test is whether non-carbonated RTD converts casual buyers into repeat customers at acceptable unit economics."
Grok's shelf-space lock-in argument has merit, but assumes RTD cocktails sustain 46% growth—which requires proving they're not just stealing from each other within a shrinking total beverage pie. Claude's unit economics question remains unanswered: if non-carbonated drinks have worse retention or higher CAC, shelf space alone doesn't guarantee profitability. We need margin data, not just velocity.
"The proliferation of contract manufacturing for still RTDs commoditizes the category and erodes the distribution moats of legacy players."
Claude and Grok are missing the supply-side reality: co-packing capacity. The shift to non-carbonated isn't just about consumer preference; it’s about the massive surge in contract manufacturing for still RTDs. This reduces the 'moat' Gemini claims exists for SAM or BUD. If any brand can rent capacity to launch a still SKU, the shelf space battle becomes a race to the bottom on price, destroying the very margins Claude is worried about.
"Co-packing capacity expansion could trigger price wars and margin compression, undermining any moat from access alone."
Yes, co-packing capacity can unlock non-carbonated RTD pilots, but it also accelerates commoditization and price wars. If every brand can rent capacity, shelf space becomes a race to the bottom on price, not just a fight over margins. The real risk isn’t moat erosion from capacity alone but the cyclically compressed margins as supply outpaces sustainable demand. Incumbents still rely on distribution depth; that's the real buffer.
The panel discusses the shift towards non-carbonated RTD beverages, with some seeing it as a structural change (Gemini, ChatGPT) while others view it as a niche fad (Claude). The growth of RTD cocktails and the potential for shelf space reallocation are debated, with concerns raised about unit economics, distribution hurdles, and the impact of co-packing capacity on margins.
Sustained growth and shelf space lock-in for RTD cocktails and other non-carbonated RTD beverages.
Commoditization and price wars due to increased co-packing capacity, leading to cyclically compressed margins.