How Surfside crushed the canned cocktail market

Citizens Bank Park vendor John Culin has sold food and drinks at Phillies games for 53 seasons. Like the other vendors who work the South Philly aisles, the Wilmington, Del., resident chooses which beverages he carries, grabbing bottles of water and cans of beer from walk-in coolers, then putting them on ice.

Culin works on commission and sticks with brands he trusts, so often needs to be won over. “I just sold Miller Lite. It took me a while to go to Bud Light, then it took me a while to go to [Michelob] Ultra.”

But Culin and his fellow vendors have been stocking a new can in their boxes lately, a local brand whose tidal wave of popularity is sweeping across the country: Surfside canned cocktails. The 4.5% ABV “no bubbles” vodka drinks, mixed with various flavors of tea and lemonade, sell for $16 per 12-ounce can at Citizens — $3 more than a 16-ounce can of beer — but customers snap them up anyway.

“I just saw the other vendors were doing well with it,” said Culin. “I’m basically losing out [not selling it].” He’s been carrying Surfside cans ever since the Phillies’ 2022 playoffs, just 10 months after the canned cocktails made their market debut. They took off like a bottle rocket in the ballpark, where they’re stocked alongside mass-market brands in hawkers’ boxes and nearly every drinks stand.

“Our first day of rolling it out, I brought 10 cases to a vending room,” remembers Jason Firestone, Citizens Bank Park’s senior director of concessions. “We now stock our vending rooms with full pallets.”

In 2023, Surfside was the stadium’s best-selling spirit, and it’s on a similar trajectory this season. This success isn’t unique, though: Surfside has enjoyed the same uptake pretty much everywhere else the striped cans are sold, which is an ever-wider area.

When Stateside Brands launched Surfside canned cocktails at the end of 2021, they distributed spirits to eight states. Today, the 10-year-old Kensington-based vodka company has a retail presence in 46 states, with plans to be nationwide by the end of the year. Last year, the company sold 1.3 million cases; this year, sales are up 350% so far.

All that success has turbocharged Stateside’s operations. The company is hiring so many employees, it finally brought on an in-house recruiter, according to co-founders Matt Quigley and Clement Pappas. Naturally, they need more space: They’re moving their offices and vodka production to a new facility in Northeast Philly, increasing its capacity from 120,000 cases per year to 1 million. (The Kensington tasting room will remain, with the distillery used for special events.)

This explosive growth is entirely due to Surfside. The brand has reshaped Stateside’s portfolio: Surfside constitutes 60% of the company’s sales, while its bubbly counterpart, Stateside Vodka Sodas, makes up another 25%. The straight-up vodka that constituted the company’s bedrock for years now accounts for just 15% of its sales.

“When we were a vodka company only, the strategy there was to go slow and go deep,” says Pappas, Stateside’s CEO. “And in this [ready-to-drink-cocktail] category — such a dynamic and fast-growing category, very different than a mature vodka category — it feels like, ‘Hey, go get it before 500 people copy you and you get lost.’”

When beverage trends land, they tend to be in-your-face. Any Pennsylvanian who walked into a beer distributor in 2019 will remember the relentless dominance of hard seltzer. Brand after brand hit the market; beverage behemoths like AB InBev added hard seltzer to their lineups and local brewers followed suit. Philadelphia even got a hard seltzer bar in 2022, when Two Robbers, the former seltzer maker, opened in Fishtown. (The company pivoted to vodka earlier this year.)

In many ways, hard seltzer laid the groundwork for canned cocktails’ boom; the two even fall into the same ready-to-drink segment, which has carved out its own multibillion-dollar category in the beverage industry. But spirits-based RTDs — true canned cocktails, using vodka, gin, whiskey, etc. — have been steadily growing, as hard seltzers, whose alcohol content usually comes from neutral malt base, have started to plateau. (Malted grains, used for beer, are also the basis for malt whiskey, malt liquor, and neutral malt base, the latter of which is stripped of its characteristic color, flavor, and smell; it’s one of the most inexpensive alcoholic bases.)

Accordingly, everyone under the sun has rushed to can a cocktail. That includes giant liquor companies like Absolut, Crown Royal, and Jack Daniel’s (who partnered up with Coca-Cola, duh), but plenty of outsiders want in on the buzz, too: Anheuser-Busch makes Cutwater, while famed craft brewer Dogfish Head makes rum-based mai tais and vodka crushes. The country’s biggest canned cocktail brand, High Noon, is owned by E.J. Gallo, the same wine-making giant that makes Barefoot. Go deeper and you’ll find Sunny D vodka seltzer, Welch’s vodka transfusions, and Dunkin’ Spiked pumpkin spice latte.

There are small-scale players, too, like Southwest Philly’s Rectified Spirits, producer of Fishtown Iced Tea. Owner and operator John Logan launched the distillery inside a former Amoroso bread factory in 2022, after he was approached by the owners of Interstate Draft House about turning the bar’s signature, house-made cocktail, an Arctic Splash-inflected take on a Long Island Iced Tea, into an RTD. Logan, who previously worked at Kensington distiller Jacquin’s, was an easy sell — and it all came down to flavor.

After noticing Philadelphians’ embrace of canned malt-based hard teas, especially Twisted Tea, Logan said he and everyone else in the distilling industry probably had the same thought: “Those products just don’t taste good,” he said, likening them to a light beer mixed with tea. “Imagine what we could do if we could offer delicious, well-crafted cocktails [made with spirits] in the same convenient can.”

There were reasons behind the prevalence of malt-based RTDs. They’re regulated like beer, which gives sellers more latitude in Pennsylvania and elsewhere. And even if a canned cocktail’s ABV is comparable to a beer’s, it’s taxed at a higher rate. As a result, many RTD producers default to malt but bend over backwards to make it as neutral as possible.

“You’re trying to take malt and dress it up as vodka,” Pappas said. “There are all these tricks that they do” to mask its color, smell, and taste. Ultimately, he said, “it’s just a lot easier to make a vodka soda.”

Though there are some canned cocktails with complexity and alcohol content of what a real-live bartender would shake up — Tip Top, for instance, sells 3.3-ounce canned cocktails like the Jungle Bird and the Naked and Famous, with ABVs well over 20% — most on the market come in a larger size (8 to 12 ounces) with ABVs below 10%. Many brands, including Surfside, are also operating in the “the low-calorie, better-for-you” space, as Stateside president Matt Quigley characterizes it.

“When we developed [Surfside], we had a hard spec that we’re gonna be 100 calories and we’re gonna make this taste as good as possible,” Pappas said. “If you want to make something 4.5% alcohol, it’s about 87 calories, so you’ve got 13 calories to work with.”

Surfside relies on artificially sweetened teas and lemonades — made with real tea and lemon juice, Pappas said — with just a couple grams of real sugar to balance out the taste. (Its vodka sodas, made with sparkling water, real juice, and no artificial sweetener, clock in at 95 calories.) In flavor and format, Surfside scratches a totally different itch than, say, a whiskey sour; it has more in common with a diet iced tea from Wawa. Its outside-the-ballpark price point does, too: A four-pack of Surfsides retails for around $10.

“We aim to make it as crushable as absolutely possible,” Quigley said.

It’s clearly been a winning formula. The local supply is made by co-packers in Latrobe, Scranton, and the town of Jersey Shore. When Surfside debuted in early 2022, Stateside started with modest order of 10,000 cases of a single variety — iced tea and vodka. It sold out immediately, so they doubled their order to 20,000 cases. It sold out again.

“Then it was like, ‘Maybe we should make 40,000 cases,’ and then that was gone. It was like, ‘Alright, we’ll make 80,000,’” Pappas remembers. “We just couldn’t get in front of it all summer.”

Summer 2023 was much the same, and while this year has been better, they’ve seen their newly introduced Surfside lemonades and green teas fly off shelves. It reflects a demand that was both unmet and unarticulated before recent years. “I’m in this phase of my life [where] I moved to the ‘burbs, I have wife and kids, and you go to these parties with families and stuff like that,” Pappas said. “Nobody was drinking Twisted Tea. There just wasn’t an option that appealed to that group.”

Quigley and Pappas said Surfside’s audience skews slightly female and younger, with the bulk of its audience falling between ages 25 and 40. But Quigley mentions a notable convert who speaks to the drinks’ broad approachability. “My mother is 72. She historically drinks red wine. ... She has never tasted a sip of Stateside Vodka because she was like, ‘Oh, I’ll just get way too drunk,’” Quigley said. In the last year, however, his mom started subbing out red wine for Surfside lemonades. ”The fact that there’s a 72-year-old woman out there that is now championing the lemonades is just a testament to the power of the brand.”

As canned cocktails rise, the rules around them are changing. In Pennsylvania, a recently signed law allowing spirits-based RTDs to be sold in restaurants, grocery stores, and bottle shops goes into effect in September. Indiana passed a similar bill earlier this year, while legislators in Texas and California are considering such changes.

Surfside is poising itself to capitalize on those shifting regulations. Besides hiring sales reps in 40-some states, the company has established relationships with more than 200 distributors nationwide. Almost all of those are beer distributors, which are accustomed to dealing with high volumes, lower-priced but faster-moving inventory, and canned products.

Stateside projects it will have sold 4.5 million cases of Surfside by the end of 2024, which would make it one of the best-selling spirits-based RTDs in the country. To handle that tremendous volume, it outsources production. Eight co-packers across the country — including in California, Vermont, North Carolina, Arizona, and Wisconsin — blend and package it to the company’s specifications.

“Our goal is to really make it a national brand. That’s what we’re pushing on everywhere,” Pappas said, adding that they hope Surfside will pave the way for Stateside’s other products. “As we build up our organization, distribution ... we think we can really come behind it with the vodka and the [canned] vodka sodas.”

Do they worry about the canned cocktail bubble bursting? Pappas said he thinks about it, but he looks at hard seltzer as a source of solace.

“In the minds of a lot of people, [hard seltzer] came and went,” Pappas said. “It didn’t go.” (Reports vary, but the U.S. hard seltzer category generated over $16 billion in revenue in 2023.) To Pappas’ mind, even as hard seltzers’ shelf space shrinks, the best-made, most popular brands are and will still be there. “There’s a market for it, and they’re going to stick around and have a very nice-sized business with that.”

Pappas and Quigley feel that because Surfside is a well-established, early entrant to market, it will be similarly positioned to endure whenever canned cocktails start to fizzle.

“We’ve got to be clear-eyed that five years from now, we’re not still going to be growing 300% a year, that we would eventually overtake all other beverages as the only thing that people drink,” Pappas laughs. “This space won’t be the most popular, exciting, or coolest space forever, but I think it will continue to be a staple.”