Why does "hard cheese" mean "bad luck"?

"Hard cheese" is like when someone says "That's not good." "hard cheese" has the meaning of something unpleasant that has happened to you, hence the bad luck, because in order for bad things to happen to you, you would need bad luck (or so the reasoning goes).

Phrase Finder gives its origin:

This slang term for 'bad luck!' is British in origin and is now becoming rather archaic even there, although it is still used. It dates from the early 19th century and was used then just as a general indication of unsatisfactoriness. This piece, taken from a play called The Tiger at Large, which was printed in a collection of plays called The Acting National Drama, edited by Benjamin Webster, 1837, is the earliest citation I've come across:

Jem. His wages was too low. Don't you think a pound a month, and find one's self is hard cheese?

Hard cheese has, of course, got a literal meaning - cheese which is old, dried up and considered indigestible. That opinion was expressed in A Cyclopaedia of Practical Receipts, 1845:

Beer and porter should be particularly avoided. Hard cheese, unripe fruit, and especially beans, are also objectionable.

(Note: Receipts are what we now call recipes.)

The figurative meaning of 'hard cheese' clearly derives as an allusion to an unwelcome and indigestible course of events.

Hope that helps.

The usage comes from rural dairy farmers of UK and Ireland making cheese for themselves from semi-skimmed milk because they sold the cream/butter off to wealthier people to make a living. the semi-skimmed milk cheese was of poorer taste and much harder – therefore, hard cheese! It essentially means something unpleasant or not as lucky as those with money who can afford the cream! video on the topic: https://twitter.com/daera_ni/status/1463839230782758912?s=20