Coca-Cola Co. plans to enter the alcoholic beverage business with the launch of a hard seltzer drink, reported The Wall Street Journal (July 30).
The company plans to release a boozy version of its Topo Chico sparkling water in the U.S. next year. Coke “is committed to exploring new products in dynamic beverage categories, including hard seltzer,” the company said in a statement posted on its website. “Topo Chico Hard Seltzer is an experimental drink inspired by Topo Chico sparkling mineral water, which has been popular with many mixologists.”
The alcoholic Topo Chico beverage will be piloted in Latin America later this year. Alcohol distribution is tightly regulated in the U.S. and a Coke spokeswoman said the company hasn’t finalized how it will distribute hard seltzer, which falls under the same regulatory category as beer. Some Coke distributors already hold licenses to carry beer.
Coke joins other beverage giants trying to capture market share as the demand for hard seltzer grows among consumers. Americans spent $3 billion on hard seltzer in U.S. retail stores in the 52 weeks ended July 11, up 241% from a year earlier, according to Bump Williams Consulting Co.
Boston Beer’s CEO Dave Burwick said that the hard seltzer craze is the biggest shift for beer drinkers in four decades, reported CNBC (July 24). Shares of Boston Beer, which owns the Truly brand of hard seltzer, went up more than 25% on July 24, a day after the company reported second-quarter earnings.
“There’s this fundamental shift right now that hasn’t happened in the beer category since light beer was launched in the late ’70s, which is called hard seltzer,” said Burwick.
Stay-at-home orders during the pandemic increased the overall demand for beer and seltzer, according to Burwick, and the company’s comparable shipments increased by over 35% during the quarter. The pandemic is amplifying trends that were already happening pre-pandemic, including the shift to more hard seltzer, he said.
“Millennials, say 21- to 35-year-olds today, are not drinking as much as the people who came before them, but they’re drinking better. When you look at those trends of health and wellness, variety seeking and premiumization, it all supports the growth of this hard seltzer category,” Burwick said.
Earlier this month, Bloomberg reported that Monster Beverage Corp. could generate $76 million in sales if it decides to introduce an alcoholic beverage, according to Stifel.
Stifel analyst Mark Astrachan said the company is considering introducing an alcoholic option, which is likely to be a hard seltzer, based on a review of trademark filings.
Goldman Sachs recently said that hard seltzer sales could reach $20 billion by 2025, up from about $3.5 billion today. In additional to Truly, Mark Anthony Brands’ White Claw currently dominates the category. However, offerings from Constellation Brands Inc. and Anheuser-Busch InBev SA dented its market share, according to Astrachan, who noted the sparkling seltzer category has grown from 3.5% of the off-premise beer market in June 2019 to 9.4% in the four weeks ended May 31.
“We think the success of new entrants suggests an opportunity for Monster given its strong track record of innovation, including, importantly, expanding usage occasions with new products,” Astrachan said.