Alcohol is in ‘the experimentation bucket’ for Coca-Cola, CEO says

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Diving Brief:

  • Coca-Cola CEO James Quincey says alcoholic beverages are in the “bucket of experimentation” as the beverage giant assesses whether the category “can demonstrate traction, momentum” for the company to do a significant investment.
  • At the recent Barclays Global Consumer Staples conference, Quincey said it’s not inconceivable that alcoholic beverages could one day become a big business for a company best known for its teas, waters, sports drinks and sodas.
  • Soft drink companies such as Coca-Cola have taken aggressive steps to partner with alcohol giants already in the space as they aim to control another occasion when a consumer could drink one of their products.

Overview of the dive:

Few companies have been as active in the liquor category as Coca-Cola.

CPG partnered with Molson Coors in 2020 to create Topo Chico Hard Seltzer. Since then, the companies have teamed up to launch a line of fortified ready-to-drink lemonades based on Coca-Cola’s Simply refrigerated juice brand. Coca-Cola has also struck deals with brewer Corona Constellation Brands to launch RTD cocktails through its Fresca brand, and with Brown-Forman to launch Jack Daniel’s RTD cocktails with its signature cola.

Coca-Cola also offers alcoholic offerings in other countries like Japan, Brazil, and the Philippines.

By launching these products, Coca-Cola’s biggest bet comes from using one of its major brands, with its alcohol partner ensuring production and marketing. As Quincey noted in his remarks to Wall Street, alcohol is by no means a safe thing for his business. But given recent deals struck by Coca-Cola, it’s one the Atlanta-based company is seriously interested in.

“When you look at consumer trends, this is a very interesting space for us because consumers are clearly moving through this space,” Manuel Arroyo, Coca-Cola’s global merchandising director, said in June. “We see a lot of potential. We are still learning.

By testing the market before moving forward with a larger investment, Coca-Cola is able to gauge the strength of RTD cocktails while strengthening consumer association with its new presence in the category.

As consumers look for other ways to imbibe, RTD cocktails are among the fastest growing in the liquor category. The global RTD cocktails market size was valued at USD 782.8 million in 2021 and is projected to expand at a compound annual growth rate of 13.4% from 2022 to 2030, according to Grand View Research.

Alcohol creates another way for soft drink manufacturers to get their products into the hands of additional consumers based on their needs or preferences. A person may not always want tea, water, or cola, and when they turn to alcohol, beer may no longer be their first choice. Where there is an opportunity to drink with significant revenue and promise, if a GIC isn’t already there, a competitor will swoop in to grab that sale.

Other soft drink companies have introduced or announced plans for their own products. Boston Beer, for example, has teamed up with PepsiCo to launch a Hard Mtn Dew alcoholic drink in the United States, while energy drink maker Monster Beverage has announced plans to launch its first more flavored malt alcohol product. late this year.

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