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

Dive Brief:

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

Dive Insight:

Few companies have been as active in dipping their toes into the alcoholic category as Coca-Cola.

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

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

In launching these products, Coca-Cola’s biggest gamble comes from the use of one of its large brands, with its alcohol partner handling the production and marketing. As Quincey noted in his remarks to Wall Street, alcohol is by no means a sure thing for his firm. But given the recent deals Coca-Cola has entered into, it’s one the Atlanta company is seriously interested in. 

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

By testing out the marketplace before moving forward with a larger investment, Coca-Cola is able to gauge the staying power of RTD cocktail drinks while simultaneously building the consumer’s association with its newfound presence in the category.

As consumers look for alternative ways to imbibe, RTD cocktails are among the fastest-growing in the alcohol category. The global RTD cocktails market size was valued at $782.8 million in 2021 and is expected 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 nonalcoholic beverage makers to get their products into the hands of additional consumers depending on their needs or preferences. An individual may not always want tea, water or cola, and when they do turn to alcohol, beer may not be their top choice anymore. Where there’s a drinking occasion with sizeable revenue and promise, if a CPG isn’t already there, a competitor will jump in to grab that sale.

Other nonalcoholic beverage companies have introduced or announced plans for their own products. Boston Beer, for example, has partnered with PepsiCo to launch a Hard Mtn Dew alcoholic drink in the U.S., while energy drink maker Monster Beverage announced plans to launch its first flavored malt beverage alcohol product later this year.