PepsiCo and Coca-Cola eye the alcohol market | WARC | The Feed

PepsiCo and Coca-Cola eye the alcohol market

Hard seltzers are a growing trend in the alcohol market and one that has piqued the interest of major drinks groups like PepsiCo and Coca-Cola – but the presence of these giants and their distribution capabilities has unsettled the industry, as has the proximity of often youth-friendly brands to the alcohol sector.

Why it matters

There are two stories here. One is about the highly regulated US alcohol industry fretting about the entrance of soft drinks giants into their territory as they blur the lines between the historic separations of the alcohol industry in which no one company can make, distribute, and retail alcohol.

The other is about the marketing story surrounding these same brands entering a very different category with a big advantage potentially conferred by being able to go where existing brands cannot.

The story

The New York Times has a round-up of the complexities faced by Mountain Dew, the PepsiCo-owned soft drink that last year brought out a ‘hard’ version. Coca-Cola’s canned Jack and Coke integration is similar.

Other versions of the trend have involved the integration of soft drink giant distribution capabilities (physical availability being key), but Hard Mtn Dew, licensed through Boston Beer Co, is quite specific, given the brand’s extreme-sport focus and youthful persona.

Some detractors have accused both brand and retailers of inappropriate placement – accusations that all deny. However, there is a larger question about the effects of the kind of long-term branding that a soft drink is able to do, where it is able to do it and how that halo effect can then translate into a different category.

In a sense, slip-ups in placement would be a good demonstration of the quick-glance effect that branding can have.

Serious growth

This is part of the rise of Ready-to-Drink (or RTD) beverages – pre-mixed G&Ts, cocktails, hard Kombuchas, hard lemonades, hard coffees, and whatever else that can be made boozy. Unlike alcopops before them, however, they are finally becoming a big segment, capable of driving significant profit – even more per case than sodas.

While current sales are relatively small in the grand scheme of the alcohol market, they are growing fast. Sales of RTD reached around $10bn in 2021 (though for context, the same Grand View Research source pegs the global beer market at $680bn) but are expected to expand at a compound annual growth rate of 22.9% between now and 2030.

The sheer breadth of this segment is quite staggering, and often depends quite a lot on chasing the latest novelty. As Just Drinks put it in its 2023 trends back in January: “It’s hard to escape the feeling that this part of the market suffers from its consumers’ brevity of attention span.” For the new hard seltzer brands, however, the high prices they charge will compensate.

Sourced from the New York Times, WARC, Coca-Cola, Boston Beer, Grand View Research, Just Drinks