Molson Coors Beverage Company has struck its second big partnership over the last two weeks.
Just 15 days after announcing a joint venture with Yuengling to distribute the Pennsylvania brewery’s beer west of the Mississippi River, Molson Coors today announced a deal with The Coca-Cola Company to manufacture, market and distribute Topo Chico Hard Seltzer in the U.S.
The announcement comes two months after Coca-Cola revealed plans to trade on Topo Chico’s brand equity and enter a hard seltzer segment that has yet to hit a ceiling.
This year, hard seltzers racked up $1.75 billion in off-premise dollar sales between the Memorial Day and Labor Day weekends — a full $1.1 billion more than the same period last year, according to market research firm Nielsen. Between those two holidays, the hard seltzer segment increased dollar sales 154%, with hard seltzers accounting for 45% of the beer category’s growth dollars.
Molson Coors will be responsible for marketing, sales and distribution of Topo Chico Hard Seltzer, which is slated to launch in the first half of 2021 in “markets where Topo Chico sparkling mineral water is known and loved,” the company said. However, production and packaging of the product will be handled by a third party contract facility — a common practice among top producers.
Topo Chico Hard Seltzer will join a Molson Coors portfolio of hard seltzer brands that includes Vizzy Hard Seltzer, which launched in April and has become the fifth best selling hard seltzer brand in the U.S., and Coors Seltzer, which hit the market at the end of August.
“Building on the incredibly successful launches of Vizzy and Coors Seltzer earlier this year, we are thrilled that Molson Coors will launch Topo Chico Hard Seltzer in 2021,” Molson Coors CEO Gavin Hattersley said in a press release. “This is another significant step in growing our above premium portfolio and becoming a major competitor in the rapidly-growing hard seltzer segment, both key components of our revitalization plan.”
“The Coca-Cola Company and Molson Coors have a shared passion for building and growing some of the world’s most beloved brands,” Dan White, VP of strategic initiatives at The Coca-Cola Company, added in the release. “In bringing Topo Chico Hard Seltzer to market, our focus is speed, quality and efficiency. Our relationship with Molson Coors Beverage Company allows Topo Chico Hard Seltzer to launch with scale, at an accelerated pace, delivering a product that consumers will love.”
As for the liquid, the companies described Topo Chico Hard Seltzer as a blend of “purified sparkling water, a gluten-free alcohol base and natural flavors, with minerals added for taste.” The hard seltzer will be available in four flavors — Tangy Lemon Lime, Exotic Pineapple, Strawberry Guava and Tropical Mango — and sold in variety 12-packs of slim cans.
In an interview with CNBC’s Jim Cramer last week, Coca-Cola CEO James Quincey said the company’s move into the hard seltzer segment shows that the company is “going to follow the consumer.” Topo Chico Hard Seltzer will first launch in Mexico and in Brazil later this month, according to CNBC.
“If we want to be consumer centric, which we always try to be, not always perfectly but we want to be, then that’s what’s taking us to this opportunity,” Quincey said.
“It’s very synergistic for the Coke system globally,” he added. “So we’re going to experiment with a number of cities around the world. Just one of the many things that we’re doing to focus our portfolio and be very consumer centric and drive for those brands that can create scale for us.”
The partnerships with Yuengling and Coca-Cola are part of Molson Coors’ strategy to further premiumize its product portfolio. Earlier this month, Molson Coors revealed the first four non-alcoholic product lines in its partnership with California-headquartered non-alcoholic beverage incubator L.A. Libations, which the company took a minority stake in last November.
The challenge for Molson Coors and Coca-Cola will be breaking through in a hard seltzer segment that has largely been dominated by two players, Mark Anthony Brands’ White Claw and Boston Beer Company’s Truly Hard Seltzer. Those two companies account for 50% and 23% of the segment’s market share, respectively, according to Nielsen. Bud Light Seltzer, which launched in early 2020, now makes up 10% share of the segment.
And those big players aren’t content with their positioning.
According to a report released by Credit Suisse analyst Kaumil Gajrawala today, Mark Anthony revealed ambitious plans for White Claw at its national sales meeting last week, gunning for 10% dollar share of the beer market (currently the company holds 6.5% dollar share and 5% volume share), aiming to make White Claw the No. 1 beer brand and planning to launch Mike’s Hard Lemonade Seltzer on March 1, 2021, backed by its “biggest marketing investment in history.”
Gajrawala reported that White Claw is on pace to deplete 135 million cases (9.9 million barrels) in 2020, which he said is “in-line with pre-pandemic Modelo Especial and Budweiser and just behind Michelob Ultra. Miller Lite and Coors Light average ~13mn barrels, with Bud Light the largest US beer at ~27mn barrels.”
Topo Chico Hard Seltzer will also face competition from within the beer space, such as New Belgium, and outside, with energy drink maker Monster also likely to enter the fray.