As products made through its beverage-alcohol licensing partnerships gain steam at retail, Coca-Cola has agreed to share profits from those brand extensions with U.S. bottlers, Beverage Digest reported.
“The Coke bottlers argued to Coca-Cola that they deserved to benefit from the boozy brand extensions because the bottlers helped build the underlying non-alcoholic brands,” Beverage Digest wrote.
The bev-alc brands include Topo Chico Hard Seltzer and Simply Spiked, malt-based drinks are brewed by Molson Coors; Fresca Mixed, spirits-based, ready-to-drink canned cocktails (RTD) produced by Constellation Brands; and a Jack Daniel’s and Coke RTD produced by Brown-Forman.
Molson Coors launched Topo Chico Hard Seltzer in limited markets in early 2021 and took it nationwide in early 2022. Along the way, Molson Coors has continued to line-extend the brand with a margarita-style variety pack and a ranch water offering.
Year-to-date through October 30, dollar sales of the Topo Chico Hard Seltzer brand family reached $189.5 million at multi-outlet food and convenience stores tracked by market research firm IRI. In that time, dollar sales of Topo Chico’s original variety pack have increased +69.3% compared to the same period last year.
Simply Spiked – the 5% ABV hard lemonade spun off from Coca-Cola’s popular juice brand – hit the market this summer and has reached $55 million in off-premise dollar sales through October, according to IRI.
Constellation Brands rolled out Fresca Mixed this fall, after it was announced in January 2022. The line includes vodka-based spritzes and a tequila paloma, all of which check in at 5% ABV and contain 100 calories. Fresca Mixed is produced at Constellation facilities and sold through its distribution network, a company spokesperson confirmed.
The Jack Daniel’s and Coca-Cola RTD launched in Mexico last month and will expand to North America and Europe next year, Coke announced.
Neither Molson Coors-produced product flows through Coca-Cola bottling plants, so compensation to bottlers is offered at a lower rate than from the other two products, Beverage Digest reported.
“Products based on bottler-delivered brands including Fresca and Coca-Cola draw compensation at a higher percentage of profit,” Beverage Digest wrote. “The agreement includes a framework for handling any new alcohol brands that are created, according to the sources. Coca-Cola declined to comment on the confidential agreement.”
Reyes Holdings – parent company of the Reyes Beer Division, the country’s largest beer distributor, which sells Molson Coors and Constellation Brands products in many of its markets – owns Reyes Coca-Cola Bottlers, which serves California, Nevada, Minnesota, Wisconsin, Michigan, Illinois, Indiana, Kentucky and Tennessee. The bottlers and beer distributors are separate corporate entities.
Evercore ISI analyst Robert Ottenstein noted recently Coke’s acquisition cycle indicates the company “might consider a third scaled initiative in the medium term, possibly in the alcohol space.” Four years ago, Coca-Cola acquired Costa Coffee for $4.9 billion, and last year acquired BodyArmor for $5.6 billion.
Deepening its ties to the bev-alc industry could help the company in its “mission to provide ‘Beverages for Life,’ expanding day parts and occasions,” Ottenstein wrote.
Coke’s licensing-driven approach to entering the bev-alc industry differs greatly from its competitor, PepsiCo. Last year, Pepsi and Boston Beer Company announced plans for the latter to license the intellectual property for its Mountain Dew brand to create Hard MTN Dew. To distribute the product, Pepsi has formed Blue Cloud Distribution (BCD), a new multistate wholesaler that will also sell Lipton Hard Iced Tea, which FIFCO USA will produce under a licensing agreement with Pepsi.
The creation of BCD has ruffled feathers among members and leadership of the National Beer Wholesalers Association (NBWA), who allege Pepsi’s ability to pay slotting fees for its non-alc products may muddy the waters for retailers when it comes to placements for Hard MTN Dew. Leaders also displayed images of Hard MTN Dew on display alongside products for children, including Kool Aid Jammers and Hot Wheels toy cars.
BCD pushed back against claims made during the NBWA convention, saying that key facts were “misrepresented’ and that it is committed to “following all government regulations for licensing and business operations, while providing expanded choices for consumers in this growing market.”
As lines between non-alc and bev-alc products continue to blur, the Distilled Spirits Council of the United States (DISCUS) last week issued guidelines for “responsible advertising, marketing and merchandi[s]ing of new alcohol crossover products entering the marketplace.”
“The booming consumer interest in ready-to-drink alcohol beverages has resulted in a number of new products, including some alcohol crossover products launched by traditional soft drink producers and beverage alcohol companies,” DISCUS wrote. “These crossover brand products often retain many of the same branding elements and consumer recognition as their non-alcohol beverage counterparts.”
DISCUS recommended the following practices for suppliers marketing crossover products:
- “Develop product packaging and branding that is clearly and easily distinguishable from non-alcohol beverage counterparts.
- Include information on product labels, packaging, and promotional materials that makes it clear that it contains alcohol, such as prominently displaying the type of alcohol contained in the product, the percentage of alcohol by volume present, general notices that the product contains alcohol, and/or inclusion in the statement of composition.
- Review packaging and advertising campaigns to ensure that they primarily appeal to legal drinking age adults, and not to individuals under the age of 21.
- Review packaging and advertising campaigns to ensure that they comply with all other Code provisions, including the Responsible Placement and Content provisions.”
The trade organization also issued guidelines for retailers, who are the last line of defense against crossover products being merchandised in potentially inappropriate ways:
- “Do not display or promote crossover brand products in a manner that could create confusion with the non-alcohol beverage counterpart. If necessary, identify to consumers that the crossover brand product contains alcohol.
- Crossover brand products should not be displayed or promoted in areas that may primarily appeal to children, such as a toy aisle.
- Ensure retail outlet employees can differentiate crossover brand products from their non-alcohol beverage counterparts.
- If feasible, program crossover brand product barcodes to indicate that they contain alcohol when they are scanned at checkout so that the retail outlet employee confirms that the consumer is of legal drinking age.”