Why did Pepsi And Coca-Cola's war burn into alcoholic beverages?

Financial Associated Press (Shanghai, editor Zhou Ling) news, PepsiCo and Boston Beer Co. (Boston Beer Co.) on Tuesday (10th) The announcement that the two companies will cooperate to launch an alcoholic beverage called Hard Mtn Dew also means that the "war" between PepsiCo and Coca-Cola has burned into the alcohol field.

Specifically, Boston Brewery will be responsible for developing and producing the drink, while PepsiCo will create a new entity to sell and promote the product. Judging from the promotional images, the drink has an alcohol content of 5% and is free of caffeine and sugar, and the product is expected to be on the shelves in early 2022.

The two companies say they worked together because they "understand the importance of delivering new, groundbreaking innovations (drinks) to meet the changing tastes of drinkers." ”

According to a Boston Beer spokesperson, the alcoholic beverage, available in plain, watermelon and black cherry flavors, will be "marketed to adults of legal age and sold alongside other alcoholic beverages." ”

PepsiCo first hinted at a possible entry into the alcohol sector in October last year, when PepsiCo CEO Ramon Laguarta said on an analyst conference call that the company would consider launching alcoholic beverages. "We're looking at every opportunity in the industry, the trend a few years ago was industrial hemp (CBD), now it's more alcohol. We have a lot of opportunities ahead of us, and all of them are researching. Laguarta said.

He said that in the face of so many opportunities in the industry, he was thinking: "The first question is whether we want to go into the army." Secondly, it is very important who we work with and with whom we are working to maximize our value. ”

Laguarta's remarks come just after rival Coca-Cola announced that it would produce Theo Chico Hard Seltzer, the first alcoholic beverage in decades, for U.S. consumers through a partnership with Molson Coors Beverage.

In fact, as early as 2018, Coca-Cola launched the alcoholic beverage "Chu-Hi" in Japan. Coca-Cola also responded at the time that they would always focus entirely on non-alcoholic beverages, and that "Chu-Hi" was a small-scale trial of a specific part of a specific market, as Japanese users were very fond of drinking drinks with alcohol.

Why the rush to enter alcoholic beverages?

An indisputable fact that PepsiCo and Coca-Cola are competing to enter alcoholic beverages is that with the change of consumer concepts, their main business, carbonated beverages, is facing falling out of favor, so the two beverage giants have to adapt to the trend and find new tracks.

In contrast, in 2020, alcohol consumption in the United States saw the biggest increase in nearly 20 years.

According to the latest findings of research institute IWSR, total alcohol consumption in the United States increased by 2% in 2020, the largest sales growth since 2002. The growth of alcoholic beverages is related to factors such as taste, convenience, and increased drinking occasions at home.

"A key driver of alcohol consumption in the U.S. is taste." Brand Rand, chief operating officer for the Americas at IWSR, said. "From beer and vodka to American whiskey, the flavoring (consumption) category is significantly better than the traditional non-flavored category," he said. ”

The IWSR report shows that sales in the U.S. category, including vodka and whiskey, grew by 4.6 percent in 2020, the biggest increase since 1990.

Of particular note is that alcohol consumption (RTD) – alcoholic pre-mixed beverages, including alcoholic sodas, pre-mixed cocktails, wine-flavored beverages, alcoholic coffee/tea, etc., increased sales in the U.S. by 62.3% in 2020, with alcoholic soda drinks increasing by 130%.

The IWSR report said that in terms of consumption, alcoholic sodas surpassed spirits to become the second largest alcoholic beverage in the United States and is expected to surpass wine by the end of 2021.

In fact, the development of alcoholic sodas can be said to be a microcosm of the rise of low-alcohol alcohol. A 2019 Report on Alcoholic Beverage Consumption Habits by mintel research institute found that 57% of consumers said they consume alcoholic beverages to relax.

Mintel food and beverage analysts pointed out that unlike traditional liquor and beer, pre-mixed liquor has a lower alcohol content, and experiences such as fruity flavor and bubbles will be easier to eat. For both female consumers and younger consumers, these products are friendly entry options for trying out alcoholic beverages.

From the perspective of market layout, while PepsiCo and Coca-Cola are entering alcoholic beverages, many leading brewers are also launching fruit-flavored beer brands, such as Carlsberg's Summer Troubles and Yanjing's ON/OFF fruit beer.

According to Nielsen IQ, annual sales of alcoholic sodas were about $500 million in 2018 and have soared to more than $4 billion by last year. Multiple analysts expect that number to exceed $8 billion over the next four years.