Coca-Cola acquires Mexico's Topo Chico sparkling water for $220M
- Coca-Cola North America is acquiring Mexico’s sparkling water brand Topo Chico, according to Food Bev Media. Coke paid $220 million to Arca Continental, the second largest Coca-Cola bottler in Latin America, which owns the rights to the Topo Chico brand, Forbes reported.
- Coca-Cola has a long history with Topo Chico. The first bottle of Coca-Cola in Mexico was bottled at a Topo Chico facility in the 1920’s. The premium brand will continue to be imported from the same natural source in Cerro del Topo Chico in Northern Mexico after the deal closes.
- “As we accelerate our evolution to a total beverage company, we’re investing in brands that are on trend,” Matt Hughes, vice-president of emerging brands and incubation for Coke’s Venturing & Emerging Brands, told the publication. “Topo Chico is a fast-growing brand with a lot of passion behind it and growth runway ahead.”
Coca-Cola’s new CEO James Quincey vowed to move Coca-Cola beyond soda and remake it into "a total beverage company." It's easy to see why: Coca-Cola's revenue has decreased during the past four years, and soda sales in general are at a 30-year low as consumers turn away from the sugary drink. Coca-Cola and its competitors are quickly branching out into healthier beverage alternatives, such as bottled water, tea, dairy and juice to balance out their beverage lineup. The latest acquisition for Coke is longtime Mexican bottling partner, Topo Chico.
The premium sparkling water company will be a nice addition to Coke’s bottled water lineup. Currently, the company owns Dasani, Glaceau’s Smartwater, and Ciel, a still water available in Mexico but not widely known in the U.S. The premium sparkling water category is growing by double-digits, and this acquisition will help Coke get a bigger stake in the game. It also will better position the company to compete against the popular sparkling water brand La Croix.
Forbes reported an estimated 250 million bottles of Topo Chico were sold in the U.S. last year, and the brand has recently expanded beyond its core market of Texas. Beverages such as La Croix and Topo Chico are popular with consumers because of what they don't have — calories, sugar, salt or artificial colors or flavors.
As soda sales have fallen in recent years, interest in sparkling water has soared. There are countless brands trying to differentiate themselves on crowded store shelves and through online retailers like Amazon. Some manufacturers try to stand out by highlighting where their water is sourced from, while others rely on unique flavors or bottle design.
As popular as sparkling water is right now, it’s still generates just a fraction of revenue for Coca-Cola. Soda still represents 70% of all sales.
Still, Coke sees consumers are moving away from high-calorie soft drinks and toward healthier, low-sugar options. Coke’s acquisition of Topo Chico is another sign that the sparkling/value-added water segment will continue to grow. Given Quincey's comments to diversify Coca-Cola's portfolio, it wouldn't be a surprise to see the company purchase more businesses such as Topo Chico.