- Coca-Cola announced it will launch Topo Chico Hard Seltzer in select cities in Latin America later this year. The hard seltzer will appear in the U.S. market in 2021, according to CNBC.
- This product launch coincides with Coke’s announcement that it will continue culling underperforming brands in its portfolio. On the company’s second quarter earnings call last week, Coke's CEO James Quincey said, “We are shifting to prioritizing fewer but bigger and stronger brands across various consumer needs.” He named Topo Chico as a rising star in the company portfolio.
- When this seltzer debuts in the U.S. it will be Coca-Cola’s first foray into alcohol in its home country since divesting its Wine Spectrum business in 1983.
Hard seltzer exploded last summer with sales growing about 164% in the four weeks ending July 30, according to Nielsen data. Following those sales numbers in a category dominated by Mark Anthony Brands-owned White Claw and Boston Beer’s Truly, many other beverage manufacturers jumped into the space.
Big alcohol companies like Constellation Brands and AB InBev have been launching seltzer brands to get in on the trend and bolster flagging beer sales. However, the pull of this drink is so great that beverage companies in different segments, including energy drink maker Monster, are rumored to also be looking into the space. Coca-Cola is the latest entrant, and it is coming in behind this influx of big-name brands.
Despite being a latecomer to the game, Coca-Cola is using the well-loved Topo Chico brand, which it acquired in 2017, as a springboard to launch its hard seltzer concept. The sparkling water brand already has a cult following, so it is a wise move on Coke’s part to capitalize on the brand’s visibility with consumers to introduce a new spiked beverage line.
Although this is Coca-Cola’s first alcoholic beverage launch in the United States, it is not the first time that the company has cracked into alcohol. In 2018, Coke released a canned alcoholic beverage called Lemon-Do in Japan. That product is a combination of carbonated water and the Japanese liquor shochu, and different varieties have different levels of alcohol — 3%, 5% and 7% ABVs. After initially testing the canned cocktail on the southern Japanese island of Kyushu, the beverage was rolled out nationwide last summer.
While Coca-Cola has no plans to bring Lemon-Do to the U.S., this experiment gave the company a taste for success in the alcohol space. For this launch, Coca-Cola will be tapping into two bubbling trends simultaneously: hard seltzer and sparkling water.
Sparkling water has proved to be a bright spot for Coca-Cola as it has seen slumping sales in some of its core areas. While the company has revamped its longtime Fresca brand to introduce new flavors and packaging designs, added new flavors to its Diet Coke line and switched up Coke Zero with Coca-Cola Zero Sugar, the Atlanta-based company is still looking to new places for profit. In its most recent earnings announcement, the company reported a 28% decline in net revenue, a drop propelled in large part by the global pandemic that all but halted purchases outside of the home, which the company said represents about half of its revenue.
Even with signs of improvement announced as lockdowns ease, the search for bottom-line growth is real. Quincey said on the earnings call half of Coke’s 400 master brands have “little to no scale” and only comprise 2% of the company’s total revenue. Some of these still require investment, he said. Some are like Odwalla, which he cited as an example of a struggling brand that was discontinued to free up space to prioritize core brands, strengthen supply chain resiliency and create more investment for profitable and rising brands. Coca-Cola's pruning work is ongoing. CNN Business reported the company eliminated 275 “zombie” products in 2019.
Investing in the competitive hard seltzer space will provide a growth runway for Coca-Cola. Hard seltzer growth is projected to continue. UBS expects the category to reach $2.5 billion by 2021, which would mean a 66% annual growth rate and a consumption spike from 14 million cases last year to 72 million by 2021, according to an UBS analysis cited by Markets Insider.