Dive Brief:
- Molson Coors has invested in L.A. Libations, a nonalcoholic beverage incubator, according to The Wall Street Journal. While financial terms weren't publicly disclosed, the paper reported that sources with knowledge of the deal said the stake was 49%.
- The California-based maker of better-for-you beverages such as aloe vera water and turmeric seltzer could help the maker of Coors Light and Miller Lite pivot to its new identity as more than just a beer manufacturer, The Wall Street Journal said. Molson Coors plans to combine its U.S. and Canadian operating units in January and rebrand as Molson Coors Beverage Company.
- L.A. Libations is on the "leading and bleeding edge of where beverages are going," Pete Marino, president of emerging growth for Molson Coors, told the newspaper. He added the minority stake means the company will be able to bring new nonalcoholic beverages to market faster than if it relied on its own R&D.
Dive Insight:
L.A. Libations said on its website the multi-year deal includes significant equity investment from Molson Coors and gives the brewer access to its brand creation and brand-building expertise. Danny Stepper, L.A. Libations' CEO, told BevNET the company had spoken to most major U.S. beverage companies before deciding to work with Molson Coors.
"It’s new to them so this marriage lets them stay focused on what they’re really good at. But at the same time, it gives them equity in non-alc brands, non-alc customer relationships, and non-alc brand creation capability over night," Stepper said.
This deal could significantly benefit Molson Coors. In addition to the minority stake in L.A. Libations, the company gets a piece of any products created by the beverage incubator and the option to acquire new brands. L.A. Libation's products include Aloe Gloe aloe vera water, Arya turmeric seltzer and Arriba Chelada tomato and clam juice drink. Should new nonalcoholic beverages from the partnership prove popular with millennials and Gen Z, the arrangement may boost revenues for Molson Coors, which has been challenged by falling demand for its popular brews.
L.A. Libations has excelled in spotting trends and quickening the development of upstart brands. It served as an accelerator for Body Armor sports drinks and Core Nutrition before they were picked up by Coca-Cola Co. and Keurig Dr Pepper, respectively, The Wall Street Journal said. Molson Coors is no doubt hoping to replicate that success.
Molson Coors' revenue picture hasn't been encouraging, and major changes are in the works. In an announcement last month, the company said it would reduce its workforce by 400 to 500 jobs, streamline its corporate structure and change its name to better reflect its intention to expand beyond beer.
CEO Gavin Hattersley said in a statement the company's business was "at an inflection point" and needed to shift direction. "We can continue down the path we've been on for several years now, or we can make the significant and difficult changes necessary to get back on the right track," he said.
At the same time, many of Molson Coors' competitors are moving into alternative beverages so investing in the renowned incubator is a way to expedite that development and potentially give itself an advantage over them.
Bud Light maker AB InBev has diversified by getting into energy drinks, canned cocktails, cold-brew coffee and iced tea, The Wall Street Journal noted. Molson Coors has previously invested in nonalcoholic beverages by buying Clearly Kombucha and Aspall Cyder and taking a minority stake in Bhakti ready-to-drink chai tea.
Cannabis-infused beverages could be another way to boost its bottom line. Molson Coors has partnered with Truss Beverage and cannabis producer Hexo on a CBD-infused spring water debuting next month in Canada. CBD could be on the table at some point for L.A. Libations, Stepper told BevNet.
Hattersley just took over from Mark Hunter, a beer industry veteran, September 27. A month later he announced the restructuring and the push to expand beyond beer. Now roughly three weeks later he made the L.A. Libations investment.
Hattersley is wasting little time making his mark on the company, a move clearly indicative of the fact that he knows Molson Coors needs to do much more to position itself for future success as consumer tastes and preferences change. As people drink more wine and spirits while cutting down on their overall alcohol consumption, Big Beer makers have increasingly found themselves on the outside looking in. For Molson Coors and other alcohol makers, bold changes such as an investment in an incubator like L.A. Libations are necessary.