- PepsiCo will launch its new coffee-infused cola concept, Pepsi Café, across U.S. retailers in April for a limited time.
- The beverage will blend Arabica coffee with Pepsi in 12-ounce cans and come in two flavors: Original and Vanilla. The blended beverage will have twice the amount of caffeine as a regular Pepsi.
- This is the second time Pepsi has released a coffee-cola beverage. In 1996, the company released Pepsi Kona in Philadelphia but discontinued the product a year later due to low sales.
Despite its first iteration of coffee and cola failing, PepsiCo seems to think today's consumers will be more interested in the mixed beverage. That could be a good bet since today's consumers are drinking more coffee and less soda. An industry survey last year found 64% of American adults drink a cup of coffee each day, which is 2% higher than 2017 and the highest level since 2012.
This new beverage could check several boxes for consumers. According to a new report by Imbibe, the future of beverages in 2020 is functional. Coffee, with its associations to brain health, anti-inflammatory properties and antioxidants, can fall into this trend and attract consumers looking for additional benefits from their food and beverage. Ready-to-drink options are also the fastest growing segment of the coffee category, growing 31% in the last two years.
As coffee grows, soda's popularity is fizzling out, so fizzy beverage companies are making investments in the space. This year, Coca-Cola closed its $5.1 billion purchase of Costa Coffee, a British coffeehouse chain, and then released an RTD beverage under the brand. The Atlanta-based company also released Coke Plus Coffee into international markets. Although Coke's coffee-flavored cola has not arrived in the U.S., the soda giant said sales have been promising enough that it plans to introduce the drink into 25 international markets by the end of 2019, CNN Business reported.
Pepsi has likely seen the international success that Coke has had with its coffee-cola and decided to roll out its own product starting in the United States. While the company is launching the product nationwide, as of now it will only be for a limited time. However, with demand for coffee continuing to increase and hectic schedules demanding more on-the-go jolts of energy, now seems to be an optimal time to introduce a chilled, RTD option that includes bean-based caffeine.
Getting in ahead of Coca-Cola in the U.S. could be advantageous for Pepsi. The two long-term rivals have been vying for consumer loyalty for decades, and the race to claim coffee-cola dominance is the latest battle. Until Coke offers an alternative, PepsiCo will enjoy a first mover advantage. If it is successful, the brand will be associated with introducing this new category into the U.S. and could expand to more than a limited-edition offering.
Besides the flop that was Pepsi Kona, Pepsi tried another variant internationally called Pepsiccino in 2004. That product also failed to take off. However, CNBC reported that both failed iterations inspired the new Pepsi Café, which took more than a year and half to develop. Similarly, Coke tried Coca-Cola Blak in 2006, but by 2008 the company had discontinued the beverage.
This time around, things may be different. With consumers more accustomed to beverages that blur lines and blend beverages, like CBD-infused beer, they may be more receptive to a mix like Pepsi Café. If that proves to be the case, this hybrid caffeinated beverage could help PepsiCo's bottom line.
Already, the company has seen more revenue while overall sales volumes have continued to tumble. In the company's most recent earnings report, volumes at PepsiCo’s North America beverage unit fell 9%, but revenue rose 3.5% because of new product offerings. PepsiCo released berry, lime and mango-flavored versions of its classic soda this year, as well as smaller cans, which bring in more profits. Adding another successful beverage option to the mix will further help fatten the company's earnings as it continues to combat the shrinking popularity of soda.