Two giants of the non-alcoholic beverage industry, Coca-Cola and PepsiCo, have set their sights on a new market by introducing ready-to-drink (RTD) alcoholic beverages. For over a century, both companies have exclusively focused on non-alcoholic offerings, but recent market trends and the allure of the growing RTD sector have enticed them to change course. This strategic shift marks a significant milestone for both brands and hints at broader changes within the alcoholic beverage industry.

Coca-Cola’s Alcoholic Ventures

Coca-Cola made its first foray into the alcoholic beverage segment in 2021 with the successful launch of Topo Chico Hard Seltzer, a collaboration with Molson Coors. This move proved to be a game-changer, quickly capturing a significant market share amidst a sea of competitors. Buoyed by the success of Topo Chico, Coca-Cola has announced the upcoming release of two new alcoholic drinks – Fresca Mixed and Simply Spiked. These will be Coca-Cola’s first spirit-based alcoholic beverages, further solidifying their position in the burgeoning RTD alcoholic market.

PepsiCo’s Entry into the Arena

Not to be outdone, PepsiCo followed suit and unveiled its inaugural alcoholic beverage, Hard Mtn Dew, in March 2022. This move was swiftly followed by PepsiCo’s entry into the production of alcoholic beverages under the Rockstar brand. PepsiCo’s entry into the alcoholic market was a significant development, intensifying the long-standing rivalry between the two soda giants and marking their transition into new territory.

RTD Market Boom

The RTD alcoholic beverage market has experienced an explosive surge in popularity in recent years. From 2016 to 2021, the sales of flavored malt beverages (FMBs) increased by a staggering 364%, while RTD spirit-based cocktails saw a remarkable 226% growth. These figures position both types of beverages as some of the fastest-growing segments within the entire alcoholic beverage industry.

Gaining an Edge in a Crowded Market

The RTD alcoholic beverage sector may be flourishing, but it’s also fiercely competitive, with numerous new product launches, particularly in the hard seltzer category. Securing consumer attention and loyalty has become a challenging task. Here, Coca-Cola and PepsiCo possess a distinct advantage with their established consumer base and brand recognition. Consumers often seek familiar brands, especially during times of economic uncertainty, as they want to spend their money on beverages they trust and enjoy. A remarkable 26% of consumers consider a “well-known brand” as an essential factor when purchasing an RTD alcoholic beverage.

According to experts, launching RTD alcoholic beverages under an existing brand name provides consumers with a sense of trust and familiarity, which can be a powerful driving force for sales.

Unlocking New Consumption Occasions

Coke and Pepsi have long dominated non-alcoholic beverage occasions, often serving as popular mixers with alcoholic drinks. However, the carbonated soft drink (CSD) market offers limited growth opportunities. By venturing into the alcoholic beverage space, both companies can unlock new consumption occasions for their products.

According to Mintel Trend, a market intelligence platform, this move is a part of a larger trend where companies expand their brands into new categories to drive sales and potentially attract new consumers. For example, PepsiCo’s Hard Mtn Dew taps into the spending power of its existing dedicated consumer base. On the other hand, Coca-Cola’s Fresca Mixed aims to bring attention to a fast-growing but relatively small brand in their CSD portfolio, while Simply Spiked aims to add a mature touch to the nation’s top-selling juice brand.

Brewers Leverage Expertise and Counter Beer’s Decline

The entry of non-alcoholic brands into the alcoholic beverage market also signals a shift in strategy for the largest brewers. With beer losing market share to spirits, leading beer companies like Molson Coors and Anheuser-Busch are diversifying their offerings. By collaborating with Coca-Cola and PepsiCo, these brewers can leverage their expertise in navigating the complex three-tier distribution system and expand their product range within the rapidly growing RTD alcoholic beverage segment.

“Partnering with Coke and Pepsi enables brewers to tap into the booming RTD market and offset the decline in beer sales, presenting a win-win situation for all parties involved,” Caleb Bryant, a market analyst explains.

The entry of Coca-Cola and PepsiCo into the RTD alcoholic beverage market has ushered in a new era of competition and innovation. As consumer preferences evolve, these industry titans are actively seeking to diversify their portfolios and capitalize on new opportunities. With the battle for market share heating up, the beverage landscape is set to witness further exciting developments in the coming years.