The Coca-Cola Company is “not here to crash [beer distributors’] party,” Dan White, Coca-Cola, North America chief of new revenue streams, said in a fireside chat with National Beer Wholesaler Association (NBWA) president and CEO Craig Purser Monday during the NBWA’s annual convention.
White discussed the strategy around Coca-Cola’s “firewalled” alcohol subsidiary Red Tree Beverages, launched this summer. The launch caused a stir, particularly with beer distributors, with industry members believing the subsidiary was Coca-Cola’s version of PepsiCo’s Blue Cloud Distribution.
However, White “wouldn’t be on stage” at NBWA’s annual conference if that were the case, he said.
“What’s going to be distinctly different about us is that we plan to use what the industries had for decades or centuries to our advantage, not to discredit any of that model that’s been built,” White said. “We believe very much in the three-tier system.”
Additionally, Coca-Cola sees the best way it can participate in bev-alc is “through relationships” between its non-alc brands and the bev-alc market like the ones the soda giant has made with Molson Coors (Topo Chico Hard Seltzer, Simply Spiked), Constellation Brands (Fresca Mixed) and Brown-Forman (Jack & Coke).
“We like to think that there’s business, like the distribution business or the selling business, that other companies can probably do a little better than we can,” White said.
“We’re not here to crash the party,” he continued. “We want to bring distinct brands with distinct trademarks to the business; we want to ensure that we keep those very separate, that’s through our authorized manufacture process. … And then we want to do it responsibly.”
White reiterated comments that he made during Molson Coors’ annual distributor convention and sentiments shared by Coca-Cola chair and CEO James Quincey during the company’s Q2 earnings call with investors. Quincey said the creation of Red Tree was “more of technicality than some new big step” and “isn’t a change of strategy” or a “vehicle to distribute in the U.S.”
Coca-Cola’s competitor PepsiCo has faced criticism from the NBWA for its use of Blue Cloud over independent beer wholesalers for distribution of its bev-alc products, including Hard MTN Dew (made with Boston Beer Company) and Lipton Hard Iced Tea (made with FIFCO USA).
Blue Cloud has also faced hurdles getting to market, with some states denying licenses. And this summer, the Virginia Alcoholic Beverage Control Authority ruled that Boton Beer violated the state’s Beer Act by using Blue Cloud to distribute Hard Mountain Dew, rather than its existing beer distributor network in the state. The ruling was in response to a complaint filed by Premium Distributors and Blue Ridge Beverage Company.
Coca-Cola’s interest in bev-alc is consumer driven, sparked by a shift in consumer behavior during the COVID-19 pandemic toward consuming beverages at home, and drinking more ready-to-drink canned cocktails, White said.
“When we look at the opportunities across the overall beverage landscape, we’re in the non-alcohol business, that’s about $300 billion, and the alcohol business, about $300 billion,” White said. “And when you’re looking for growth, you look out to where the consumers are today and where they may be going.”
Going forward, White does not “know for sure what the overall plays are” for Coca-Cola, but he knows the company “will follow the consumer to the space[s] that we believe are the biggest opportunity.”
White added that flavored-malt-beverages (FMB) pose some of the biggest opportunities right now, “by virtue of availability,” as FMBs can be sold in more places in most states than spirits-based offerings.