PepsiCo and FIFCO USA have struck a licensing agreement to allow the latter to produce a hard iced tea using the Lipton brand, which will roll out next year through Pepsi’s Blue Cloud Distribution.
“Connecting America’s favorite tea brand with FIFCO’s expertise in this hot and growing segment allows us to leverage 130 years of brand history that consumers already know and love,” Piotr Jurjewicz, CEO of FIFCO USA, said in a press release. “Our FIFCO USA product development team stayed true to Lipton’s high quality and great taste. And based on our consumer research, we expect a strong brand launch and great response from consumers.”
Lipton Hard Iced Tea will check in at 5% ABV, similar to the segment leader, Boston Beer Company’s Twisted Tea. It will launch with four flavors: Lemon, Peach, Strawberry, and Half and Half, FIFCO USA said.
Hard tea has nearly doubled its share of off-premise beer category dollars since 2018, according to NielsenIQ. For the 52 weeks that ended September 10, hard tea accounted for 1.8% of beer category sales, up from 0.9% in 2018.
The segment’s share gains are accelerating. In the four weeks that ended September 10, hard tea accounted for 2.2% of beer category dollar sales, according to NielsenIQ. Those gains are driven by Twisted Tea, which has increased off-premise dollar sales +29.2% year-to-date through September 4, according to market research firm IRI.
Hard Lipton Iced Tea won’t be Pepsi’s first foray into the increasingly crowded beverage-alcohol/soft drink crossover territory. Earlier this year, the company partnered with Boston Beer to launch Hard MTN Dew, which has rolled out to initial markets via Pepsi’s Blue Cloud network. Lipton Hard Iced Tea will be the multistate wholesaler’s second offering.
Blue Cloud’s first year has included more regulatory snags than expected, and the wholesaler has been slow to add new states. It launched in Virginia, its newest state, in mid-September, according to a post on Hard MTN Dew’s Instagram account. Blue Cloud’s other markets include Florida, Tennessee, Iowa, Arkansas, Oklahoma, Minnesota, Missouri and Las Vegas.
Pepsi first approached Boston Beer with the Lipton opportunity, but the company declined due to its similarities to Twisted Tea, according to a note from CEO Dave Burwick to staff on Friday.
“We chose not to participate because we already have the dominant player in that space in Twisted Tea,” he wrote. “We strongly believe it wouldn’t make sense for us to launch a brand that 1) would compete directly with Twisted Tea, and 2) would compete with our wholesaler partners.”
For FIFCO USA, the launch represents a renewed commitment to the flavored malt beverage (FMB) segment, where the company has found success with its Seagram’s Escapes brand. The Seagram’s Escapes variety pack is the fourth best-selling FMB brand (excluding hard seltzers) in dollar sales at multi-outlet grocery and convenience stores year-to-date through September 4, according to IRI. However, the SKU’s sales have declined -10.1%, to $70 million, compared to the same time last year.
FIFCO USA is the 11th largest beer category vendor. YTD through September 4, its dollar sales have declined -10.4%, to $277.1 million, according to IRI. The Rochester, New York-headquartered company’s portfolio includes Labatt USA, Genesee Brewing and Magic Hat Brewing. FIFCO has deprioritized the Magic Hat brand, offering the craft legacy brand for sale, as well as shuttered taprooms for its other craft brands, Pyramid Brewing and Portland Brewing. The latter was discontinued.