Molson Coors Beverage Company believes that it finally has a portfolio of brands to win in the hard seltzer segment, after announcing a multiyear partnership Tuesday that allows the company to use the Topo Chico trademark to produce, market and distribute a much-anticipated hard seltzer brand in the U.S.
“We think between Vizzy, Coors and now Topo Chico, we have a portfolio that’s really ready to fight and go after the seltzer category,” Molson Coors chief marketing officer Michelle St. Jacques told Brewbound Tuesday afternoon.
St. Jacques said the partnership with Coca-Cola fits into the company’s ongoing strategy to expand its presence in the above premium space. The move also shows the company’s commitment to a portfolio strategy to tackle a hard seltzer segment that has thus far been dominated by Mark Anthony Brands’ White Claw and Boston Beer Company’s Truly Hard Seltzer, which combined make up nearly 75% of the hard seltzer segment.
A portfolio approach is similar to the strategy taken by Molson Coors’ long-time rival Anheuser-Busch, which has unleashed a litany of hard seltzer brands led by Bud Light Seltzer.
For Molson Coors, the company has gained traction in the segment with Vizzy Hard Seltzer, claiming the No. 5 in the hard seltzer segment. With Vizzy, which launched in April and is made with antioxidant vitamin C from acerola superfruit, the company is vying for the better-for-you drinker.
Year-to-date through September 6, off-premise dollar sales of Vizzy Hard Seltzer’s variety pack have topped $35.7 million.
“We’re really thrilled with the results so far,” St. Jacques said. “We think we’ve just scratched the surface.”
Molson Coors also launched Coors Seltzer in late August, trading on the equity of its namesake beer brand. The Coors Seltzer variety pack has already racked up $811,325 between late August and early September.
“We feel like Coors is really well-positioned to go after being the No. 1 beer brand in the category,” St. Jacques said.
With Topo Chico Hard Seltzer, slated to launch in the first half of 2021, Molson Coors will be attempting to convert existing drinkers of the non-alcoholic mineral water into consumers of the alcoholic version, St. Jacques said.
“Our priority is going to be focusing on people who know and love the brand already,” she said. “They have an incredible following of people who love the brand, love the story, love the taste. And our goal will be to bring those into the seltzer category as much as possible.
“We really believe that it’s going to bring a whole new set of consumers to the hard seltzer category,” she continued.
Although Topo Chico has a strong presence in the southwestern U.S., St. Jacques said the company believes it has “full national potential.” Still, the company will focus on the markets where Topo Chico “is most known and loved.”
“We’re working through that as we speak,” she said, declining to say where.
The initial production and packaging of Topo Chico Hard Seltzer in the U.S. will be handled by a third-party contract producer, which St. Jacques declined to disclose. However, she said producing at a third party “will not interfere with our ability to deliver both Vizzy and Coors Seltzer out in the marketplace.”
“We previously announced as a company that we began a multimillion dollar investment to expand our own Molson Coors seltzer capacity by 400% in our Fort Worth brewery,” she said. “So this investment is going to allow us to transition production of Vizzy, of Coors Seltzer and Topo Chico Hard Seltzer production when we think the time is appropriate.”
The deal sparked faint praise and raised questions from one Wall Street analyst.
Goldman Sachs analyst Bonnie Herzog in a report Tuesday called the deal a surprise from the Coca-Cola side, as many wholesalers expected the soda giant to leverage its existing bottling network, namely the Reyes Beverage Group.
For Molson Coors, Herzog called the deal “a modest positive,” creating “an incremental revenue profitability stream.”
Nevertheless, Herzog ticked off several “risks” associated with the deal, questioning Molson Coors’ ability to prioritize Topo Chico seltzer alongside Vizzy and Coors Seltzer and raising questions about Molson Coors’ ability to execute after facing “persistent out-of-stocks across its supply chain.” To be fair, essentially every major brewer has faced supply chain issues during the pandemic.
Herzog also tempered excitement for Topo Chico’s launch and ability to be a player in a segment dominated by two brands and with an increasing number of new competitors. Still, she estimated that the brand could claim a 5% share of the U.S. hard seltzer market by 2025 and provide a $1.1 billion retail sales opportunity. Additionally, she wrote that Topo Chico has an opportunity to breakthrough with Latino consumers.
In addition to Topo Chico, Vizzy and Coors seltzers, Molson Coors plans to launch a fourth in early 2021: Proof Point, a spirits-based hard seltzer brand that checks in at 5% ABV, according to the company’s blog.
However, the Henry’s Hard Seltzer brand, an early entrant into the segment for Molson Coors, is no longer a priority brand for the company, St. Jacques said.