Pepsi teases bigger alcohol push after Hard Mountain Dew launch

After what appears to be an encouraging launch of alcohol-based Mountain Dew earlier this year, the brand’s owner PepsiCo (PEP) may be about to push deeper into the ready-to-drink booze space.

“I think we have a great product that they [Boston Beer] have developed,” PepsiCo CEO Ramon Laguarta told analysts on an earnings call Tuesday. “We’ve licensed the brand to Boston Beer, and we’re providing distribution in some states. Execution is very good. The product is turning very well, high share in those states. So it makes us feel positive about the potential of Hard Mountain Dew and the relationship with Boston Beer.”

Earlier this year, PepsiCo launched Hard Mountain Dew in partnership with Boston Beer (SAM). The 5% alcoholic drink is currently available in Tennessee, Florida, and Iowa.

“Obviously, we get encouraged by this [performance], and we’re working on multiple new innovations that will come to the market shortly. We think in alcohol, we can bring new brands to the market. We don’t want to be distributing a lot of brands. That’s not our intention to have many, many brands and a very complex set of brands in our distribution. We’d rather focus on a few large consumer opportunities and put them through what is a very powerful DSD [direct distribution] system,” explained Laguarta.

The ready-to-drink cocktail wars are heating up as PepsiCo and Coca-Cola (KO) begin to dive deeper into a sector they had long shunned.

Coca-Cola and Jack Daniels owner Brown-Forman (BF-B) in June inked a deal to distribute a ready-to-drink Jack & Coke cocktail. The product — which channels the spirit of drink ordered at bars for decades — will boast about 5% alcohol, similar to Hard Mountain Dew.

“There is a Jack and Cola product that’s already quite size-able for us. It’s a big business for us around the world. It’s particularly big in places like Germany and Australia. But certainly, putting the Coke label on the can is a game changer and something that we’re really excited about,” Brown-Forman CEO Lawson Whiting said on Yahoo Finance Live.

The companies stated that the rollout will begin in late 2022 in Mexico, followed by “select” markets worldwide in 2023.

The total volume of sales of spirits-based ready-to-drink cocktails surged 226% from 2016 to 2021, according to data from Mintel. In 2021, about 50% of adults over the age of 22 consumed a ready-to-drink cocktail, Mintel’s data shows, up from 40% in 2018.

Coca-Cola also inked a deal earlier this year with beer and wine maker Constellation Brands (STZ) to distribute alcoholic Fresca. This comes on top of a new deal between Coca-Cola and Molson Coors (TAP) for Topo Chico hard seltzer.

“First of all, Fresca fits in with a lot of consumer trends,” Constellation Brands CEO Bill Newlands told Yahoo Finance Live about the launch. “It’s refreshing, it’s convenient, and it’s low calorie obviously. We were surprised that over 50% of Fresca drinkers already mix it with alcoholic beverages. So it seemed like a natural fit to be able to bring that to market in ready-to-serve form.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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