China Consumer

A new fizz

Can Coca-Cola’s alcoholic drink be successful in China?


Coca-Cola’s booze offering

Coca-Cola has been selling sweet, dark soda since 1886. The beverage giant dabbled in wine in 1977, buying Sterling and Monterey Vineyards in California as well as New York’s Taylor Wine and creating a unit called Wine Spectrum. The subsidiary, which produced and bottled mid-priced wines and even wines in cans for airlines, was short-lived. Coca-Cola sold the whole division to Seagram & Sons in 1983.

That hasn’t stopped the soft drink firm from revisiting the booze sector. In April Coca-Cola launched Topo Chico Hard Seltzer (a Mexican brand it acquired back in 2017) in the US, marking its first return to selling alcohol since the brief experiment with Wine Spectrum four decades ago.

Last week, the American firm brought the liquor seltzer to China as well. Hard seltzers are essentially flavoured, alcoholic fizzy waters. Typically containing about 5% alcohol content, they are lower in carbs and calories than most premixed alcoholic beverages. Topo Chico currently comes in three fruity flavours: lemon lime, strawberry guava, and pineapple. All are available for sale on Coca-Cola’s Tmall store – although the plan is to expand distribution to other retail channels.

The new product is likely a reaction to shrinking sales in Coca-Cola’s core soft drinks business in China (revenue went down 11% year-on-year in 2020) as it tries to see off challenges from domestic brands such as Genki Forest (see WiC511), which is known for its sugar-free sparkling water. And unlike rival PepsiCo, which has diversified from sugary soft drinks to food, Coca-Cola lacks a snacking business.

China’s low-alcohol drinks business is on a bit of a tear. According to market researcher Academia Sinica, the market size for fruit-flavoured alcohol (that is, a fermented alcoholic drinks made with a fruit juice other than grape juice) in 2019 was approximately Rmb231.5 billion ($25.56 billion). While still small in proportion to the rest of the beverage industry, it has been growing more than 50% annually.

The rising popularity is driven by young drinkers, many of whom are women and prefer alcoholic seltzer drinks as a healthier alternative to beer, while still allowing them to drink socially with their friends, says Taobao Maijia, an e-commerce news portal. Hard seltzer also falls somewhere between two key sectors: sugar-free sparkling water and alcopops. “From the Gen Z consumers’ point of view, it is strategically important to add alcoholic drinks to Coca-Cola’s product portfolio, as they have growth potential and the capability to increase revenue and profits,” Zhu Danpeng, a food and beverage analyst, told Xinhua.

But so far, consumers seem underwhelmed with Topo Chico. On Tmall, most of the comments about the product did not sound impressed. At Rmb29 for three cans, Topo Chico is also more expensive than domestic brand Rio, which sells a similar hard seltzer at Rmb7 a can.

Still, other beverage makers are piling into the hard seltzer market. Local craft beer brand Panda Brewery introduced a vodka-based soda called Chill last year. Anheuser-Busch also launched a flavoured alcoholic beverage called Mike’s Hard Lemonade around the same time.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.