Beverage giant Coca-Cola KO is one of several beverage and food stocks that have been hit due to potential concerns from weight loss drugs hurting sales.
Ahead of its quarterly earnings report, the company announced another venture into the alcoholic beverage category.
What Happened: For the past several years, Coca-Cola has been building up partnerships with alcohol manufacturers as it utilizes its well-known brands to push into new categories.
The company announced this week its newest partnership that will bring the company’s iconic Sprite drink into the alcoholic beverage sector.
Coca-Cola is partnering with Pernod Ricard to launch Absolut Vodka & Sprite, a ready-to-drink pre-mixed cocktail.
The new beverage will debut in 2024 with an initial launch in select European countries, including the United Kingdom, the Netherlands, Germany and Spain.
Pre-mixed cocktails will include both Sprite and Sprite Zero Sugar along with Absolut, a well-know international premium vodka.
“We are expanding in the alcohol ready-to-drink space, including products that use select brands from our core portfolio,” Coca-Cola CEO James Quincey said. “We are excited about our new relationship with Pernod Ricard and look forward to the introduction of Absolut & Sprite.”
Lemon-lime soft drinks have been a popular mixer for alcohol for years, and the move could see strong momentum.
“Sprite is a wonderful pairing for Absolut, and I’m convinced that our joining forces will bring the whole alcohol RTD category to the next level,” Pernod Ricard CEO Alexandre Ricard said.
The new beverage is expected to come with an alcohol beverage volume (ABV) of 5%.
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Why It’s Important: The announcement by Coca-Cola continues the move into alcohol and partnerships with leading liquor producers.
“We keep consumers at the center of everything we do as we continue to develop our portfolio as a total beverage company,” Quincey said.
Coca-Cola partnered with Brown Forman for Jack Daniels and Coke pre-mixed cocktails in 2022.
The company partnered with Constellation Brands STZ for Hard Fresca in 2022.
Coca-Cola partnered with Molson Coors Beverage Company TAP for Topo Chico hard seltzers in 2020. The companies also partnered on Simply spiked hard lemonades.
The company is leveraging its robust brand portfolio without delving into production expansion or acquiring licenses for alcohol production. Instead, it relies on its partners for both production and distribution.
Coca-Cola’s rival PepsiCo PEP has also launched several hard seltzers and alcoholic beverages.
Hard seltzers continue to be one of the fastest-growing alcoholic beverage categories and pre-mixed cocktails help with travel and portability of drinks.
The hard seltzer category is dominated by the Boston Beer Company SAM with its Truly brand and the White Claw brand, which is privately owned.
Other alcohol companies have expanded their presence in hard seltzers and ready-to-drink pre-mixed cocktails to attempt to capture on the growing trend.
The strong brand presence of both Sprite and Absolut could make the new drink stand out.
Coca-Cola’s announcement comes before it is set to report third-quarter financial results before the market open on Oct. 24.
The company’s share price has fallen 3% over the last year and 14% year-to-date. Pepsi shares are down 7% over the last year and 11% year-to-date.
Alcohol manufacturers have share prices that have gained over the last year. Molson Coors shares are up 20% in the last year and Constellation shares are up 7%.
Anheuser-Busch InBev BUD, which has had its share of controversy thanks to its Bud Light brand, has shares up 16% over the last year, outperforming Coca-Cola and Pepsi.
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