The two companies are going into a very crowded market, but name recognition should help.
August 13, 2021
It seems like nearly every company has lent its brand to some variation of an alcoholic seltzer. Boston Beer Company (NYSE: SAM) has been a major player in that space but it saw a pretty major dip in sales during he most-recent quarter. To rebuild those numbers, the Sam Adams brewer has partnered with PepsiCo (NYSE: PEP) to produce an alcoholic version of the popular Mountain Dew soft drink.
That’s a well-known name with a built-in fan base. It’s also a soft drink platform which has been expanded to energy drinks, breakfast beverages, and a variety of different frozen versions sold at Taco Bell. Maxx Chatsko and Dan Kline Do the Dew and break down whether this latest hard beverage will be able to win some market share on the August 11 edition of 7investing Now.
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A full transcript follows the video.
Dan Kline: But we’re going to switch from the noise and the clutter to something that made me smile when I saw this. PepsiCo and Boston Beer are going to create an alcoholic Mountain Dew drink. I have never had any sort of Mountain Dew drink. But let me ask the question. So they’re creating hard Mountain Dew it’s an alcoholic flavored malt beverage. It’s gonna be 5% alcohol by volume.
So as someone who is a bourbon drinker it’s it’s not going to be all that alcoholic but that that is in line with your typical beer or malt beverage. Early images of the product show that it will contain zero sugar that may not be the case. It’s expected to hit shelves in early 2022. And Pepsi has leveraged the Mountain Dew brand for years there’s the Mountain Dew products in in Taco Bell’s. There’s all sorts of variants of Mountain Dew’s aimed at gamers and other spaces they have an energy drink that’s a big seller.
But let me ask the question Maxx. Is this a good way to leverage a brand name to win share in a crowded space. I don’t know if this, but pretty much every third company has a hard seltzer or similar product. Like would it shock you if I told you that i don’t know city furniture was was releasing a, I should have picked more national brand there. I can’t think of a, Macy’s is coming out with a hard seltzer. Like if Radio Shack was coming back as a hard seltzer is Mountain Dew going to attract attention in this market? And is this a smart move by PepsiCo and Boston Beer company?
Maxx Chatsko: It is a crowded market Dan and I don’t know for Pepsi or does it make sense if they even capture like a few percent? Is that worth it for them? I don’t know what Mountain Dew has been doing lately. I’ve never had it. When I was a kid remember like I mean it was like Mountain Dew Red came out and then a Mountain Dew Blue or something like that was fun because like turned your tongue blue and red. I don’t know about the hard seltzer stuff but does it make sense if they capture like 3% of the market or 5%
Dan Kline: Well I wonder if it undermines their brand. I know Mountain Dew has been pushed in recent years as a gamer brand. But the core of its marketing was always was always like sort of an athletic like a a counterculture skateboarding was a big part of their iconography and imagery. So I do wonder if is that a positive that that audience wants an alcoholic beverage or are they sort of is this might be overreach and I wonder. Look, I think the hard seltzer market is here to stay unlike say like the wine cooler market in the 80’s when Maxx certainly wasn’t around to do that. But that was a really big thing. The akin to this.
But I do think there’s got to be some contraction because I went to our to our liquor store. We have a really nice ABC Liquors near us in the in Davenport actually think that one’s in Kissimmee. But it’s about a mile from us. And I went in and I was buying some housewarming gifts for a friend who bought a house in the area. And I’m like, Yeah, I should throw some hard seltzer or something like in my fridge, or in my owner’s closet for when I’m here. if the bars closed at the pool, have a have a have a drink available. And there were so many choices. I didn’t buy anything. It was overwhelming. It was like, like, I’d have three things in my cart. And then like, well, maybe I want to premix Margarita, maybe I want a hard iced tea, like, Oh, wait, that is too. It was too much.
So I like this idea. I think anything you can do to stand out is probably good. I do think there’s a small percentage of the Mountain Dew core audience that’s not going to like this. But I don’t think that matters. I think if they like Mountain Dew, they’re not going to stop drinking it for that reason. So yeah, I think anything you could do to get attention for your hard seltzer or whatever exactly this beverage is. This alcoholic soda. I think it’s not the worst idea. I don’t think it’s a game changer. But I do think it is a smart niche partnership. Maxx, your thoughts here?
Maxx Chatsko: Yeah, I mean, there’s nothing to lose the Mountain Dew brand, if you can leverage that or reinvigorated somehow. And also, I mean, I went to college not that long ago. I mean, this could be big around like weekend parties and things and like that demographic, I don’t know, maybe it’s trending on Reddit, Mountain Dew seltzers or whatever. you never know, maybe they could, get a couple percent 5% 10% of the market. Maybe that does make sense. Why not?
Dan Kline: When I was in college, there was still beer that came in a white can that just said beer. And it was pretty common that if you went to a Friday or Saturday night, and I wasn’t the guy going to these things, for the most part, if you went to a Friday or Saturday night beer event, you were just handed a plastic cup and you never knew what type of beer you were drinking. I think there is much more of a beer culture now. And I do think that transcends there are winners here. I will say that anecdotally having been on a lot of cruises, Corona, their light beer and they’re hard seltzer and truly and White Claw have really become market leaders here. But we saw with Boston Beer company, that they had a big drop in sales here. So this is going to be very volatile.
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