Dive Brief:

• Boston Beer is partnering with PepsiCo to launch a Hard Mtn Dew alcoholic offering in the U.S., the companies said in a statement. The no-sugar product is expected to reach shelves in early 2022.
• As part of the business arrangement, Boston Beer will develop and produce Hard Mtn Dew. PepsiCo has set up a new entity to sell, deliver and merchandise the product. 
• The deal between Boston Beer and PepsiCo mirrors another partnership announced last year with Coca-Cola and Molson Coors to create Topo Chico Hard Seltzer. The Coca-Cola product hit U.S. shelves earlier this year and so far appears to be a success.

Dive Insight:

As consumers look for new flavors and ways to imbibe, soda makers like PepsiCo and Coca-Cola are increasingly looking for ways to enter the alcohol category with offerings of their own. For now, it appears the beverage giants are content to provide a well-known brand that is modified by another company with an alcohol twist.

PepsiCo has hinted for months it was considering a move into alcohol. CEO Ramon Laguarta told analysts last October the company was looking at its options and deciding whether it wanted to be in the alcohol category. And in June, Bloomberg reported the New York company filed a trademark application under its Rockstar energy brand to register the name for beer, alcoholic fruit cocktail drinks, alcoholic malt beverages and hard seltzer. 

As people relax and unwind at the end of the day, they may want to reach for an alcoholic drink rather than a soda or juice. A move into alcohol enables PepsiCo to provide more choices to satisfy the need of the consumer depending on the specific place, time or preference. It not only allows PepsiCo to enter an entirely new category, but also gives it an alcohol product to compete with its archrival Coca-Cola.

The beverage and snack maker also is shrewdly tapping into the recognition of its Mtn Dew brand as the platform to introduce its first alcohol-based product, a move that will provide it with a boost of early momentum as it fights for shelf space. PepsiCo has been moving aggressively to increase the reach of its popular Mtn Dew brand through the rollouts of energy drinks and even a new flavor. CNBC, citing Euromonitor data, said Mtn Dew holds about 7% market share in carbonated soft drinks, putting it in fifth place.

For Boston Beer, the opportunity to develop and produce Hard Mtn Dew will provide it with another arrow in its quiver as it grows its portfolio beyond its iconic Sam Adams beer. The broader beer category as a whole has been struggling for years, and Boston Beer recently cut projections for its Truly Hard Seltzer, removing billions of dollars from its market cap in one day. It recently formed a partnership with Beam Suntory to bring several of their iconic brands into some of the fastest-growing beverage alcohol segments such as spirits.

"We know that adult drinkers' tastes are evolving, and they are looking for new and exciting flavorful beverages," Boston Beer CEO Dave Burwick said in a statement. "The combination of our experience in brewing and developing the best-tasting hard seltzers and hard teas, and Mtn Dew, a one of a kind multibillion dollar brand, will deliver the excitement and refreshment that drinkers know and love."

Boston Beer is no stranger to adding alcohol to popular drinks with its Twisted Tea and Angry Orchard Hard Cider. The partnership will allow it to bring its beverage development expertise to create Hard Mtn Dew. PepsiCo will then use its robust distribution network to get the product on retailer shelves. With alcohol distribution far more complicated than soda, tea, water or juice, Boston Beer will no doubt be able to provide PepsiCo with some valuable insight to help it navigate.