After 125 teetotal years, Coca-Cola has decided to take the plunge and dabble with alcohol. The world’s largest soft drinks company has chosen Japan to test its tolerance to the hard stuff by joining the growing market there for “Chu-Hi” alcopops.
The gambit, which one senior Coke executive described as “unique in our history”, will propel the US company into a competitive arena dominated by Japanese brands such as Strong Zero, Highball Lemon and Slat.
Chu-Hi is a canned alcoholic drink traditionally made from a distilled beverage called shochu, sparkling water and flavouring. The market has hundreds of flavours and, according to figures used by the Japanese drinks group Suntory, has seen growth fluctuate between 5 per cent and 25 per cent a year since 2013.
Jorge Garduno, president of Coke’s Japanese division, said the plan to enter the market “makes sense” and was an example of how the company was exploring opportunities outside its core areas.
“Coca-Cola has always focused entirely on non-alcoholic beverages, and this is [a] modest experiment for a specific slice of our market,” he said, adding that he did not think people around the world should expect to see something similar from Coke.
Chu-Hi canned drinks mostly range in alcohol content between 3 per cent and 8 per cent — a profile that has put them in direct competition with beer, and proved particularly attractive to female drinkers. The appeal of Chu-Hi has been enhanced by the relentless trial-and-error approach by major Japanese producers Kirin, Asahi, Takara and Suntory, which have released flavours that include yoghurt, acerola and wild basil.
The total Japanese market for shochu, a vodka-like spirit distilled from potatoes, rice, barley or sugar that provides Chu-Hi with its kick, has expanded almost 40 per cent since 2011. The move into alcohol comes as Coca-Cola, like other large food groups, has faced shrinking sales in its core business: fizzy drinks.
As a younger generation of consumers shun sugar, Coke has been investing in products in faster-growing segments, such as water and tea. The plans have been revealed almost four months after a US-based analyst at Wells Fargo speculated in a report that Coke might shortly announce a move into alcoholic drinks.
James Quincey, Coke chief executive, did not rule out such a step at an investor event in November, but offered no timing or detail on ambitions to brew alcohol, according to media reports at the time.
In the late 1970s Coca-Cola embarked on a short experiment with wines, buying a number of California vineyards and a New York wine company. This culminated in, among other items, the sale of wine in cans on United Airlines flights.
Mr Quincy said last month the company had launched more than 500 new products in 2017. “There’s a lot of focus on innovation,” Mr Quincy told an industry conference in February. “We’re making innovations in Coke, innovations with flavours, innovations with ingredients all around the world . . . taking it into different categories than it was in before.”