KDP Keurig Dr Pepper Inc

By Jennifer Maloney 

Keurig Dr Pepper Inc. and Anheuser-Busch InBev SA are pushing ahead with an idea to automate home bartending with a K-Cup machine for cocktails, seeking to tap new areas of growth as sales of their core products slow.

After a recent pilot in St. Louis, the Drinkworks drinkmaker machine this year is rolling out across Missouri, Florida and California.

AB InBev is looking beyond beer for growth as the world's biggest brewer grapples with declining sales of Budweiser and Bud Light. Keurig, meanwhile, is trying to replicate the success of its namesake coffee-brewing device. Sales of the machines, which the company says are now used regularly in 22% of U.S. homes, declined in the fourth quarter.

The Drinkworks machine is offered for preorder for $299 and is on sale in St. Louis for $399. Using liquid-filled pods, it adds water and carbonation to serve up cocktails like a Moscow Mule, an Old Fashioned, a mojito or a gin and tonic -- plus three brands of beer and cider. The machine chills drinks but doesn't add ice. The pods, which contain the equivalent of a shot of alcohol plus flavorings, sell in a pack of four for $15.99 for most cocktails. To avoid consumption by children, they are designed so that they can't be opened by hand, according to Drinkworks CEO Nathaniel Davis. The company is working on developing a lock for the machine, he said.

The joint venture between AB InBev and Keurig follows a failed effort between the coffee maker and Coca-Cola to sell single-serve machines for cold soft drinks. In 2016, they discontinued the Keurig Kold after the home soft-drinks machine failed to catch on. Many consumers balked at the price of the machine, which initially cost $369. The pods also were expensive, costing $1.25 to make an 8-ounce drink. And the machine took about 60 seconds to make a single serving, much longer than it took to grab a can of soda from the fridge.

Drinkworks faces some of the same challenges. At $4 per drink, the price is higher in many cases than mixing a cocktail by hand. Drinkworks is betting that its target consumers -- couples who have a drink at home each night and have guests over a few times a month -- will be attracted by the convenience of popping in a pod instead of measuring and mixing a cocktail. While Keurig's coffee pods come in brands such as Starbucks and Peet's Coffee, Drinkworks doesn't currently offer any spirits brands, and AB InBev doesn't own any large ones. The company is in discussions to license brands, Mr. Davis said.

French spirits maker Pernod Ricard SA is planning to launch its own home-bartending assistant this year, a system called Opn that dispenses spirits such as Absolut vodka and Jameson whiskey from flasks shaped like books in a library. Through an app it will offer cocktail recipes, but consumers will need to mix the drinks themselves. Pricing for the flasks and the tray they sit on hasn't been disclosed, a spokesman said.

For AB InBev, the project helps it expand its portfolio beyond beer as consumers in the U.S. shift from American lagers to craft and Mexican import beers as well as wine and spirits. In February, the brewer bought a maker of ready-to-drink canned cocktails, adding to its nonbeer offerings, which include spiked seltzer, nonalcoholic energy drinks and ice tea.

The brewer reported that Budweiser and Bud Light volumes continued to decline in the fourth quarter.

The Drinkworks project also signals a push into e-commerce. About 15% or 20% of sales in the St. Louis pilot were made online, Mr. Davis said. Selling booze online is difficult, both because of the weight of the bottles and because U.S. regulations prohibit alcohol makers from distributing or selling their own products. The small, lightweight Drinkworks pods, by contrast, are well-suited for e-commerce, Mr. Davis said. The e-commerce startup Thirstie is operating the Drinkworks website and working with third-party alcohol retailers to ensure that the sales comply with the law, executives at Drinkworks and Thirstie said.

Write to Jennifer Maloney at jennifer.maloney@wsj.com

(END) Dow Jones Newswires

March 19, 2019 00:15 ET (04:15 GMT)

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