Coca-Cola Takes on LaCroix With Caffeinated Seltzer
November 07 2019 - 9:29AM
Dow Jones News
By Jennifer Maloney
The maker of LaCroix, beset by falling sales and increased
competition, faces another threat: Coca-Cola Co. is launching a new
flavored seltzer brand with caffeinated options.
Coke's new offering, called AHA, is a late entrant to the
category. The market-leading bubbly water, LaCroix, has lost market
share over the past year as new drinks crowd store shelves. PepsiCo
Inc. last year launched a competitor called Bubly. A startup called
Spindrift, made with a splash of real juice, has been gaining
momentum. And private-label seltzers abound.
Sparkling water sales have soared as consumers switch from soft
drinks to healthier options. But Coke's flavored seltzer line,
Dasani Sparkling, hasn't gained traction.
U.S. retail-store sales of Coke's flavored seltzers had a market
share of just 2.5% in the four weeks ended Oct. 5, according to
Wells Fargo analyst Bonnie Herzog. By contrast, National Beverage
Corp., which makes LaCroix, had a market share of 16.6% and PepsiCo
stood at 10.5%.
Coke's Dasani Sparkling, introduced nationally in 2014, was too
similar to other seltzers on the market, Coke executives said. So
the beverage giant decided this year to scrap it in favor of a new,
stand-alone brand. AHA has stronger flavors than LaCroix, which
developed a cult following with drinks that had just a hint of
flavor.
AHA is set to go on sale in the U.S. in March with eight
flavors, including two options -- Citrus + Green Tea and Black
Cherry + Coffee -- that contain 30 grams of caffeine, a little less
than a can of Coke. The brand's developers looked for unusual
flavor combinations, such as strawberry with cucumber, that would
help it stand out, said Celina Li, vice president for water at
Coca-Cola North America.
Consumer research showed that as people drink seltzer on more
occasions throughout the day, they are interested in options that
contain caffeine, she added. The name AHA was inspired by the
reaction people have had in taste tests, executives said.
Brewers have also capitalized on interest in seltzers by rolling
out alcoholic versions. Anheuser Busch InBev SA said Wednesday it
will release a Bud Light Seltzer in the first quarter of 2020. A
100 calorie can will have about the same alcohol content as a beer
and come in flavors like strawberry and mango. Constellation Brands
Inc. is also preparing to launch a Corona seltzer.
National Beverage in September reported its third straight
year-over-year quarterly sales decline, following five years of
steady growth.
The results "were even worse than our soft expectations due to
the rapid deceleration of the LaCroix brand that has yet to find a
bottom," Guggenheim analyst Laurent Grandet wrote in September. He
noted last week that the decline of LaCroix's sales had slowed to
11.5% in the four weeks ended Oct. 19, a slight improvement over
the previous month, as the company increased its promotional
activity.
"LaCroix remains the No. 1 brand of sparkling water in the
United States, " a National Beverage spokesman said in an email
Wednesday. "The LaCroix brand and its performance clearly
demonstrate leadership."
Private-label seltzers this year have entered the market, the
spokesman said, and name brands have offered substantial
promotional discounts. He noted that LaCroix had been among the
first to offer cans without liners containing BPA, a chemical that
some consumers want to avoid because of health concerns.
LaCroix's sales started to slow last year after PepsiCo launched
Bubly. Coca-Cola, meanwhile, was expanding distribution for Topo
Chico, a sparkling mineral water from Mexico it acquired in late
2017.
Then in October 2018, law firm Beaumont Costales said it filed a
class-action lawsuit against National Beverage on behalf of a
consumer, alleging that the company's all-natural product claims
were false and that LaCroix contained synthetic ingredients.
National Beverage has denied the allegations as "shameless
fabrications" and said independent lab testing it commissioned
supported its natural product claims. Beaumont Costales didn't
respond to a request for comment.
Write to Jennifer Maloney at jennifer.maloney@wsj.com
(END) Dow Jones Newswires
November 07, 2019 09:14 ET (14:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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