Coca-Cola Takes on LaCroix With Caffeinated Seltzer

Date : 11/07/2019 @ 2:29PM
Source : Dow Jones News
Stock : National Beverage Corporation (FIZZ)
Quote : 54.06  5.82 (12.06%) @ 12:39AM
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Coca-Cola Takes on LaCroix With Caffeinated Seltzer

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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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