You may have heard of the what has become one of the most popular hard seltzer drinks to hit the market in recent times, but if you haven’t, it’s called Topo Chico. It’s relevant because at the moment the product is selling like no tomorrow with consumers across the Texas consuming it like crazy, which might be good news for it’s bottler Molson Coors.
Unfortunately for investors in TAP, the company does not own the rights to the drink, the brand or anything else that’s important. All they do own is the right to bottle the drink and distribute it on behalf of Coca Cola. It’s a big shame because it’s the kind of product that Molson need considering the year they just had on top of a really down beaten stock pre-pandemic. But, there might be a silver lining somewhere.
Firstly, the company will earn a small percentage of revenue from each can sold of the drink, that’s a given. As we do not currently know how well the drink is doing other than the fact that it’s red hot, then it’s difficult to determine accurately how much money TAP is going to bring in. Yet, we can still do some back of the envelope calculations.
Presuming that they manage to capture 5% of the Selterz US market (forecasted to be worth $3 billion) since it’s launch in late March, that would give Coca Cola just under $12.5million in revenue (150m/12months). Presuming that TAP get a small portion of the revenue, let’s say 10% – it would only bring in $1.25m a month in revenue. Not exactly great! Now what if my figures are way too conservative? What if you double the percentages. 10% market capture, 20% of revenue. You still only arrive at $2.5m a year. Still not great.
However, what is more instrumental in this project is the potential for Coca Cola to partner with Molson Coors further down the line, in more projects that can open up many different avenues for the company. It’s also entirely possible then that if the synergies match and the business performs well, Molson Coors could be brought by Coca Cola down the line. Why would they do that? Well Coca Cola might want to enter a new space they currently don’t have a foothold in or the facilities to manage to help grow and diversify their revenue. After all, almost every soft drink is owned by either them or Pepsi. Although, a lot of this is speculation.
What you can’t deny though is that Molson Coors can learn from this successful brand. How it’s developed, grown, rapidly succeeded and what it took. Management have needed the reminder on how it can be done and it’s possible that this could be the jump start they needed.
Anyway, Topo Chico is good news for Molson Coors and allows for them to get into a space they have neglected for too long, however, I can’t see how it will generate any kind of significant revenue for a business that relies heavily on it’s heavy hitters. Topo Chico will need to be globally successful to have the kind of imprint needed to make it’s mark. Yet, it might have it’s secondary benefits for a management that needed a kick up the backside.
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