Coca-Cola says it will explore the potential of Chu-Hi, a drink that includes alcohol and is traditionally made with a distilled beverage called shōchū and sparkling water, along with flavoring.
“We haven’t experimented in the low alcohol category before, but it’s an example of how we continue to explore opportunities outside our core areas,” said Jorge Garduño, president of Coca-Cola’s Japan business unit.
Japan’s ‘unique and special’ culture
Coca-Cola says the work with alcohol is ‘unique’ in its history: the only other occasion it was involved in alcohol was via its Wine Spectrum subsidiary between 1977-1983.
“Coca-Cola has always focused entirely on non-alcoholic beverages, and this is a modest experiment for a specific slice of our market. The Chu-Hi category is found almost exclusively in Japan,” said Garduño.
Japan is known for its beverage innovation and rapid product cycle, and Coca-Cola’s Japanese business unit launches around 100 new products a year. Innovations include Coca-Cola Plus, which has added dietary fiber.
“Globally, it’s not uncommon for non-alcoholic beverages to be sold in the same system as alcoholic beverages. It makes sense to give this a try in our market.
“But I don’t think people around the world should expect to see this kind of thing from Coca-Cola. While many markets are becoming more like Japan, I think the culture here is still very unique and special, so many products that are born here will stay here.”
Category blurring
Howard Telford, Head of Soft Drinks at Euromonitor International, said that Coca-Cola’s foray into alcohol shows how companies like Coca-Cola are looking for new opportunities as traditional beverage categories blur.
“This is a departure for Coca-Cola but I think this reflects the way that changing consumer tastes are pushing the company into less familiar areas like premium dairy, coffee, tea and now low-alcohol flavored drinks,” he said.
“This also reflects a culture change at the company in terms of product development: company leadership have spoken recently about being less afraid to experiment in terms of innovation - and dipping a toe into this category makes particular sense in Japan where the style of beverage is more familiar to consumers and the pace of CPG innovation is faster.
“While I don’t think this represents a global shift in company strategy, I do think we can expect Coca-Cola and its competitors to continue looking for new opportunities as traditional category lines and beverage occasions blur.”
However, with a number of markets facing challenges in the soft drink category, launch specialist agency Five by Five of the UK does see the potential for Chu-Hi to eventually expand. James Roles, sales and marketing director, says that with the UK introducing a sugar tax next month, companies will increasingly look to a wider range of products.
“Coca-Cola’s move into the alcohol sector is much less surprising than it might first appear," he said. "Having announced the launch of such a product in Japan, to ride on the country’s ‘Chu-Hi’ alcopopularity, the iconic soft drinks brand could surely be eyeing up other markets with this so-called ‘modest’ launch.
“If the product’s actually good and is a success, this could be high time for Coca-Cola to launch similar products in Western markets, especially the UK. As the sugar tax comes into play next month and brands are forced to branch out and experiment, an alcoholic alternative could do wonders for the 130-year-plus institution.
"It’s already experimented with healthy soft drinks and teas - surely alcohol is the next logical step. UK consumers might not pay hiked-up prices for the same old Coke in a smaller can, but they’ll surely pay for a Coca-Cola branded alcopop.”
Challenging old assumptions
Whatever the likelihood of global expansion, IRI says that Coca-Cola's experiment shows that old assumptions about set categories - and the competitors within then - can no longer be taken for granted. The alcoholic drinks category, for example, may eventually find its competition coming from a completely different place.
Toby Magill, head of beer wines and spirits at IRI, said: “Coca–Cola’s launch into alcoholic drinks in Japan shows that the challenging FMCG landscape is causing even major manufacturers to challenge old assumptions in order to adapt and thrive.
"Within beer, wines and spirits in the UK we are seeing this manifested through increased cross-pollination of ideas with manufacturers exploring new formats and blurring old category boundaries.
"The consequence of this for all players in beer wines and spirits is an increasing need to revaluate who their competitive set really is and where the next challenge may come from on the aisle and beyond in order to deliver growth today – and in the future.”