Coca-Cola, Molson Coors Team Up For US Topo Chico Alcoholic Drink

Coca-Cola Co. entered into an exclusive agreement with Molson Coors Beverage Co. to manufacture and market Topo Chico Hard Seltzer, the alcoholic version of the soft drink, in the US.

Under the terms of the agreement, Molson Coors will use its marketing, sales and distribution for a scaled national launch in the first half of 2021, prioritizing markets where Topo Chico sparkling mineral water is already known. The production and packaging of the products will be initially handled by a third party. Topo Chico Hard Seltzer will be Coca-Cola’s (KO) first alcoholic beverage it launches in the US.

Topo Chico Hard Seltzer blends purified sparkling water, a gluten-free alcohol base and natural flavors, with minerals added for taste, and is based on Coca-Cola’s Topo Chico sparkling mineral water. Topo Chico Hard Seltzer will be developed in 4 flavors including: Tangy Lemon Lime, Exotic Pineapple, Strawberry Guava and Tropical Mango.

Molson Coors, a producer of beer brands, said that the agreement marks another big step in its plan to aggressively grow the company’s above premium portfolio and become a major competitor in the fast-growing hard seltzer segment.

The plans for a launch of a new alcoholic drink comes as Coca-Cola is grappling with a decline in global volumes due to the impact of the coronavirus pandemic. The beverage giant’s have dropped 12% so far this year. (See Coca-Cola stock analysis on TipRanks)

Morgan Stanley analyst Dara Mohsenian recently reiterated a Buy rating on the stock with a $54 price target, as he sees a compelling valuation, with the market appearing to have more than accounted for short-/longer-term Covid-19 risk factors.

Mohsenian believes that the stock’s underperformance versus mega-cap peers due to COVID concerns seems overdone. He noted though that there is still risk with regard to the company’s away-from home business in the near-term.

The rest of the Street shares Mohsenian’s bullish outlook. The Strong Buy analyst consensus boasts 9 Buys versus 1 Hold. The $54.70 average price target implies 12% upside potential in the shares over the coming year.