- Molson Coors Beverage's move beyond beer and into new categories, like energy drinks, seems to be paying off for the brewer.
- The company is the distribution partner of and minority investor in Zoa Energy, which was co-founded by Dwayne Johnson.
- Molson Coors is leaning on its existing distribution network for Miller Lite and its other beers to get Zoa on shelves.
Zoa Energy, Molson Coors Beverage's latest bet beyond beer, seems to be paying off for the brewer.
The new energy drink was created by actor and former professional wrestler Dwayne Johnson, his ex-wife Dany Garcia, her current husband Dave Rienzi and Juggernaut Capital founder John Shulman. The brand touts itself as a healthier, more natural energy drink. Molson Coors owns a minority stake in the brand and serves as its distribution partner, helping cans of Zoa hit shelves over the past four months.
"It's the number one new energy drink in the latest four weeks of IRI [data]," said Pete Marino, president of Molson Coors' emerging growth division. "It's very early days, but it's been tremendously successful thus far."
Zoa is currently sold at more than 26,000 retailers, surpassing 100,000 points of distribution.
The energy drink is part of Molson Coors' larger plan to reinvent itself as more than just a beer company. In 2020, it formally swapped the word "Brewing" in its name with "Beverage" to indicate the shift in its strategy.
The change comes as U.S. consumers drink less beer, opting for hard seltzer or spirits instead. Last year, overall beer volume declined 2.8%, despite total alcohol consumption increasing by its highest rate in nearly two decades, according to industry tracker IWSR. In Molson Coors' second-quarter earnings release, the company said that the results of its non-alcoholic brands like Zoa have already surpassed expectations for the whole year.
As Molson Coors expands its drink portfolio beyond beer, it's looking to three drink categories specifically to drive growth: ready-to-drink coffee, functional water and energy drinks. It has a distribution partnership for canned coffee drinks with La Colombe Coffee Roasters and recently took a stake in ZenWTR, an alkaline water brand that uses entirely recycled packaging.
All three beverage segments that Molson Coors is targeting have seen climbing sales in recent years. For example, the $16 billion energy drink category has seen consecutive double-digit retail sales growth over the last three years ended July 31, according to Nielsen data. And Molson Coors already has a built-in network to distribute the beverages.
"The energy drink category is dominated by [convenience stores], and nobody services the c-store channel better than the beer network and beer distributors," Marino said.
According to Nielsen data, convenience stores accounted $10.57 billion in energy drink sales in the U.S. in the 52 weeks ended July 31, nearly double the amount of sales from grocery, drug and club stores combined.
"We spoke to a number of other energy drink companies that were either existing or emerging, and then we had the opportunity to hear about Zoa," said Marino. "That was the one that we really wanted to anchor our energy drink play."
One point in Zoa's favor: Johnson's celebrity. He regularly promotes Zoa — and his other projects — to his 262 million Instagram followers. He most recently posted about the energy drink on Monday.
Johnson also starred in the brand's first advertising campaign, which aired during the Olympics. The drink's positioning as a more natural option also fit well with Molson Coors' desire to add healthier beverages to its portfolio.
But Zoa also faces stiff competition. Red Bull and Monster Energy each hold roughly 37% of the U.S. market share, according to Euromonitor International data. But the success of upstart Bang Energy, which is owned by Vital Pharmaceuticals, is an encouraging sign.
"The category is obviously dominated by very wealthy competitors, but it also could be disrupted, like Bang has most recently done, creating a billion dollar brand in the span of a few short years," Marino said.
In 2020, Bang Energy accounted for 8.4% of U.S. energy drink sales, up from 2.8% in 2018, according to Euromonitor. Similar to Zoa, Bang has appealed to consumers by saying that it only uses ingredients that are backed by science.
Molson Coors is hardly the only company to notice the spike in energy sales in recent years. PepsiCo bought Rockstar Energy last year and recently launched Mtn Dew Rise Energy, which tapped NBA star LeBron James as its face. It also has the exclusive rights to distribute Bang Energy until October 2023.
Coca-Cola has been less successful, creating a cautionary tale for Molson Coors. It tried to use the heft of its trademark soda to enter the market with Coke Energy but pulled the drink in North America roughly a year after its launch. The pandemic no doubt impacted the drink's success, as lockdowns kept many U.S. consumers at home, dragging out the time between trips to the gas station and leaving many feeling more well rested.
New Covid-19 cases are once again on the rise due to the highly contagious delta variant. Five U.S. states set new records for the number of Covid cases over the weekend. While some states like Louisiana, the hardest hit by the latest surge, have reinstated mask mandates, another round of stay-at-home orders seems unlikely at this point. Marino said that consumption of Zoa hasn't been impacted yet.
"The demand signals and the velocities are actually increasing week-over-week now, so that's a very encouraging sign for us," Marino said.