Suntory Holdings’ Strategic Bet on U.S. Canned Cocktails: A Game-Changer for Investors and Consumers
By Rocky Swift
TOKYO (Multibagger) - Suntory Holdings, a titan in the global beverage industry, is leveraging its spirits acumen to capture a larger slice of the burgeoning U.S. canned cocktails market. With ambitions to dominate the sector by 2030, the Japanese drinks giant is making calculated moves to double its annual Ready-to-Drink (RTD) revenue to approximately $3 billion.
Suntory's Strategic Vision: From Whisky to RTDs
While Suntory is globally renowned for its whisky, the company sees immense growth potential in the RTD segment. Suntory is currently the second-largest player globally in the RTD market, mainly due to its stronghold in Japan. However, it trails behind the market leader, Mark Anthony Group, the creator of the celebrated White Claw alcoholic seltzers, largely due to its relatively small U.S. market share.
"We believe that in the U.S., spirits-based canned RTDs and spirits-based cocktails are pivotal for laying the groundwork for our growth," stated Kay Oh, Suntory's Sydney-based senior general manager for RTDs.
Product Innovation: Meeting Consumer Preferences
Suntory's Minus 196, a 6% alcohol RTD made from vodka or other spirits, has gained significant traction since its debut in Australia in 2021 and has subsequently penetrated the U.S., British, and German markets. This product is less potent than Suntory’s Strong Zero brand, which boasts a formidable 9% alcohol content and has been a bestseller in Japan for two decades.
Although there are no immediate plans to reduce the alcohol content of the 9% brew sold in Japan, Oh acknowledges the growing consumer preference for lower-alcohol, lower-sugar beverages. "We understand and realize where consumer needs and trends are going. So the strength or that, if you will, hedonist impression is not what we stand for," Oh noted.
Expansion Challenges and Competitive Edge
The global RTD market experienced double-digit sales growth during the pandemic, driven by health concerns that prompted a shift from higher-calorie drinks like beer. However, this growth decelerated to a mere 2% annual volume increase in 2023, as reported by industry analyst IWSR.
Suntory's ambitious overseas expansion will require it to "navigate local tastes, intense competition, market positioning, and NoLo (no and low) alcohol trends," said Mac Salman, the creator of Kanpai Planet, a YouTube channel dedicated to the Japanese drinks industry.
In the U.S., higher taxes on spirits-based RTDs compared to those made with malt liquor present an additional hurdle. Despite this, Oh is confident in Suntory's competitive advantage. "Malt beverage seltzers have less sugar and fewer calories but are somewhat 'lax in taste'. The better version comes in spirits, which offer higher quality and better taste while still keeping the calorie and sugar count low," she explained.
Financial Implications and Market Impact
For investors, Suntory’s strategic focus on the U.S. canned cocktails market represents a significant growth opportunity. By doubling its RTD revenue to $3 billion by 2030, Suntory aims to solidify its position as a global leader. This expansion could lead to increased market share, higher revenue, and potentially, better returns for shareholders.
For consumers, Suntory’s move means more choices in the RTD segment, particularly those favoring higher quality, better-tasting options with lower alcohol and sugar content. This aligns with the growing trend towards healthier beverage choices.
Breaking It Down: What This Means for You
- For Investors: Suntory’s targeted growth in the U.S. RTD market is a strategic move poised to double its revenue. This could translate to higher stock values and better returns.
- For Consumers: Expect a greater variety of high-quality, spirits-based canned cocktails that cater to the trend of lower alcohol and sugar content.
- Market Impact: Suntory’s expansion could shake up the U.S. RTD market, challenging existing leaders and potentially leading to more competitive pricing and improved product offerings.
In summary, Suntory Holdings’ strategic focus on the U.S. canned cocktails market is a calculated bet to tap into a lucrative and growing segment. This move not only signifies potential financial growth but also aligns with evolving consumer preferences, making it a win-win for both investors and consumers.