Diageo DEO collaborated with The Vita Coco Company to launch a premium canned cocktail — Vita Coco Spiked with Captain Morgan. The new drink will be a mix of Captain Morgan Caribbean white rum and Vita Coco coconut water. Captain Morgan and Vita Coco coconut water are leading products in their respective categories.

The move is in sync with Diageo’s plans to expand its ready-to-drink (RTD) portfolio. It also reflects consumers’ growing preference for low- or no-alcohol drinks due to health consciousness. This has led to the rise in the popularity of bar-like ready-to-drink cocktails in canned packaging.

Notably, shares of DEO have lost 10.9% in the past year but came ahead of the industry’s decline of 11.4%.

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Most beverage companies are tapping into new categories like ready-to-drinkand alcoholic beverages to drive growth. These factors have led RTDs to become preferred alternatives for traditional alcoholic drinks. The RTD category is expected to rise 29% over the next three years, per IWSR Drinks Market Analysis.

With the partnership, DEO seeks to leverage the rising demand for rum-based cocktails. In the United States, the demand for such cocktails has been growing rapidly, outpacing the entire spirit-based ready-to-drink category.

The new product will come in three flavors — pina colada, daiquiri and mojito — for $14.99 per 4-pack. It is likely to be available in early 2023 across the United States. Diageo will produce, distribute and market the new cocktail.

Prior to this, Brown-Forman Corporation (BF.B) and Coca-Cola collaborated to introduce the iconic Jack & Coke cocktail. The new ready-to-drink pre-mixed cocktail will be made using Jack Daniel’s Tennessee Whiskey and Coca-Cola.

The companies intend to launch the cocktail initially in Mexico and make it available in markets worldwide from late 2022. BF.B also noted that a zero-sugar version of the beverage would be available.

Constellation Brands STZ has also partnered with Coca-Cola to launch another spirit-based drink, FRESCA Mixed cocktails, in collaboration with Corona brewer. As part of the deal, Constellation Brands will manufacture, market and distribute the new FRESCA Mixed cocktails in the United States.

Constellation Brands’ FRESCA Mixed cocktails are expected to be launched later this year in the United States. The drink will be a spirit-based, ready-to-drink cocktail, in sync with the emerging consumer trends.

Similarly, Boston Beer SAM collaborated with PepsiCo to launch alcoholic beverages under the Mountain Dew brand name in February. This new drink, Hard Mtn Dew, is sold and marketed by a new entity Blue Cloud created by PepsiCo.

The Hard Mtn Dew will be developed and produced by Boston Beer. The beverage will contain 5% alcohol by volume with zero sugar.

Coming back to DEO, we hope that the continued recovery in the on-trade channel, strong consumer demand in the off-trade and market share gains, and expansion in the RTD category will aid this Zacks Rank #4 (Sell) company and help it get back on track.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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