PepsiCo (NASDAQ: PEP) reports Q2 earnings Tuesday, July 13, before the stock market opens.  Will Pepsi officially announce a hard seltzer?

According to analysts, the beverage and snack behemoth is expected to report earnings per share of $1.53, a slight bump from last year’s Q2 EPS of $1.32. PepsiCo’s is forecast to report $17.97 billion in sales this year. If that projection holds true, the company will see a 12.72% increase in sales over last year. Analysts expect Pepsi to report gains thanks, in part, to its drink brands like Starbucks, Gatorade and Bubly, a line of soft sparkling water launched in 2018. Pepsi also owns Frito-Lay and Quaker, which, like the company’s drink brands, benefited from a shift in consumer habits brought on by the pandemic.

So far Pepsi has ridden the post-pandemic wave successfully, continuing to see growth where other beverage giants, including archrival The Coca-Cola Company, have experienced declines. Through late March, the company’s organic sales rose only 2%, far less than the 6% increase they enjoyed during the previous quarter. Still, given all of the uncertainties of the post-pandemic market, Pepsi has held on tight to a formidable overall growth of 5%.

Hard Seltzer Strategy

Wall Street will be watching PepsiCo closely in the upcoming months to ensure the company is investing wisely in products that will bolster sales growth and an overall increased profit margin. Pursuing hard seltzer would be strategic for Pepsi. The hard seltzer category grew a whopping 130% last year during the height of the pandemic. If the company is looking to enter a category with growth potential, hard seltzer is still a smart bet.

It appears that PepsiCo may be close to announcing a hard seltzer as it recently filed for trademark protection for Rockstar hard seltzer, a brand extension of its new acquired energy drink brand. 

PepsiCo’s chief executive officer, Ramon Lagurta, discussed the possibility of the company introducing an alcoholic beverage during an earnings call last October.

He stated, “We will make decisions in the coming quarters – whether this is an area where PepsiCo wants to play.” Analysts and investors are eager to know if this will be the quarter in which concrete plans for a hard seltzer or a similar beverage are announced.

Rival beverage titan, The Coca-Cola Company, recently banked on a hard seltzer growth plan. The company released Topo Chico Hard Seltzer domestically in March after the beverage’s impressive performance in both Latin America and Europe. According to the company, Topo Chico Ranch Water is being developed as well. Ranch Water is a West Texan cocktail typically containing Topo Chico, lime juice and tequila. US distribution of Topo Chico Hard Seltzer is supported by Molson Coors.

Topo Chico Hard Seltzer comes in four flavors in the US including Tropical Mango, Tangy Lemon Lime, Exotic Pineapple and Strawberry Guava. The beverages contain 100 calories and 2 grams of sugar per 12 ounce can. Topo Chico Hard Seltzers contain an ABV of 4.7%.

Rockstar would not be the first energy drink brand to explore hard seltzer. Earlier this year the popular energy drink brand Bang launched MIXX, a hard seltzer featuring added electrolytes. MIXX comes in four flavors including Strawberry Blast, Purple Kiddles, Frosé Rosé, and Piña Colada. Each flavor contains 100 calories and an ABV of 5%. Unlike Bang’s line of energy drinks, MIXX does not contain caffeine.

Announcing a hard seltzer during the Q2 earnings call would be a power move for the future of PepsiCo. The announcement, if it happens, will almost certainly drive sales and foster healthy competition between the world’s largest beverage companies.

Shirani Jayasuriya
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