. The flavored malt beverage will contain 5% alcohol by volume and sell on the soda's brand equity — without the high caffeine content.
But the NBWA's main argument centers on Pepsi's potential impact on the competitive environment and, thus, the three-tier system that has long governed the alcohol industry. After the repeal of Prohibition in 1933, the alcohol industry adopted the three-tier system, which separated manufacturers, distributors and licensed outlets.
"If successful, [Pepsi's] foray into alcohol to capture a wholly new white space opportunity could drive meaningful new sources of revenue and profit growth over the next three to five years, while challenging the near oligopolistic beer distribution networks of [AB InBev] and [Molson Coors] as a viable third alternative in beverage alcohol distribution," wrote Deutsche Bank analyst Steve Powers in a Dec. 12 note to clients.
Emiliano Di Vincenzo, general manager of Pepsi's alcohol business unit, said in a statement to CNBC that Blue Cloud has filed applications and has received federal approval to operate as a beer wholesaler in several states. It will distribute alcohol products made by independent brewers, while Hard Mtn Dew will be distributed by Blue Cloud, Pepsi bottlers and independent local beer distributors, according to Di Vincenzo.
Brewers are also pushing beyond hard seltzer and flavored malt beverages and into spirits. The category has seen consumption climb in recent years, boosted by mezcal and whiskey, while beer has lagged.
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