After having closed the acquisition of overseas based Costa Coffee in a deal worth $5 billion in the first quarter of the current year, Coca-Cola is now eyeing greater involvement with the wider coffee industry.
After Starbucks, Costa Coffee is the largest coffee brand in the world.
The company CEO James Quincey does not want to waste time to jump into the global coffee industry. During the first quarter earnings call of the company with analysts, Quincey laid out an array of details that the company is planning on for its expansion strategy into the global coffee market.
For a start, starting this year, Coke would launch the test phase for its coffee-infused soda into 25 markets. Its Coke ‘Plus Cafe Espresso’ was launched in 2018 in Southeast Asia.
There is however no current plans of the company to debut Coke Coffee in the US, said Coke spokesman to the media.
While giving out little details, the company also said that it would shortly release its ready-to-drink coffee products under the Costa brand.
People looking for a “pick me up” in the afternoon would be the target customer base of Choke for these caffeinated products, in addition to expanding its network for distribution for its Coke Energy, Quincey said. Analysts say that it would be an interesting product in terms of catching the fancy of the targeted consumers if Coke could deliver its trademark soda taste minus sugar and coffee in just one product.
Others see business sense in the new products. They would allow the Coke brand to move into new use cases and would also deliver a higher profit margin.
“So the opportunity to have a Coke and a coffee variant of Coca-Cola is really at that juncture of what are the benefits that people see in Coke versus what are the benefits they look for in coffee, especially perhaps in some of the markets where the occasions are less well developed,” Quincey explained.
However the downside to this new range of products is that there can be consumer shift from the classic Coke, still the mainstay of the revenues of the company, to the coffee-based Coke products.
“Now things like coffee, that’s at the beginning, we’ll see how that develops,” said Quincey. “Clearly, that’s a product variant that’s crossing over into another category with coffee. And obviously there is a danger there as you say that it becomes — it starts to change the nature of Coke itself.”
The CEO has not minced words of the plans of transforming the company into a “total beverage” producer. And that range can include, in addition to its coffee-infused soda, the conventional ready-made coffee drinks through its Costa brand and the new better-for-you sports drinks via the minority stake that Coke owns in the hard-charging BodyArmor.
That should be encouraging for investors.
But Starbucks should be worried about the Coke’s more aggressive posture on coffee – more so because the former has faced trouble in getting customers to its stores recently.
(Adapted from YahooFinance.com)