respond to the instruction using the following criteria: Individual Written Case Exercise Respond to the specific questions provide in the case document it will be seven documents. Please make sure to perform and describe your analysis of key case data (including the course concepts underpinning your solution) while reviewing how you would implement your proposed solution(s) to case challenges. Participants will be provided with the necessary data to deliver a good case challenge submission but can access data outside the case data set if they so choose.  Please include a bibliography and footnote index in order that cited works can be properly identified. 

 

 

You have been hired as a consultant to Starbucks Corporation in order to defend against increasingly significant incursions, by Pepsico and Coca Cola Corporation, into its coffee business. Both Pepsi and Coke have already launched alternative coffee beverages into several markets and now both will launch new more directly competitive offerings into the N. American market Pepsi Café and one or more Coke branded products have been launched in the previous months.  In addition Coca Cola has bought UK-based Costa Coffee as well as other smaller coffee shop retailers in India and other international markets as Pepsico and Starbucks have signed an alliance to co-sell several beverages in Latin America & the Caribbean.  In addition to these competitive incursions the advent of Covid-19 in February-March 2020 did throw many significant economies into recession. This has had a disproportionately negative impact on food and DTC (direct to consumer) beverage retailers vs. their grocery store chain competition over the course of the last 2.5 years. In order to complete your consulting mandate you must respond to the four questions that the client wants answers to- as listed below: 

1. Define the nature of the marketing/sales revenue challenge Starbucks faces in the America's from Coke and Pepsi in both the alternative (blended) coffee beverage business as well as its traditional hot coffee business

 

1. What are the potential weaknesses in the Pepsi/Coke attacks on the coffee beverage market that Starbucks may be able to deflect or turn back on Coke and Pepsi?

 

 

 

1. How should Starbucks respond to the key threats to its alternative coffee beverage (shelf stable- cold coffee-based beverages) in its core N. American markets? (next 24 months)
2. As the US slowly moves out of a limited recession (negative GDP-negative GDI- increasing inflation)  in 2023 continuing into Q1-Q4 of 2024, how would this affect overall performance of Starbucks and its ability to weather the increasingly significant challenges to its global coffee business?

 

 In responding to the case challenge make sure to perform and describe your analysis of key case data (including the course concepts underpinning your solution). Participants will be provided with the necessary data to deliver a good case challenge submission but can (but do not need to in order to do an excellent job on the case study challenge) access data outside the case data set if they so choose. I have included data in this case document that takes you from 2007-2008- (start of the previous recession) through to 2020-2022. How will they do it this time -specifically when dealing with large beverage space players coming in to directly attack Starbucks in market? Please remember that all work that is not footnoted and referenced must be original work. (this includes any AI-based content generated for this assignment) . Please include a bibliography and footnote index

 

 

MBQC 932- NBAB 6220- Marketing Strategy-EMBAA- Summer 2023- Starbucks vs Pepsi Café & Coke /3

L. Gialloreto 

 

 

You have a lot of data- mostly diagrams and tables. The core element of the exercise is to review the data and then provide what you feel are the most correct answers to the case questions.  Your case file includes the attached data and articles in this file as well as the following 2 files-

 

Pepsico-CAGNY 2022- Data Plan File - PDF

Starbucks & Coca Cola Marketing Strategy Data File- Word File

 

Brand management

 

Mar 1st 2007

From The Economist print edition

 

PEPSI and Starbucks share a problem. The second-biggest maker of cola and

the world's largest chain of coffee shops are both worriedabout how customers perceive their brands. Pepsi has always been about "experience", says Ron Coughlin, a Pepsi marketing executive. The trouble is that consumersare increasingly experiencing healthier soft drinksand bottled water, ratherthan sugary cola. Starbucks, meanwhile, may have expanded too quickly, which is why Howard Schultz,its chairman, worries that the "Starbucks experience" is under threat.

 

In an internal memo sent to senior Starbucks executives on February 14th, which was leaked onto the internet, Mr. Schultz says that the expansion from 1,000 to more than 13,000 shops over the past ten years has led to a watering down of the Starbucks experience and to "what some might call the commoditization of the brand". One result, says Mr. Schultz, is that some people find its stores "sterile, cookie-cutter, no longer reflecting the passion our partners feel about coffee."...

 

 

National US Beverage Market Growth as a factor in Pepsico Beverage Growth 

 

 

The Launch of Pepsi Café

 

 

 

Pepsi

Pepsi Café - when Cola meets Coffee

Hitting the market in April 2020,  Pepsi Café is a blend of the deep flavorful coffee with the refreshing, crisp taste of a Pepsi cola. Featuring two delicious flavors, Original and Vanilla, Pepsi Café will have nearly double the amount of caffeine than a regular Pepsi cola.  The new beverage from the soda manufacturing giant will be available in 12oz slim cans.

PepsiCo Follows Coca-Cola Into the Hybrid Coffee Market 

Contributor

Leo Sun The Motley Fool 

Published

Dec 20, 2019 7:55AM EST

 

PepsiCo (NASDAQ: PEP) recently introduced Pepsi Café, a new drink that blends cola with coffee. The new drink comes in original and vanilla flavors, and offers "nearly double" the amount of caffeine as a regular Pepsi cola in each 12 oz. serving.

Pepsi will launch the drink next April and it will follow Coca-Cola's (NYSE: KO) expanded launch of Coca-Cola Plus Coffee into over 25 markets this year. Pepsi Café isn't Pepsi's first hybrid cola-coffee drink -- it tested a similar product, Pepsi Kona, in Philadelphia back in 1996.

Pepsi Kona was discontinued a year later, and the company admits that Kona was "ahead of its time." But this time, Pepsi's marketing VP Todd Kaplan claims that Pepsi Café will appeal to "cola fans, iced coffee drinkers and anyone in need of an extra caffeine boost."

• Let's take a look at why PepsiCo is entering the hybrid cola-coffee market, and why it's a vote of confidence for Coca-Cola's latest plans.

Why is PepsiCo interested in coffee?

PepsiCo's beverage business faces two main headwinds: declining soda consumption rates and fierce competition from rival beverage makers.

To counter those headwinds, PepsiCo diversified its portfolio with teas, fruit juices, bottled water, sparkling water, sports drinks, and licensed coffee drinks from Starbucks (NASDAQ: SBUX). It also packaged its sodas in smaller cans and developed lower-calorie, sugar-free, and caffeine-free versions.

PepsiCo also constantly mirrors its competitors' moves into higher-growth markets. It bought premium juice brand Naked Juice to appeal to health-conscious consumers, launched Stubborn Soda to reach the growing craft soda market, introduced Bubly flavored sparkling water to challenge National Beverage's La Croix, and created Mountain Dew Amp Game Fuel for the energy drink market.

Therefore, it isn't surprising that PepsiCo is also launching a cola-coffee drink to counter Coca-Cola Plus Coffee, which is expanding globally after a successful test run in Japan.

 

Image source: Coca-Cola.

Is the world finally ready for cola-coffee drinks?

Coca-Cola Plus Coffee isn't Coca-Cola's first attempt to crack the cola-coffee market, either. It launched a cola-coffee drink called Coca-Cola Blak in 2006, but it flopped and was discontinued just two years later. However, Coca-Cola Plus Coffee adds more caffeine than Blak. It has slightly more caffeine than a regular Coca-Cola, but less caffeine than a regular coffee -- which is the same niche Pepsi Café is targeting.

For Coca-Cola, Coca-Cola Plus Coffee represents an extension of its coffee strategy, which stems from its $5.1 billion takeover of British coffee chain Costa Coffee earlier this year. It also complements its aggressive push into the energy drink market with new beverages like Coca-Cola Energy.

For PepsiCo, Pepsi Café widens its moat against Coca-Cola, complements its Starbucks coffee drinks, and boosts its presence in the the global ready-to-drink coffee market, which could grow from $19.1 billion in 2017 to $36.6 billion in 2025, according to Fortune Business Insights.

What this new drink means for investors

PepsiCo's new drink won't move the needle on its own. However, it could strengthen its North American Beverages unit, which grew its revenue 3% annually to $15.5 billion in the first nine months of 2019 and accounted for a third of its top line.

Bottled coffee drinks are also particularly popular in Asia. If PepsiCo follows up Pepsi Café's U.S. launch with an expansion into Asia, it could significantly boost its Asia, Middle East and North Africa revenue, which grew 1% to $4.2 billion in the first three quarters and accounted for 9% of its top line.

PepsiCo could also cross-promote Pepsi Café with its Frito-Lay snack products. It already did this earlier this year, with cashback rewards for customers that paired certain drinks with snacks -- and it could promote Pepsi Café in a similar manner.

The key takeaway

The soda market remains sluggish, but PepsiCo and Coca-Cola are both expanding their portfolios and testing new products to offset that slowdown. It's unclear if Pepsi Café and Coca-Cola Plus Coffee will fare better than their ill-fated predecessors, but they indicate that the two beverage giants are still willing to take innovative risks to create new products.

 

Pepsi blurs boundaries with new cola-coffee drink

Pepsi Café will hit stores in April, with nearly double the caffeine as regular Pepsi cola 

By E.J. Schultz. Published on December 12, 2019.

 

Pepsi is trying to perk up its soda sales with a new product that blends Pepsi cola with coffee. The offering, branded Pepsi Café, includes roasted Arabica coffee and has nearly twice the caffeine as regular Pepsi cola. 

The drink, which hits stores in April, comes in two varieties: original and vanilla. It will be distributed nationally, but PepsiCo has not finalized advertising plans.

"We know that the consumers today are looking for products that meet the needs of energy, indulgence, and refreshment during that afternoon pick-me-up occasion. At Pepsi, we've known the potential of blending cola and coffee for years and after striking the perfect balance, we cannot wait to introduce Pepsi Café to the US next year," Todd Kaplan, VP of marketing for Pepsi, said in a press release.

Pepsi Café continues a trend of blurring boundaries in the beverage industry. Alcohol marketers, for instance, have seized on the sparkling water craze with hard seltzers, while non-alcoholic brands take cues from wine and beer. Pepsi, for instance, earlier this year experimented with "Pepsi Sparkling Rosé," a zero-calorie, rosé-flavored cola created exclusively for BravoCon, a three-day event for super fans of the cable network held earlier this month in New York.  Coke will soon launch Coke Energy in the U.S., putting its spin on the energy drink category. 

Coke already sells a coffee-soda drink, called Coke with Coffee, but so far it is available only in Australia, Italy, Spain, Thailand and Poland. "We haven't committed to the product being in the U.S., but we are optimistic about the potential," says a Coca-Cola Co. spokeswoman.

This is not Pepsi's first foray into a cola-coffee blend. The brand in 1996 sold "Pepsi Kona," which was backed with an ad starring Tom Jones. 

. 

PepsiCo already has a stake in the ready-to-drink coffee space via its long-running partnership with Starbucks for a wide range of Starbucks-branded products sold at retail, including Frappuccino. Starbucks confirmed that Pepsi Café does not include Starbucks coffee. Pepsi Café could theoretically compete with Starbucks' products such as bottled Cold Brew and other drinks.

PepsiCo to debut Pepsi Cafe, a coffee-cola drink, next year

Published Thu, Dec 12 20199:00 AM ESTUpdated Mon, Dec 16 20197:37 AM EST

Amelia Lucas

Key Points

• Twelve-ounce cans of Pepsi Cafe will arrive on shelves in April, but for a limited time.
• The coffee-infused cola beverage has nearly twice as much caffeine as regular Pepsi.
• Coca-Cola has its own version available internationally but has not announced a U.S. launch.

It looks like PepsiCo could beat rival Coca-Cola to market with a coffee-cola beverage.

Twelve-ounce cans of Pepsi Cafe will arrive at U.S. stores in April, but will be available only for a limited time.

Coke's version, Coke Plus Coffee, is available in international markets, but the Atlanta-based company has not announced a U.S. launch despite months of speculation.

"We want to be first to market, and launch this really in the right way," said Todd Kaplan, Pepsi's vice president of marketing.

Pepsi Cafe will come in two flavors: original and vanilla. The coffee-infused cola beverage has nearly twice as much caffeine as regular Pepsi.

The reintroduction of coffee-cola drinks comes as U.S. soda consumption continues to decline annually. But Pepsi and Coke are betting that consumers would still like an afternoon pick-me-up that combines the taste and carbonation of soda with coffee flavors.

The two beverage giants have tried coffee-cola drinks before. Pepsi introduced the short-lived Pepsi Kona in 1996. In 2004, Pepsi tried another variant internationally called the Pepsiccino, a creamier version meant to taste more like cappuccino. Both iterations inspired the taste of Pepsi Cafe, which took more than a year and half to develop.

"We leveraged both of those learnings and then went to the consumer groups and said, 'OK, what is the right space?' And it's somewhere right in the middle," said Danielle Barbaro, director of research and development.

Coke's first attempt in the category, Coca-Cola Blak, came to market in 2006 but was discontinued two years later. In 2017, Coke introduced Coca-Cola Plus Coffee in Australia. A year later, the company brought it to Asia for more tests after tweaking the formula.

"We know they have a product as well, but we feel great about the product that we developed," Kaplan said.

Shares of Pepsi, valued at $191 billion, are up about 24% this year, as of Wednesday's close. Coke's stock, which has a market value of $231 billion, has risen nearly 14%.

Pepsi's Caffeinated Brew

By: Mackenzie Baker | Dec 16, 2019 

Pepsi is taking caffeine rushes to a whole new level with its new soda-coffee hybrid. 

Pepsi Cafe will arrive in twelve ounce cans this spring in two flavors: original and vanilla. These new beverages contain twice the caffeine amount of a regular can of Pepsi. The drink was made with those who may enjoy the taste of coffee and carbonation in mind. Although the drink will only be available for a limited time in 2020, it is the first coffee-soda hybrid to be released in the United States. Pepsi's top competitor, Coca-Cola, has a drink of its own—Coke Plus Coffee—available in several international offices, but not yet released in the states. Pepsi has also made attempts in the past to release coffee-soda drinks internationally, including with the brand's Pepsiccino—a creamy cappuccino-esque drink—in 2004, and the Pepsi-Kona, a morning beverage the brand released in the late 1990's. With the help of social media, Pepsi hopes the popularity of Pepsi Cafe will far surpass that of its two predecessors. Pepsi currently dominates on Instagram—the brand has had almost two million interactions on the platform in the past year, according to a Gartner L2 report. 

 

The brand has spent over a year and a half developing the Pepsi Cafe, taking inspiration from both the Pepsiccino and Pepsi-Kona to bring a whole new drink to fans. The drink is coming at a time when soda consumption has been on an annual decline in the U.S. as consumer preferences continue to change. However, the American markets have seen the desire for mixed beverages surge—take alcoholic seltzer, for example—and Pepsi may be hoping  consumers are finally ready to get on board its coffee-soda trend.  Pepsi is hoping to give fans a nice afternoon pick-me-up with the introduction of Pepsi Cafe. Brands looking to introduce functional refreshments may look to Pepsi for innovative ideas to stay relevant in the changing beverage market.  Top of Form

Bottom of Form

 

Pepsi Cafe coffee-cola drink launches next year

10:28 am December 13, 2019 By Julian Horsey

PepsiCo has announced a new coffee-cola drink aptly named Pepsi Cafe which will be making its way to stores throughout the United States during April 2020. The new Pepsi Cafe will only be available for a limited time shipping in Twelve-ounce cans, similar in size to Red Bull.

Pepsi Cafe will be available in two flavours original and vanilla, offering a coffee-infused cola beverage packing nearly twice as much caffeine as regular Pepsi and possibly beating Coca-Cola to market with a coffee-cola beverage. "We want to be first to market, and launch this really in the right way," said Todd Kaplan, Pepsi's vice president of marketing.

It's not the first time that cola and cofee have been combined with both companies launching similar beverages before. Pepsi introduced the short-lived Pepsi Kona in 1996 and in 2004, Pepsi tried another variant internationally called the Pepsiccino. I'm still not sure whether coffee and Pepsi Cola is a good idea, but I will give it a chance and they try when it is available. Perhaps third time lucky for Pepsi, although soda consumption continues to decline annually.

Source: CNBC

 

2020 Is Pepsi's Year

Posted on January 3, 2020, 11:14 pm, by Zack Hill. 

 

The Pepsi-Co Corporation is planning to compete against Coca-Cola in 2020. Though these two corporations have faced each other in the soda market, this is the first time their battling for the best coffee beverage. It was announced that Pepsi Café would be released to American retail chains in April 2020. Available for a limited time, it'll come in a twelve ounce can and act as a test product. This coffee-infused soda beverage is being released in two flavours, Vanilla and Original and will feature twice the caffeine than a standard Pepsi.

The Coca-Cola Company already has its coffee-infused beverage available in international markets. Coke Plus Coffee is offered in the European and Asian Markets, with it being announced that their United States market launch is coming this year. Subsequently, these two companies will compete for consumer attention. It's known that the Pepsi Corporation plans to engage an extensive advertising campaign, which will use a new slogan to attract consumers.

It should be noted that the American public hasn't ever adopted coffee-infused cola. Every time one of these products has released into the market, profits have declined rapidly and eventually are pulled from shelves. It's been sixteen years since either of these beverage corporations last released one of these coffee-infused products, with company analysts betting that the American public is ready for a re-introduction. Previously, Pepsi released Kona backed in 1996 and then Pepsiccino in 2004. Neither products performed admirably in their respective markets. These two products were used for the inspiration behind Pepsi Café, which was in development for nearly two years. 

New Tagline in 2020

The Pepsi Corporation has a significant amount of competition going forward in 2020, which is prompting them to start an advertising campaign with their new tagline. Named "That's What I Like," this tagline will be used for many years to come and target the younger generations of consumers. The two previous slogans that were used by this corporation include the Joy of Pepsi and the Taste of a New Generation. The later was maintained for multiple years and is considered a triumphant tagline.

Beverage analysts are surprised that Pepsi is implementing this tagline, as often this is a strange form of advertising that hopes to compete against other notable slogans. The chances of becoming a pulp-culture tagline are one and a billion, even for the Pepsi Corporation. Regardless, their competition is extensive, and with Coca-Cola releasing multiple products next year, their challenges are continually growing. 

 

 

Why Is Coca-Cola Paying A Hefty Premium For Costa Coffee?

Trefis Team Contributor 

Great Speculations Contributor Group 

Opinions expressed by Forbes Contributors are their own.

 

A branded Costa Coffee cup sits next to a can of classic Coca-Cola, manufactured by The Coca-Cola... [+] Co., in this arranged photo at a Costa Costa coffee shop in London, U.K., on Friday, Aug. 31, 2018. Coca-Cola Co. agreed to buy the U.K. chain Costa Coffee for 3.9 billion pounds ($5.1 billion). (Photographer: Simon Dawson/Bloomberg)

The Coca-Cola Company (NYSE:KO) announced its intention of acquiring Costa Limited from parent company Whitbread PLC for $5.1 billion. This deal, expected to close in the first half of FY 2019, would give the cola giant a strong coffee platform across parts of Europe, Asia Pacific, the Middle East, and Africa. Costa has nearly 4,000 retail outlets, and is a leading coffee company in the U.K. and is scaling its operations in China. Such a move places Coca-Cola in direct competition with companies like Starbucks and Dunkin' Donuts, in a market that is growing at a fast pace, in contrast with that of its traditional business. Many beverage companies have been undertaking acquisitions recently to be in segments that seem to have better prospects, such as the acquisition of SodaStream by Pepsi, and the merger of Dr Pepper Snapple and Keurig Green Mountain. KO's chief executive, James Quincey, stated that the primary rationale behind this acquisition is the combination of Costa's coffee capabilities and Coca-Cola's marketing and distribution expertise.

We have a $52 price estimate for Coca-Cola, which is higher than the current market price. The charts have been made using our new, interactive platform. The various driver assumptions can be modified by clicking here for our interactive dashboard on Our Outlook For Coca-Cola In FY 2018, to gauge their impact on the earnings and price per share metric.

 

Reasons For The Acquisition

Today In: Money 

1. Coffee Expertise: The purchase of Costa Coffee provides Coca-Cola with strong expertise across the coffee supply chain, including sourcing, vending, and distribution. This will be a complement to existing capabilities within the Coca-Cola system. The management also stated that the coffee company has a brand new roaster with significant additional capacity, giving them significant roasting capacity in the future. The company also has built up a large coffee vending business, with 8,237 Costa Express machines worldwide, located in places such as convenience stores, cinemas, and offices. This may make it easier for Coca-Cola to expand its existing offerings. Since the cola giant has not had experience in running a retail format, it intends to let the existing management handle that part of the business.

2. Diversifying Into A New And Fast-Growing Segment: Coca-Cola is a big player in the non-alcoholic ready-to-drink beverages industry, currently valued at $0.8 trillion. However, when you add the hot beverage market to this, the addressable market size jumps to $1.5 trillion. Moreover, this segment is growing at a fast pace - 6% annually. Costa Coffee is the number one coffee shop brand in the U.K., and has been voted the most preferred coffee store in the region for the past eight years.

3. China Opportunity: Like Starbucks, Costa Coffee is also looking at China to drive its international growth, with the company intending to increase its store count in the country from 449 currently to roughly 1,200 by 2022. China continues to remain a long-term growth driver for the company, as its GDP, projected to exceed $15 trillion by 2021 from $11 trillion in 2014, is expected to fuel a massive increase in its middle class. Moreover, the per capita coffee consumption in China is about one-half of one cup per person per year compared to approximately 300 cups per person per year in the U.S. The buy-out of Costa's joint venture partner in South China, gave the company full control of Costa's Chinese operations outside of Beijing, which should be another factor that may result in an increase in revenues from the region.

4. New Revenue Sources For Costa: Coca-Cola has the capability to expand the coffee company faster and more economically than Whitbread. Moreover, Coca-Cola has plans to launch RTD cold and hot coffee, and at-home options, such as roast and ground beans, and pods, for the Costa Coffee brand. The cola giant already has experience in providing bottled and canned coffee in a few markets, such as Georgia coffee in Japan.

5. Synergy Possibilities: The company says it anticipates revenue synergies, possibly through the sale of Costa products through its distribution network, and through the sale of its products in Costa Coffee shops or vending machines. Currently, it does not expect any cost synergies, although we feel there is a likelihood of a reduction in SG&A costs for the combined company.

 

 

U.S. coffee shops: market share as of October 2019, by number of stores 

Published by S. Lock, Nov 18, 2019 

Starbucks was the largest coffee shop chain in the United States by number of units as of October 2019. According to the source, the world famous chain accounted for approximately 14.88 thousand stores in its home nation. In comparison, competitor Dunkin' (formerly known as Dunkin' Donuts) had around 9.57 thousand stores. 

Read more 

 

 

Why Is Coca-Cola Paying A Hefty Premium For Costa Coffee? 

 

Trefis Team Contributor 

Great Speculations Contributor Group 

Opinions expressed by Forbes Contributors are their own.

Markets 

 

A branded Costa Coffee cup sits next to a can of classic Coca-Cola, manufactured by The Coca-Cola... [+] Co., in this arranged photo at a Costa Costa coffee shop in London, U.K., on Friday, Aug. 31, 2018. Coca-Cola Co. agreed to buy the U.K. chain Costa Coffee for 3.9 billion pounds ($5.1 billion). (Photographer: Simon Dawson/Bloomberg)

The Coca-Cola Company (NYSE:KO) announced its intention of acquiring Costa Limited from parent company Whitbread PLC for $5.1 billion. This deal, expected to close in the first half of FY 2019, would give the cola giant a strong coffee platform across parts of Europe, Asia Pacific, the Middle East, and Africa. Costa has nearly 4,000 retail outlets, and is a leading coffee company in the U.K. and is scaling its operations in China. Such a move places Coca-Cola in direct competition with companies like Starbucks and Dunkin' Donuts, in a market that is growing at a fast pace, in contrast with that of its traditional business. Many beverage companies have been undertaking acquisitions recently to be in segments that seem to have better prospects, such as the acquisition of SodaStream by Pepsi, and the merger of Dr Pepper Snapple and Keurig Green Mountain. KO's chief executive, James Quincey, stated that the primary rationale behind this acquisition is the combination of Costa's coffee capabilities and Coca-Cola's marketing and distribution expertise.

We have a $52 price estimate for Coca-Cola, which is higher than the current market price. The charts have been made using our new, interactive platform. The various driver assumptions can be modified by clicking here for our interactive dashboard on Our Outlook For Coca-Cola In FY 2018, to gauge their impact on the earnings and price per share metric.

 

Reasons For The Acquisition

1. Coffee Expertise: The purchase of Costa Coffee provides Coca-Cola with strong expertise across the coffee supply chain, including sourcing, vending, and distribution. This will be a complement to existing capabilities within the Coca-Cola system. The management also stated that the coffee company has a brand new roaster with significant additional capacity, giving them significant roasting capacity in the future. The company also has built up a large coffee vending business, with 8,237 Costa Express machines worldwide, located in places such as convenience stores, cinemas, and offices. This may make it easier for Coca-Cola to expand its existing offerings. Since the cola giant has not had experience in running a retail format, it intends to let the existing management handle that part of the business.

2. Diversifying Into A New And Fast-Growing Segment: Coca-Cola is a big player in the non-alcoholic ready-to-drink beverages industry, currently valued at $0.8 trillion. However, when you add the hot beverage market to this, the addressable market size jumps to $1.5 trillion. Moreover, this segment is growing at a fast pace - 6% annually. Costa Coffee is the number one coffee shop brand in the U.K., and has been voted the most preferred coffee store in the region for the past eight years.

3. China Opportunity: Like Starbucks, Costa Coffee is also looking at China to drive its international growth, with the company intending to increase its store count in the country from 449 currently to roughly 1,200 by 2022. China continues to remain a long-term growth driver for the company, as its GDP, projected to exceed $15 trillion by 2021 from $11 trillion in 2014, is expected to fuel a massive increase in its middle class. Moreover, the per capita coffee consumption in China is about one-half of one cup per person per year compared to approximately 300 cups per person per year in the U.S. The buy-out of Costa's joint venture partner in South China, gave the company full control of Costa's Chinese operations outside of Beijing, which should be another factor that may result in an increase in revenues from the region.

4. New Revenue Sources For Costa: Coca-Cola has the capability to expand the coffee company faster and more economically than Whitbread. Moreover, Coca-Cola has plans to launch RTD cold and hot coffee, and at-home options, such as roast and ground beans, and pods, for the Costa Coffee brand. The cola giant already has experience in providing bottled and canned coffee in a few markets, such as Georgia coffee in Japan.

5. Synergy Possibilities: The company says it anticipates revenue synergies, possibly through the sale of Costa products through its distribution network, and through the sale of its products in Costa Coffee shops or vending machines. Currently, it does not expect any cost synergies, although we feel there is a likelihood of a reduction in SG&A costs for the combined company.

 

Here's why Coca-Cola is muscling into the coffee-shop business in a big way 

By Victor Reklaitis 

Published: Aug 31, 2018 8:30 a.m. ET

Share

It's hardly Coca-Cola's first foray into coffee. Do you remember the introduction of Coke Blak in 2006? 

 

By

 

 

Money & Politics reporter

To get through this last workday before the long weekend, Coke's management just ordered up a whole lotta coffee.

Those big shots in Atlanta KO, +0.47% plan to buy British coffee-shop chain Costa for $5.1 billion, taking it over from Whitbread WTB, +0.15% , a U.K. FTSE 100 component that has been jolted higher by the news.

What's the deal with this deal?

Coke, "like a lot of its peers, is looking to diversify away from its core business of sugary drinks, an area that has been increasingly attracting government ire due to a rising global obesity problem," says Michael Hewson, chief market analyst at CMC Markets UK, for our call of the day.

A growing number of U.S. cities, for example, have levied special taxes on sodas and other sugary beverages.

Hewson warns that the coffee business is "extremely competitive," and he notes that the acquisition follows PepsiCo's PEP, -0.02% move to branch out in a different way with the agreement earlier this month to buy home-carbonation company SodaStream US:SODA . (Campbell Soup's CPB, -0.62% new strategic direction, meanwhile, is to get out of fresh food.) 

See: Pepsi will buy SodaStream, in extended shift away from sugary drinks 

Coke has jumped on the chance to "gain an attractive brand with a fast-growing global presence," writes Neil Wilson, Markets.com's chief market analyst.

The seller of Sprite and Powerade seems to think "this is the ideal way into a frothy market that it's maybe missed out on so far," Wilson adds.

Costa, a rival to Starbucks SBUX, +0.77% in the U.K., has more than 2,400 coffee shops in its home country, along with more than 1,400 retail outlets in other nations. It also sells coffee in grocery stores and gas stations. 

Is this big trouble for Starbucks? Traders seem only somewhat concerned at the moment, with the Seattle company's shares down 1.4% in premarket trading.

Coke has ventured into coffee before, including acquiring a minority stake in once-hot Keurig Green Mountain. That company is now owned by an investor group led by JAB Holding.

 

 

Coca-Cola may buy major stake in Cafe Coffee Day after acquiring Costa Coffee

 

If the deal with Cafe Coffee Day (CCD) materializes, it would be Coca Cola's second major investment after acquiring UK-based Costa Coffee for $5.1 billion in September 2018.

 BusinessToday.In        Last Updated: June 27, 2019  | 15:03 IST 

 

Soft drinks maker Coca-Cola has initiated preliminary talks with Cafe Coffee Day (CCD) to acquire a substantial stake in India's largest coffee chain.

Soft drinks maker Coca-Cola has initiated preliminary talks with Cafe Coffee Day (CCD) to acquire a substantial stake in India's largest coffee chain. If the deal materialises, it would be Coca Cola's second major investment after acquiring UK-based Costa Coffee for $5.1 billion in September 2018.

The US beverage giant is eyeing a significant foothold in the fast-growing cafe business space as the core carbonated drinks segment is slowly losing sheen, a source told the Economic Times.

Both the companies are exclusively discussing the contours of the deal which is being led by Coca-Cola's head office in Atlanta.

"The potential stake acquisition is being driven by Coca-Cola's headquarters in Atlanta and officials from the beverage maker's global team are engaged in active talks with the Coffee Day management," the source told the news daily.

"It would give Coca-Cola significant scale in the fast-growing cafe business, compared to aerated soft drinks, which have been slowing down," he added.

Meanwhile, the beverage maker's spokesperson told the news daily that the news is "absolutely speculative in nature" and refused to comment on the same under the company policy.

Founded by VG Siddhartha, CCD is India's largest coffee chain and is owned by Coffee Day Global which is a subsidiary of Coffee Day Enterprises. The coffee chain as of March 2019 had a footprint of 1,752 cafes in the country and is a market leader in organised cafe space.

Siddhartha is the elder son-in-law of former Karnataka Chief Minister SM Krishna. He is credited with creating India's largest coffee empire.

All the coffee served at Coffee Day outlets comes from the 10,000 acres of plantations that Siddhartha owns in Chikmagalur, Karnataka.

He opened CCD's first outlet on Bangalore's upscale Brigade Road in 1996. The coffee chain's first launch came at a time when Bangalore was on the cusp of a transformation from a pensioners' paradise to an IT and lifestyle haven.

 

 

Coca-Cola Plus Coffee May Be Coming To The U.S. By End of Year

 

 

Starbucks plans to close up to 200 Canadian locations over two years 

16 hrs ago -June 2020

 

 

 

© Provided by The Canadian Press 

TORONTO — Starbucks is planning to close up to 200 coffee shops across Canada as it responds to changes in consumer habits during the COVID-19 pandemic.

The Seattle-based chain is restructuring its company-operated business in Canada under a two-year plan.

The details were included in a letter to shareholders filed on Wednesday with the U.S. Securities and Exchange Commission.

"As our business recovery continues, we are now laying the foundation for a more transformational phase — 'restore and build resilience' — enabling us to accelerate the transformation of our business," the letter said.

 

© Provided by The Canadian Press 

Starbucks said it typically closes about 100 company-operated stores each year in North America, mainly due to leases expiring. The latest round of closures would surpass that figure in Canada alone.

Some of the Canadian stores up for closure will be "repositioned," according to a statement provided by a Starbucks representative, with store formats that include "pick-up, drive-thru and curbside delivery."

The company was already experimenting with pick-up only coffee shops before the pandemic dramatically shifted consumer habits to interactions that minimize contact. The first Canadian Starbucks store using the new format, which measured at 93 square metres or 1,000 square feet, launched in Toronto's financial district in January.

Starbucks' pick-up stores are designed to cater primarily to customers who order before they arrive using the company's mobile app. "These test stores have provided us with insights into how we can optimally integrate this new format with nearby cafe locations," the company said.

"While we had originally planned to execute this strategy over a three- to five-year timeframe, rapidly evolving customer preferences hasten the need for this concept and we are now envisioning the accelerated development of Starbucks Pickup stores... including retrofitting and repositioning many existing cafes to expand our store portfolio with a mix of appropriate store formats." Starbucks said while it still plans to open more new locations in other parts of the world, including China, it was pulling back on structural growth in North America.

The company plans to add 300 new stores this year, a more restrained target than its initial 600 locations, but it'll come with the closure of up to 400 company-operated stores over the next 18 months. David Friend, The Canadian Press

 

Coffee evolution driving beverage category growth

 

Source: The Coca-Cola Co., Adobe Stock

12.26.2019

By Jeff Gelski 

 

KANSAS CITY — Coffee drinks, both hot and cold-brew varieties, spilled over into other beverage categories in 2019. The year also saw sales of bottled water continue to increase and Coca-Cola Co. and PepsiCo, Inc. become more active in the energy drink category.

Data from The Nielsen Co., New York, showed dollar sales in the U.S. ready-to-drink coffee category rose 16% to $3 billion in the 52-week period ended July 27. Coffee even has entered the alcohol category through Pabst Blue Ribbon hard coffee and Jäegermeister's cold-brew coffee. The Nielsen Co. anticipates cannabis-infused coffee in the future.

Coffee is being integrated into sparkling beverages, energy drinks and juices, according to Packaged Facts, Rockville, Md.

"The carbonated soft drink or soda category is challenged, but many consumers moving away from soda still want flavored drinks that have bubbles," said David Sprinkle, research director for Packaged Facts. "They also want healthier, more natural versions with less or no sugar. One of these soda alternatives is ready-to-drink coffee, which has seen a spate of sparkling versions on store shelves. Even more interesting is when we see coffee and sodas converge into an amalgamation that satisfies multiple tastes with a single beverage."

New York-based CB Insights, a tech market intelligence platform, listed coffee as one of 12 industries that will thrive thanks to millennials. Instead of store-bought and pre-packaged coffee, millennials seek cold-brew and other specially prepared beverages. They also show interest in ethically sourced, sustainable and gourmet products.

While premium coffee sales surged, more traditional coffee brands struggled. U.S. retail sales of ground coffee slipped 1.8% to $3,925.9 million in the 52-week period ended Aug. 11, according to Chicago-based market research firm Information Resources, Inc. Sales for brand leader Folgers dipped 7% to $1,003.1 million. Starbucks moved into second place as sales increased 2.6% to $460.5 million. Sales for No. 3 Maxwell House fell 10% to $459.7 million.

Like coffee, tea is being incorporated into sparkling beverages, energy drinks and juices, according to Packaged Facts. Tea merged into the energy drink space with stimulants like guayusa, green tea and matcha as well as yerba mate. Lipton Pure Leaf was the brand leader in canned and bottled tea with U.S. retail sales of $395.6 million over the 52-week period ended Aug. 11, up 4.7% from the previous 52-week period, according to I.R.I.

Bottled water sales continue to outpace carbonated soft drink sales. Total U.S. bottled water volume grew to 13,846.8 million gallons in 2018 from 8,534.3 million gallons in 2008, according to Beverage Marketing Corp., New York. Dollar sales over that time increased to $18,357.8 million from $11,426.8 million. Per capita consumption in 2018 was 42.3 gallons for bottled water and 37.2 gallons for carbonated soft drinks, which compared to 2008 numbers of 28.1 gallons for bottled water and 46.7 gallons for carbonated soft drinks.

Nestle Waters reported 1.4% organic sales growth in the first half of 2019. In North America, premium brands S.Pellegrino, Perrier and Acqua Panna saw high single-digit growth.

"The future is in premium offerings, sparkling, flavored, functional waters, that kind of work," said Ulf Mark Schneider, chief executive officer of Nestle S.A., Vevey, Switzerland, in a July 26 earnings call.

Valuable soft drink brands

Diet varieties were popular in the soft drink category.

Coca-Cola ranked as the world's most valuable soft drink brand at $36.2 billion, according to a 2019 report from Brand Finance, an independent brand valuation consultancy. Brand value for second-place Pepsi was $18.5 billion. Brand Finance determines the strength of brands through metrics evaluating marketing investment, stakeholder equity and business performance. Brand Finance attributed Coca-Cola's recent success to the uplift in sales of Diet Coke as a result of marketing and rebranding campaigns.

"The soft drinks sector is facing scrutiny like never before in the western world," said David Haigh, c.e.o. of Brand Finance. "From high sugar content causing a stir, to the backlash over single-use plastic, brands are having to think fast to meet the changing needs and circumstances. Although Coca-Cola always has its sheer volume of sales to rely on, the brand needs to evolve with society if it wants to maintain its dominance in the sector."

Keurig Dr Pepper, Burlington, Mass., and Plano, Texas, in 2019 put up strong financial numbers after the merger of the companies was completed in July 2018. Keurig Dr Pepper said adjusted net income increased about 19% to $423 million in the second quarter of 2019, which compared to adjusted pro forma net income of $356 million in the previous year's second quarter.

Keurig Dr Pepper will invest about $200 million to develop a production and warehouse facility in Allentown, Pa. The new facility will employ 400 people and provide the company with additional capacity for existing and new brands.

Already competing in the beverage categories of soft drinks, juices and waters, Coca-Cola Co., Atlanta, and PepsiCo, Inc., Purchase, N.Y., both are ramping up plans in energy drinks. PepsiCo in July of this year launched Bolt24, a beverage positioned for athletes off the field, under its Gatorade brand. Coca-Cola Energy is expected to launch in the United States in January 2020.

U.S. retail sales of non-aseptic energy drinks rose 14% in the 52-week period ended Aug. 11 to $3,122.7 million, according I.R.I. Red Bull led all brands with sales of $728.2 million, up 0.8%. Monster Energy sales increased 8% to $568 million, and Monster Energy Zero had sales of $232.3 million, up 12%.

Addressing plastic use

Coca-Cola and PepsiCo increased their efforts to reduce plastic use as well.

PepsiCo in July announced LifeWTR will be packaged in 100% rPET (recycled polyethylene terephthalate) and bubbly no longer will be packaged in plastic.

"As one of the world's leading food and beverage companies, we recognize the significant role PepsiCo can play in helping to change the way society makes, uses and disposes of plastics," said Ramon L. Laguarta, chairman and c.e.o. of PepsiCo. "We are doing our part to address the issue head on by reducing, recycling and reinventing our packaging to make it more sustainable, and we won't stop until we live in a world where plastics are renewed and reused."

Coca-Cola in August introduced a HybridBottle under its Dasani brand that will be made with a mix of up to 50% plant-based renewable and recycled PET material.

"Designing our packages to reduce the amount of raw materials used and incorporating recycled and renewable content in our bottles to help drive a circular economy for our packaging is an important part of our commitment to doing business the right way," said Sneha Shan, group director, packaging innovation for Coca-Cola North America.

 

 

Coca-Cola's Costa Coffee Pursues Three-Pronged U.S. Strategy

Brand to Launch Canned Flat White Coffee for US Market in December

October 10, 2022

Coca-Cola's US strategy for Costa Coffee came into sharper focus last week at the NACS convenience retail show. The company unveiled a new ready-to-drink canned coffee for the US market, showed off its Smart Cafe? automated coffee kiosk program, and shed light on plans to add standalone cafe?s.

 

 

 

The first major Costa Coffee product launch since Coca-Cola's acquisition of the brand has been announced: Costa Coffee ready-to-drink.

The range includes the variants Classic Latte, Caramel Latte, and Black Americano. The range is made from "proper coffee", with the blend that Costa uses for its entire line, its Mocha Italia Signature Blend.

Jennifer Mann, senior vice president and president of Global Ventures for Coca-Cola, said: "Our teams at Coca-Cola and Costa Coffee have been working around-the-clock to make our shared vision of Costa Coffee ready-to-drink coffee a reality.

"This demonstrates the power of our partnership. It combines the marketing expertise, global scale and distribution credentials of the Coca-Cola system with Costa Coffee's expertise and capabilities in coffee. The result is a fantastic tasting, ready-to-drink coffee."

Dominic Paul, CEO of Costa Coffee, said: "Through this collaboration we've been able to work together to offer consumers the great taste of Costa Coffee in a can for the first time. We are committed to working together to give consumers more opportunities to enjoy the Costa Coffee they know and love, whenever they want, wherever they are.

"We're really proud to have bought this product to market at such speed while still ensuring the range has proper coffee at its heart."

The range will debut in the UK later this month, followed by launches in Poland and China. The decision to release in these regions has been determined by the high levels of Costa's success in these particular countries.

Coca-Cola acquired Costa in August in a deal worth £3.9 billion. At the time, CEO James Quincey noted how Costa would fit into Coca-Cola's vision for a global coffee platform. 

The company has noted that all the coffee beans in the Costa ready-to-drink range are Rainforest Alliance Certified. The range will be sold in 250ml cans which are 100% recyclable.

 

 

Market News

Coca-Cola's Costa Coffee Makes U.S. Debut, Competing Against Starbucks

 

Devina LohiaAug 11, 2022, 03:27 PM

 

Story Highlights

Coca-Cola launched the first-ever U.S. store of its Costa Coffee brand that it acquired three years ago. The world's second-largest coffee chain, so far absent from the U.S. market, will serve coffees to customers in Atlanta, Georgia.

UK-based coffee chain Costa Coffee finally marked its entry into the North American territory with its first retail store launched in Atlanta, Georgia, this month. Founded in 1971, Costa Coffee is a UK coffeehouse chain well-known for its premium coffee. With over 4,000 locations globally, it ranks second after the largest coffee maker, Starbucks (SBUX). In the UK, Costa coffee has a strong following, with 2,681 locations, whereas global coffee giant Starbucks has only a little over 1,000 stores there.

Costa Coffee was acquired by Coca-Cola (KO) in January 2019 for a whopping $4.9 billion. Coca-Cola's initial plans to increase the presence of Costa Coffee in the U.S. took a backseat due to the onset of the COVID-19 pandemic.

Since then, Costa Coffee has had a limited presence in the U.S., operating through automated Costa Coffee Smart Café machines and BaristaBot locations.

Coca-Cola: Looking to Capture Coffee Market Share

During the pandemic, coffee consumption saw humungous growth, and Coca-Cola looks all set to capture more market share with the expansion of Costa Coffee stores in the U.S. Separately, Coca-Cola also acquired a 30% stake in Casa Del Caffè Vergnano, an espresso company based in Italy.

During its Q2 earnings call last month, Coca-Cola stated that its Coffee business grew 15%, driven by the continuous expansion of Costa coffee across locations globally.

Markedly, Costa Coffee has expanded its on-the-go coffee outlets with 300 new store openings in the UK. It also wants to expand its on-the-go store count to 500 by 2025.

Final Thoughts: Coca-Cola's Costa Coffee Can Pressure Starbucks

 

Though neither Coca-Cola nor Costa Coffee has set out targets for their expansion plans in the U.S. market, they could surely bring in some competition for Starbucks.

It's important to note that Starbucks has been in talks to sell its UK business due to rising costs and compressed margins as well as increased competition from the local players in the U.K., including Costa Coffee. Only time will tell how the two giants will capture the growing coffee market in the U.S. in the times to come.

 

 

Starbucks and PepsiCo Partner to Bring RTD Coffee and Energy Portfolio to Latin America

 

 

SEATTLE & PURCHASE, N.Y.-(BUSINESS WIRE)-Starbucks (NASDAQ: SBUX) and PepsiCo, Inc. (NYSE: PEP) today announced they have entered into an agreement for the marketing, sale and distribution of Starbucks® ready-to-drink (RTD) coffee and energy beverages including Starbucks® Frappuccino® chilled coffee drinks, Starbucks Double Shot® Espresso and Cream, and Starbucks Refreshers® beverages in Latin America. The RTD coffee and energy beverage category in Latin America is an estimated US$4 billion business and is projected to grow by 22% over the next five years.*

The agreement leverages the respective strengths of Starbucks and PepsiCo to bring a carefully selected portfolio of Starbucks® RTD coffee and energy beverages to consumers in Latin America unlocking new market opportunities for each company. Starbucks will provide coffee expertise and PepsiCo will sell and distribute Starbucks® RTD coffee and energy beverages leveraging its expansive network and experience across the region. Together, both companies will continue to market, innovate and further develop the brand in Latin America.

In 2016, consumers in select markets in the Caribbean, Chile, Colombia, Costa Rica, Guatemala, Mexico, Panama, Peru, Puerto Rico, and Uruguay will see a portfolio of Starbucks® RTD coffee beverages. Over time, the companies plan to expand to other markets in Latin America.

 

"Our expansion throughout Latin America in 2016 enables us to deliver high-quality Starbucks coffee in a convenient ready-to-drink format to our customers where they live, work and play," said Michael Conway, president, Global Channel Development at Starbucks. "PepsiCo's sales expertise and distribution network makes them the ideal company to work with to unlock the Latin American ready-to-drink market and accelerate local demand for Starbucks."

"The North American Coffee Partnership is arguably one of the most successful joint ventures in the beverage industry, and with this new agreement, we bring more than 20 years of partnership success to a region where coffee is part of the culture," said Laxman Narasimhan, CEO of PepsiCo Latin America. "Together, our highly talented and passionate teams will expand upon the vision set decades ago to create a new blueprint for continued growth in Latin America."

Starbucks relationship with PepsiCo began more than 20 years ago when the two companies formed the North American Coffee Partnership (NACP), a joint venture that built the RTD coffee category in the U.S. The NACP now has approximately 97 percent market share** in RTD coffee, and the RTD coffee category is one of the fastest growing liquid refreshment beverage categories in the U.S. The NACP has grown to more than a $1.5 billion retail business***, in terms of annual retail sales as of June 14, 2015. What began with the launch of Starbucks Frappuccino® chilled coffee drinks, now includes a diverse portfolio of coffee and energy beverages: Starbucks® Frappuccino®, Starbucks Double Shot®, Iced Coffee, Iced Espresso Classics, and Starbucks Refreshers®. Starbucks and PepsiCo will leverage the scale and innovation of the NACP for this new Latin American agreement.

Since launching its retail operations in Latin America in 2002, Starbucks retail presence has grown to more than 870 stores in 14 markets. Latin America is an important growing region for Starbucks coffee as it supplies more than half of the approximately 400 million pounds of high-quality arabica coffee that Starbucks purchases every year. PepsiCo and its predecessors have been operating in Latin America for more than 100 years, and its beverages operations and franchises span across all countries within the region and in select markets throughout the Caribbean Islands.

 

 

Forget the Cola Wars, here comes the Coffee Clash

With The Coca-Cola Company and PepsiCo both set to launch new coffee themed ready-to-drink products in 2020, Andy Morton takes a look at whether we might be about to witness another clash of the drinks titans.

About two years ago, on holiday in Sicily, I fell deeply in love with coffee. I'd never really drunk it before, but since that first tentative iced coffee on a terrace in Palermo, I haven't stopped. Today, my kitchen boasts a cafetière, an espresso machine, even a grinder - the hallmark paraphernalia of the coffee addict.

The Coca-Cola Company has also gone through a similar Damascene conversion to Coffee. Since buying the Costa Coffee chain in January last year, Coca-Cola has plunged feet first into the category, launching ready-to-drink coffee products around the world and expanding a portfolio of coffee-flavoured Cokes. 

With the Costa purchase, Coca-Cola gained not only a retail outlet for coffee but also access to coffee beans and roasters - the hallmark paraphernalia of a coffee business.

Racing to market, or coincidental timing?

As we've stepped into 2020, Coca-Cola is brewing up a fresh battleground to further fuel its coffee fixation.

The US was never a major focus of the Costa Coffee acquisition. At the time of purchase, there were no Costa branches in the country; despite the chain's stature as the second-largest coffee-shop operator worldwide after Starbucks. 

But it seems Coca-Cola is keen to bring its coffee products to the world's largest soft drinks market by value. In January, a social media account that highlights new snacks and beverages posted a picture of a new Coca-Cola-flavoured ready-to-drink coffee range. 

 

The three flavours of Coca-Cola's ready-to-drink coffee. Image: @candyhunting / Instagram

Three flavours were shown - caramel, vanilla and dark blend - with the account saying they are due to hit US shelves in April. Coca-Cola refused to be drawn on the launch.

But, April just happens to be the same month PepsiCo is due to release the first cans from its own flagship coffee project in the US, Pepsi Café.

It's like the 1980s all over again, except instead of going head-to-head in the Cola Wars, PepsiCo and Coca-Cola will battle it out in the Coffee Clash. 

 

Pepsi to launch Pepsi Café in April 2020. Image: Pepsi

There is much up for grabs. According to GlobalData figures, Americans drink less coffee than their European counterparts (2.9kg per person compared to 4kg in Western Europe) but more than the UK, where hot coffee consumption is only 1.9kg per person.

The hot coffee category in the US is expected to be worth just under $20bn by 2023, an annual growth rate of more than 4%.

Meanwhile, iced/ready-to-drink coffee grew US volumes by 9% in 2018, the second-largest growth rate in soft drinks. Similar annual increases are predicted to continue until at least 2024, GlobalData says.

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