COFFEE KLATCHES AT STARBUCKS AND COCA-COLA

Things are looking better at Starbucks.  The company beat its profit expectations for the last quarter and has boosted forecasts for growth this year.

CEO Kevin Johnson’s streamlining efforts are clearly kicking in.  Same-store sales grew by 3% during the last quarter, with sales up 4% in the Americas stores and 3% in China, its second biggest market.  Johnson has pushed the company to boost its digital efforts, including delivery and loyalty programs.  A new loyalty program went into effect last week, and the company plans to introduce mobile ordering and payment in its China stores this year.  Coca-Cola is pushing forward with overseas rollouts of a coffee-infused variant and an energy-drink version of coke (ref. WSJ).  Coke tested Coca-Cola Plus Coffee last year in Asia and had a positive response. It now plans to launch the drink in 25 markets by the end of the year, and will forge ahead in Europe with Coca-Cola Energy.  The company is focusing its efforts on diversifying into water, coffee, juice, and other new variants of its flagship brand, including Coca-Cola Zero Sugar, a reformulated diet drink that grew by double digits in the last quarter.  In the  U.S., the launch of Orange Vanilla Coke, the first new Coke flavor in a decade helped drive a 6% retail sales growth for Coca-Cola.  CEO James Qunicy has said that the coffee version of Coke is designed to appeal to people who need a mid-afternoon pick-me-up at work.  Coca-Cola Energy has a stronger caffeine boost than regular Coke and a new taste.  Monster and Red Bull have led the way for energy drinks in North America and Europe.  But, thus far, there’s lots of room to grow in emerging markets making it a good opportunity for introducing a drink that blurs the boundaries between an energy drink and a cola.  Quincy has said, “We think it will help complement the other brands that sell successfully in this category.”  Coca-Cola is exploring all sorts of opportunities, including the recent acquisition of British coffee shop chain Costa which has a total of 3,800 cafes, 2,500 in the U.K. and a growing presence in China.  Coca-Cola plans to launch its first ready-to drink Costa products this spring, concentrating in areas where the chain already has a presence.  It’s always invigorating to observe and follow the entrepreneurial actions of a company dedicated to recasting and refocusing its brands and its practices for future relevance.

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