Coca-Cola adds coffee with Costa acquisition

Diversifying its product and brand portfolio, Coca-Cola has moved to buy Costa, the UK-based coffee shop chain now owned by Whitbread. Currently, Costa has 4,000 locations in 32 countries, plus thousands of self-serve coffee vending machines.

This acquisition will enable Coca-Cola to build on Costa's strong brand identity and, at the same time, enhance the non-cola beverage elements of its product portfolio. The acquisition has implications for global marketing, as well. Costa does well in China, for instance, and Coca-Cola already owns the best-selling Georgia coffee brand in Japan.

But as consumer behaviour changes, and coffee consumption grows year after year, Coca-Cola sees Costa as a brand with significant potential for further global expansion. 'Costa has strengths in many countries and in many key distribution channels of the coffee business', says Coca-Cola's CEO.

Easy marketing £1 coffee

EasyCoffee is a growing franchised coffee chain under the Easy brand umbrella, soon to open dozens of new branches around the UK. The top brand attribute for Easy is (no surprise) value (£1 for a regular -sized coffee or tea). You know, Easy as in easyJet, the high-profile Easy-branded budget airline.

Here's the EasyGroup mission:

To manage and extend Europe's leading value brand to more products and services, whilst creating real wealth for all stakeholders.

Businesses or other organisations can have an EasyCoffee vending machine (above) on their premises to offer employee value-priced branded coffee. In other words, EasyCoffee's distribution strategy goes beyond consumer-oriented retailing into B2B marketing.

Which is a good thing, because competition in the retail side of coffee shops is intense, given the strong brands trying to increase market share (Starbucks, Costa and so on). Not to mention competition from other food service brands that make coffee a signature element in their outreach to certain customer segments (such as McDonald's with its McCafe coffees).

Costa brews up supply-chain success

Supply-chain management is a vital ingredient for marketing success today--and Whitbread's Costa Coffee is perking up profits because of its careful planning.

Coffee prices are rising, but Whitbread has locked up supply until March, allowing Costa to hold the line on retail prices. That will undoubtedly put competitive pressure on Starbucks, among other rivals.

Costa Coffee is opening new stores as the economy improves and customers regain their spending momentum. The brand is social, with 1.1 million Facebook likes and 94,000 Twitter followers.

New products are launched with YouTube support on Costa's Coffee Lovers channel. And Instagram is another way Costa promotes its brand, its products and its special events.

Coffee culture heats up

The Italian coffee company Lavazza will open dozens of Lavazza Espression coffee shops around London in the coming years, part of its intense focus on the UK market.

Italian-style coffee has been trendy in the UK for some time, with Whitbread's Costa operating 1,300 shops, Starbucks operating 760 shops and Caffe Nero operating 400 shops. Add it all up, and one expert says these three chains hold a combined 52% of the UK coffee-shop market. These chains revived the UK coffee culture and helped educate consumers about great tasting espresso, capuccino and other hot (and cold) coffees that have become favourites.

Even so, if the market share numbers are correct, and coffee consumption continues to increase as strongly as in previous years, there's opportunity for innovation by independent shops and small chains that emphasise high quality.

The Independent recently listed the 50 best UK coffee shops, including indies like Allpress Espresso, Caravan and 6/8 Kafe, highlighting friendly service, superior coffee, special events and comfortable cafe ambiance. After all the years of enjoying chain coffee, many consumers are seeking out different places and tastes, partly for the novelty and partly to be among the first to discover something new and different.

One fast-growing new entrant is Harris & Hoole (above), which has 10 coffee shops and multimillion-pound backing from Tesco. Although the Tesco investment has sparked some controversy, the founders of Harris & Hoole explain that they had difficulty obtaining funding and Tesco's money doesn't represent a controlling interest. Watch for more H&H shops popping up all over London and beyond--and for independents that make great coffee or offer great ambiance.