Coca-Cola brews up a coffee business

Faced with stagnating demand for soft drinks and increased competition in bottled water, Coca-Cola Co. set out to enter the lucrative, fast-growing market for premium hot brews.

But how to do that turned into a five-year odyssey that took a team of Coca-Cola executives around the globe and led to creation of an innovative concept dubbed "the café in a box."

Instead of tackling the premium-coffee market head on with a string of Starbuck's-like coffee shops, as some observers had expected, Coca-Cola decided to leverage its existing relationships in pop, water and juice.

By creating an easy to operate and maintain "box," Coca-Cola says, anyone from the convenience-store operator to the fine-restaurant chef can offer customers a range of premium specialty coffees and teas at the press of a button.

Coca-Cola will also supply the coffees, teas and hot chocolate that go into the box, under the brand name Far Coast for the higher-end leisure market, and Chaqwa for the convenience market.

The company says the two brands are similar in quality, but Far Coast offers more blends, including a Fair Trade blend called Passage West.

"We wanted to create a turnkey operation for our customers who don't know where to buy the beans, or how to roast them. We give them the equipment, the products and the service," said Udaiyan Jatar, Coca-Cola's general manager for premium brewed beverages.

Noting the global market for coffee and tea is twice that of carbonated beverages, Coca-Cola is betting that the only thing holding back sales of high-quality specialty brew is convenience.

"I think there's a huge growth opportunity here ... that's restricted today by lack of availability," Jatar said, adding the company hasn't ruled out future grocery-store sales.

A year into the project, after "searching the world" for an easy solution, Jatar said, Coca-Cola concluded it would have to create its own. The equipment would have to be cost-effective and easy to operate in settings where labour turnover is high, and would have to address customers' health concerns about handling fresh milk.

The result is an enclosed box that uses a "pod" system to brew and dispense a finished product at the touch of a button.

The global launch took place in Toronto yesterday at the first Far Coast "concept store" in the upscale Bloor-Yorkville area, where the company says it will collect direct feedback from consumers. But executives emphasized they're not trying to compete directly in the coffee-house business.

"We're are fundamentally not competing with the coffee houses. We're not going into the retail business," Jatar said.

"We're not trying to compete with Tim Hortons," said Silvio Annosantini, director of premium brewed beverages business development for Canada.

The product is also available at four Toronto-area business locations, and the company plans to roll out a total of 40, all in Toronto, by the end of this year.

Silvercity Cinemas in Richmond Hill began selling the Chaqwa brand two weeks ago at prices between $2.59 and $3.49 depending on the size of the cup.

Yorkville-area restaurant Flow began serving the Far Coast blend two days ago, and the chef said the machine helps save time in the kitchen.

"I tried it last night," said chef Richard Andino. "It's amazing. Watch out Starbucks. It's the same quality, if not better."

The other two customers are the upscale Windsor Arms Hotel, also in the Bloor-Yorkville area, and Port Credit's Village Market, an independent convenience grocer.

Comparing the current state of the coffee market to that of the wine industry a few years ago, Coca-Cola's global marketing director Scott Stuckmann said consumers are developing more sophisticated tastes.

The company chose Toronto for the global launch because of the city's multicultural market and because Canadians love hot coffee and tea, Annosantini said.

The total market for coffee and tea in Canada, including grocery-store sales, is $5.2 billion.

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