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Forget the Cola Wars, here comes Coca-Cola and PepsiCo's Coffee Clash - comment

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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.

PepsiCos Pepsi Cafe is due to launch in the US in April

PepsiCo's Pepsi Cafe is due to launch in the US in April

The Coca-Cola Co has gone through a similar Damascene conversion to caffeine. The group's flagship soda brand has always been associated with the coffee bean but since buying the Costa Coffee chain in January last year, Coca-Cola has plunged feet first into the category, launching coffee RTDs 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.

As we step 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. Earlier this month, a social media account that highlights new snacks and beverages posted a picture of a Coca-Cola-flavoured RTD coffee range. 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. 

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 US$20bn by 2023, an annual growth rate of more than 4%.

Meanwhile, iced/RTD 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.

There's a lot to play for, then, but who will win the US coffee showdown?

PepsiCo, which for the past 25 years has distributed Starbucks RTDs in the US and more recently Latin America, showed its hand last year with a tie-up with Italy's Luigi Lavazza. Like Coca-Cola's Costa purchase, this should give the Pepsi producer clear access to quality coffee. As us addicts will tell you, good coffee is all about the bean. 

But, Coca-Cola appears more bullish in its coffee plans. Costa was a bold move, but the company has also not been shy in leveraging the Coke brand in coffee RTD roll-outs around the world. To compound matters, it also has a new Costa Coffee RTD range and access to Costa's vending machines, which management in the company's bottler network have already pinpointed as a key distribution channel.

Whoever prevails in the new coffee contest, one thing is certain - our grocery shelves will see a lot more coffee innovation. Cold-brew Cokes, Pepsi lattes, Mountain Dew macchiatos – anything is possible.

Looks like I picked the right time to start drinking coffee.

Click here to read the latest from the The just-drinks Analyst


Expert Analysis

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Iced/RTD Tea Drinks (Soft Drinks) Market in Canada - Outlook to 2022: Market Size, Growth and Forecast Analytics

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