Interview

Coca-Cola's Costa Coffee global expansion - just-drinks speaks to Prodromos Nikolaidis, Coca-Cola HBC's group coffee director

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Earlier today, Coca-Cola HBC announced an expansion of the Costa Coffee range to three of its markets. The move is one of the Coca-Cola system's first wide-scale activations of Costa since The Coca-Cola Co acquired the UK-based chain for US$4.9bn last year. CCHBC, which bottles Coca-Cola beverages in a number of European markets as well as Nigeria, views coffee as a EUR56bn (US$61bn)-per-year opportunity in its territories and will sell Costa products including RTDs, roasted and ground beans and even Nespresso-compatible coffee pods through a range of retail and away-from-home channels.

Coca-Cola HBC is leading the way in taking the Costa Coffee brand global

Coca-Cola HBC is leading the way in taking the Costa Coffee brand global

just-drinks yesterday spoke to Coca-Cola HBC's group coffee director, Prodromos Nikolaidis, about how the coronavirus pandemic has affected the launch, the prospect of a new battleground in Coca-Cola's rivalry with PepsiCo and whether we will see a Costa-branded Coke.

j-d: You've lined up the launch of Costa-branded products in markets including Switzerland, Croatia, Greece, Ireland and Northern Ireland. This will follow the roll-out announced this week for Bulgaria, Poland and Hungary. The activation covers four of Costa's five brand platforms - home, non-Costa-branded stores, Costa Express [stand-alone vending machines] and ready-to-drink. The one platform you will not be working with is franchise Costa stores. Why not?

Coca-Cola HBC group coffee director Prodromos Nikolaidis: We would be seen as trying to work and compete with the same customer base [as Costa]. Also, running a store is a completely different area of expertise, and we don't really have any expertise there. 

j-d: CCHBC previously worked with Luigi Lavazza as a coffee partner. Does the Costa platform present a different challenge to the company?

PN: It can be very similar and very different. When it comes to supermarkets and at-home channels, it's very similar to what we know how to do already. When it comes to HoReCa [hotels, restaurants and cafes] and away-from-home, that's a completely different story. The biggest bet for us was to see how good we can be at that. I think we've proven to ourselves that we can be really good.

j-d: How have your plans for HoReCa been affected by the coronavirus pandemic?

PN: Given that all this happened before we launched in any market, we had time to adjust our plans accordingly. We started with more focus on the at-home channels. Coffee sales have been increasing because people are staying at home more. Our plans have simply moved forward in time. We're now seeing stores opening, country by country. HoReCa is opening up again.

HoReCa isn't a channel you can build immediately at a fast pace. Building up our business in HoReCa is something that happens step by step - you can't start with 1,000 customers in one month. In year one, HoReCa was going to be a smaller part of our business. This has been affected, of course, because there's a time delay. But, we're not talking about massive changes.

j-d: Do you see the coronavirus changing the HoReCa channel permanently?

PN: What experience shows is that when there's such a big change, there's a lot of overreaction in the beginning. Then, gradually, things adapt to a new normal, which isn't as different as the current reality but isn't the same as the previous normal as well. We expect some permanent change, but I can't say that we expect everything to turn upside down.

just-drinks spoke to Coca-Cola HBC's group coffee director,
Prodromos Nikolaidis, earlier this week.

just-drinks spoke to Coca-Cola HBC's group coffee director, Prodromos Nikolaidis, earlier this week.

j-d: The Costa expansion will include branded coffee machines. What potential do you see there?

PN: We see huge potential. We'll have professional espresso machines operated by a barista, fully automatic bean-to-cup machines for self-serve, both with fresh liquid milk, which is a must for Costa. We also have the Costa Express machines that are like a barista in a box. It's like a small-store format, an unmanned coffee shop - it's real coffee with real liquid milk coming from an automatic machine. They also offers a combination of different syrups and toppings.

[With the machines] there have been a lot of learnings; how we set up for repair and maintenance, for example. When a [soft drinks] cooler breaks down, there's always another cooler next to it that can do the job. If a coffee machine breaks down, it means no sales.

j-d: You will also look to get machines in offices, but a lot of offices are empty at the moment because of the coronavirus. Have you changed your plans there?

PN: I think we can safely assume the return of people to the offices will be gradual, but offices will remain relevant to a great extent. And, people in offices will want to drink coffee.

Our plan for offices goes well beyond machines - we're looking not only into different coffee machines, but also different business models. We're looking at machines that offer payment as well as cashless payment systems. We're looking at machines that can be controlled via your mobile phone so you don't need to touch the machine.

j-d: Has the coronavirus affected coffee's longer-term trends?

PN: Coffee is a very promising category - we estimate the coffee category to be about EUR56bn (US$62bn) in annual consumer spending terms across CCHBC markets. There might be a hiccup because of COVID, I don't see that having any permanent effects on the underlying trends.

The coffee market is extremely fragmented compared to other categories

j-d: Do you plan to launch in Nigeria?

PN: Absolutely. It's still a small coffee market but coffee is growing. At the same time, UK-based brands are very well-appreciated in Nigeria. With Costa being the favourite coffee in the UK for the last ten years in a row, it has good credentials to become a favourite in Nigeria as well.

j-d: The coffee category is heating up. PepsiCo this year announced a tie-up with your former coffee partner, Luigi Lavazza. How will you approach this increase in competition?

PN: There's definitely a lot of activity and we've seen a lot of consolidation. But, if you look at away-from-home, the coffee market is extremely fragmented compared to other categories. What we've seen in the last three years is that there's always space for a great coffee partner. That's why our aim is to be the best coffee partner combined with our products and our services. It's not going to be easy, but that's our aim.

j-d: We have two big brands here - Costa and Coke. Will we see those brands come together in new products?

PN: You never know. I think there's such a [consumer] appetite for exploration. There is already a Coke with coffee, right? Will there be an opportunity to combine the two brands? I don't know. We'll see.


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