The second new initiative for Coca-Cola is a partnership and joint-venture with Italian premium coffee producer and retailer Illycafe. Trieste, Italy-based Illycafe is well-known as one of the best producers of premium and gourmet coffees, especially its espresso. The coffee roaster markets branded coffee to upscale retailers, coffee bars and restaurants in 140 countries. Illycafe also has its own gourmet coffee cafes and bars located in major cities globally, including in the U.S.
What We Think
It's clear Coca-Cola is moving far beyond its heritage as a carbonated soda pop company that morphed into a beverage company with juice and water in addition to soda. If you ask a Coke executive today what business the company is in they will tell you Coca-Cola is in the hydration business, producing and marketing beverages of every type, and as we see in the case of Lumae not limited to thirst quenching or even health (like Vitamin Water) bit now for cosmetic enhancement as well.
We find the company's evolution and growth into the natural, health, wellness, gourmet and beauty segments fascinating. It shows Cola-Cola isn't afraid to innovate, lead--and perhaps even fail. In the case of health, wellness and upscale beverages however failure isn't the likely outcome. In the 1990's Coke bought all-natural juice brand Odwalla. In the decade since the company has grown the brand dramatically, showing it can be successful in the natural beverage segment. Earlier this year Coke bought Glaceau, the maker of Vitamin Water and other nutritionally enhanced water brands, for a whopping $4.1 billion, paying a premium for the hugely successful brands of flavored and enhanced water. This acquisition alone shows Coke is committed to the health and wellness segment.
We'll watch with great interest the developments that will come out of the Chinese medicine/herbal research facility. There's a myriad of beverages and related products that Coke can develop for sales globally from Chinese herbs. Everything from extending its brands in the health and wellness segment. to creating drinks specific to various world regions, to even creating entire new categories based on the research and product development that can come from the joint venture and new facility in China.
The "beauty drink" could also be just the tip of the iceberg for Coke. Using beverages to aid medical conditions--such as drinks for joint problems and other ailments--is a rapidly growing segment that the company also could enter. Further, with the Chinese herbal medicine research facility, in addition to a joint-venture Coke has with Swiss-based food giant Nestle, we expect the company to come out with more types of beverages for things like skin care and other cosmetic purposes if the Lumae product is a success.
We often talk here about the convergence between the natural and specialty or upscale product categories which includes environmentally sustainable elements and programs as well. With its new ventures and product development and acquisitions Coke is demonstrating it sees this convergence as well--and that it could be key to the company's future growth and success. A combination of good old fashion soda pop--with some upscale and herbal additions--along with new products in the health, wellness, gourmet, cosmetic and other categories is changing Coke from your parent's soda pop company into your grandchild's hip, new age hydration company. It will be interesting to watch as Coke continues to gets it groove on.