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Coke jumps into coffee fray

Coca Cola teams up with Caribou Coffee, hoping to cash in on the boom of packaged coffee products such as Starbucks' Frappuccino.

By ASSOCIATED PRESS
Published January 5, 2007

SEATTLE - Even in this caffeine-soaked city, there are times Tommy Key can't make it to a Starbucks for his favorite pick-me-up.

On those mornings, Key's preferred stand-in is Starbucks' bottled Frappuccino, a cold milk-and-coffee concoction he grabs on his way out the door.

"It's a quick fix, is what it is," Key, 43, said as he loaded a 12-pack into his cart at a local Costco warehouse. "This will last me a good month or two."

Hurried coffee lovers such as Key will have more choices for that quick fix in the coming year, as Starbucks Corp. and others angle for the growing number of consumers who get their java from the grocery store or vending machine.

Beverage titan Coca-Cola Co. plans to push further into the ready-to-drink coffee market this summer, introducing an iced drink under the banner of the country's No. 2 coffeehouse chain, Caribou Coffee Co.

Coke also hopes to move another drink, the coffee-and-chocolate flavored Godiva Belgian Blends, into national distribution.

Starbucks, whose Frappuccinos and other packaged drinks dominate the market through a partnership with PepsiCo, is high on the future of its newest iced coffee offering.

The companies also are preparing to roll out a long-sought hot vending machine, which will dispense nine-ounce cans of Starbucks coffee in recyclable steel cans with insulated labels.

The flurry of activity might not exactly recall the cola wars of years gone by. But Coke's aggressiveness shows how important coffee-laced drinks have become, along with other beverages that deviate from the traditional soda recipes.

"Any of the major beverage companies, and smaller companies as well, are aware of the consumer trends for healthier products, more variety," said Gary Hemphill, managing director of Beverage Marketing Corp.

While carbonated soft drinks still tower over the beverage market, with a 2005 retail value of $68-billion, sales are declining for the first time in decades, Hemphill said.

Alternatives have been picking up the slack. Energy drinks and bottled water are leaders, but ready-to-drink teas and coffees are also players.

The packaged-coffee market alone is worth just under $1-billion in the United States and has seen several years of double-digit growth that analysts and executives expect to continue.

Coke isn't going alone with its newest coffee drinks.

The partnership with Caribou, based in Minneapolis, combines a large coffee brand - more than 400 coffeehouses, mostly in the Midwest and Southeast - with Coke's bottling and distribution force.

Coke and Caribou's first offering will be a chilled, slightly sweet dairy-and-coffee blend, said Michael Coles, Caribou's chairman.

[Last modified January 4, 2007, 23:15:34]