"Never kick a man when he's down," goes the ancient admonition. But as Coca-Cola
Over in Seattle, Starbucks
Coffee with an Italian kick
As you may recall, last year Coke teamed up with Italy's illycaffe to create a joint venture to hawk canned, ready-to-drink (RTD) coffee concoctions -- "Caffe," "Cappuccino," and "Latte Macchiato" under the "illy issimo" brand name.
Back then, I argued against the new joint venture's name: "Ilko Coffee." (Sound it out. That's right: "Ill-co".) But it's hard to argue with the timing -- or the success. When it announced the partnership last year, Coke boasted of a $16 billion market opportunity, which was growing in excess of 10% per year. Fast forward 14 months, and Coke's CEO Muhtar Kent now puts the market at $17.4 billion in size. For those in the class who forgot to bring their calculators, I'll give you the answer: The market actually grew at 7.5%, annualized.
Sure, sure. So the market's not ramping up quite as well as expected. But in case you haven't noticed, we're in a bit of an economic slump right now. When you consider that both Starbucks and McDonald's, and also Procter & Gamble
Coke had a bad quarter, too, revenue-wise, as did PepsiCo
So it's little wonder that Coke wants to break into this growing market stateside, where approximately 11% of worldwide RTD coffee sales take place. Coke recently launched distribution of illy issimo in three U.S. cities -- New York, San Francisco, and Los Angeles -- distributing the drinks through upscale locations such as Whole Foods
Kick and run
And once it's kicked Starbucks (and -- for bonus points -- Pepsi) here in the U.S., Coke aims to tackle the biggest RTD market of them all: Japan. That's where 75% of the market lies and where we'll ultimately see Coke's coffee klatsch succeed or fail.
Have another sip of our Coke commentary and a smile:
Starbucks and Whole Foods are Motley Fool Stock Advisor selections. Coca-Cola and Starbucks are Inside Value selections. Coca-Cola, PepsiCo, and Procter & Gamble are Income Investor picks. The Fool owns shares of Procter & Gamble and Starbucks.
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