Is Coca Cola a good match for Costa Coffee?

September 1, 2018

This week the most powerful global soft drinks conglomerate acquired the second largest chain of coffee shops in the world. A perfect match?

The announcement has been met with near-universal enthusiasm from business and financial commentators.

According to The Guardian, Alison Brittain, the chief executive of Costa Coffee’s owner Whitbread, said the coffee chain had been approached by a number of potential buyers but Coke’s desire to snap up the 4,000-store chain was a “dream deal” for investors.

“The other suitors weren’t wearing the right suit or driving the right car,” explained Brittain of the other approaches it received. “It’s Coke we decided to go up the aisle with, with a very large ring on our finger.”

 

There is an easy-to-understand logic in the move. There is growing movement against sugary drinks as a contributing factor in the growing problem of obesity (bad pun intended). Coffee, while still suspect for its caffeine, is successful in decaf versions with only a few pedants frothing at the mouth about oxymorons. Overall, Coca Cola is investing in a healthier future.
It avoids the years of denial required of the cigarette manufacturers over links between its product and assorted life-shortening impact on consumers.

Coca Cola Innocent

 

Smoothies

The logic adds to an earlier case studied in LWD and at the Alliance Business School’s Executive MBA programmes. Coca Cola revealed its longer-term acquisition policy when it snapped up Innocent, the environmentally fragrant smoothies business.

How to screw up a good deal

Superficially, then, it’s a good deal. Onward and upward. Whitbreads are making reassuring noises that they will spend the cash responsibly and not just in helping fat cats get fatter. Shareholders will benefit. Some money will go to plugging a hole in the pension funds. So at least employees will get some benefit (even if they were already entitled to negotiated pension rights.)

Leaders we deserve has examined similar acquisitions in which a larger organisation introduces a strategically promising unit to strengthen or diversify. The process is much loved in Business Schools for providing yet another case for the Mergers and Acquisitions component of its courses. Kraft/ Cadbury; Pfizer/Astra Xenica are two important heavyweight examples.

The received wisdom is to avoid messing with the brand assets of the acquisition. This is easier said than achieved, as some of the anticipated gains call for re-organisations, consolidation of back office staff and computer systems. It helps, if there is a rationale beyond rescuing an ailing brand by liberating its potential. In this, I leave readers to decide whether project Brexit might be an example.


Fruitizz McDonald is the new fizzy smoothie at the School gates

May 9, 2012

As Innocent gets used to Coca-Cola as its foster parent, it learns of the arrival of a new kid on the block. Fruitizz from McDonalds is a newcomer at the School gates hoping to become popular for its fruitie fizzie nature

McDonald’s chief executive and president Jill McDonald said:

‘We are thrilled to be unveiling Fruitizz, a refreshing fizzy fruit juice drink that will help parents give children one of their five-a-day. For the past three years, we have been working hard behind the scenes to create a fizzy drink that is unlike anything else currently available in high street restaurants.We tried and tested 80 formulations in order to create the right product that delivers nutritional benefit as well as a new, exciting taste.’

That brainstormy feel

The name, with its slightly clunky combination of Fruit and Fizz, has that brainstormy feel to it. If so, no doubt it was the brainchild of a highly paid bunch of creatives.

But according to the story being promoted

McDonald’s aptly named boss Jill McDonald has been aiming to get her rivals in a right tizz. And the high-flying career woman and mum reckons she’s cracked it with the launch of an innovative, sparkling fruit drink for kids. Her brainchild Fruitizz – a blend of apple, grape and raspberries topped with sparkling water – has taken three years and 80 recipes to perfect.

Now it is ready to take its place on the Happy Meal menu and Jill confessed she is quietly confident of success. Available from next Wednesday [16th May 2012] the drink contains 150ml of fruit with no added sugar, artificial colours or flavours. Marking a first for a burger chain, Fruitizz is one of the recommended five-a-day fruit and veg children should have.

Jill, who has two boys aged nine and 11, revealed she had her mum’s hat on when she first came up with Fruitizz while she was the chain’s marketing manager.

A signal of worthy intent?

But will Fruitizz help the McDonald brand, or will it appear as a worthy signal of intentions, like Coke’s support for Innocent?