Coca-Cola may take on Starbucks

By Justin Rubner

updated 2:28 p.m. ET Jan. 30, 2006

The Coca-Cola Co., already locked in a decades-long clash with PepsiCo Inc. for supremacy in the cold beverage business, may be about to pick a fight with the nation's No. 1 hot beverage powerhouse: Starbucks Corp.

For the past two years, Coca-Cola has been quietly investigating ways to brew high-quality coffee, espresso and teas quickly in individual servings, a review of the company's patent and trademark applications shows. The company filed five U.S. patent applications in 2005 for coffee and tea "pod" designs, single-serving brewing machines, and a system to steam milk to make hot espresso and cappuccino. Coca-Cola already has been awarded two patents.

Plus, Coca-Cola in late 2005 filed nine applications to trademark the name "Far Coast" for coffee, coffee grinders, hats, fruit tea and other products.

Coca-Cola tipped its hand at a Dec. 7 analysts' conference in New York at which Mary E. Minnick, president of worldwide marketing, mentioned a brand of coffee, tea and a "proprietary dispensing technology" called Far Coast that will be launched in four countries. Sometime in 2006, she said, Coca-Cola would invest in marketing the brand.

"To deliver a good cup of coffee, you need a barista [an expert coffee-maker] and a lot of average kiosks and cafes can't afford those, so we've developed a cost-efficient technology that dispenses a perfect cup of coffee, perfect latte, perfect tea, every time," Minnick told analysts.

Launching Far Coast would be Coca-Cola's first foray into brewable coffee, a business PepsiCo has yet to enter.

Potential customers would be restaurants, cafés and kiosks, Minnick said. Busy restaurants could quickly brew coffee -- Coca-Cola coffee -- for one customer at a time without making an entire pot, patent filings indicate.

Offices that already have Coca-Cola vending machine contracts could be a logical extension.

"There is no doubt they are looking really hard at this space," said Michael Coles, CEO of Caribou Coffee Co., the second-largest coffee chain in the country after Starbucks. "I would think for Coca-Cola, who is already providing machines for offices, to be able to provide coffee would give them an edge over their competitors."

Starbucks has cornered the market on all fronts. The company, which posted $6.4 billion in 2005 sales, operates more than 8,500 coffee shops worldwide, owns Seattle's Best Coffee and has dominated the ready-to-drink coffee market for years with partner PepsiCo. Once a small company, Starbucks has come to represent 7 percent of the total coffee consumption in the United States.

In 2001, Coca-Cola entered the ready-to-drink coffee market with Planet Java -- five years after PepsiCo and Starbucks partnered on their Frappuccino brand. In 2003, however, Planet Java flopped. Now PepsiCo's and Starbucks' Frappuccino and DoubleShot coffee beverages have gained a 93 percent market share.

However, 2006 could be a breakout year for Coca-Cola. Soon, the company plans to launch Coca-Cola Blak, a coffee-flavored cola that could compete this year against Frappuccino and DoubleShot. Plus, Coca-Cola is partnering with chocolate-maker Godiva on a ready-to-drink "indulgent" coffee drink due out this spring. In addition, the company is planning to introduce a tea drink called Gold Peak, according to published reports.

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