The digital opportunity for Coca Cola at Costa Coffee

Coca-Cola has years of experience and tonnes of data, which can fuel Costa's ambitions to innovate and create a big win for both companies in the future.
10 September 2018

Coca-cola just bought Costa Coffee. Source: Shutterstock

Coca-cola bought Costa Coffee for GBP3.9 billion (US$5.1 billion) recently. As a result of the deal, the US-based fizzy drink company will gain a strong cafe presence across Europe, Africa, the Middle East, and the Asia Pacific.

So far, Costa has about 2,400 coffee shops in the UK, 1,400 coffee shops in 31 international markets, and more than 8,000 Costa Express self-serve units.

On average, the brand has been in business for more than 40 years and has opened 289 new stores every year. In fact, prior to the deal, Costa was set on establishing a strong presence in China.

The company also earned GBP1.167 billion (US$1.507 billion) in revenues in 2016. The figure pales in comparison to Starbucks’ revenues of US$22.39 billion (2017) but maybe in a couple of years, Costa might be in a position to lead the market.

One of the biggest factors that will play to Coca-Cola’s advantage is that innovation is part of Costa’s DNA. “When I came to the business I could see the foundation was strong but we needed to invigorate and innovate. I want us to be famous for innovating,” said Costa MD Dominic Paul last year.

The company even worked with startups in the UK to prepare itself for the digital world, and build the coffee shop of the future. “We want to build an experience that’s relevant in 2025,” said an executive at one of the company hackathons.

Highlighting the digital opportunity

Starbucks has access to plenty of data about its customers and their buying habits, and it does a fabulous job using technology to drive business growth — today.

Costa Coffee, on the other hand, might not know as much about its customers but with Coca-Cola in the mix, the company has significant opportunities ahead of it.

Coca-Cola owns brands like fairlife (milk), Dasani (water), Georgia (coffee), Nestea (ice-tea), Cappy (fruit juice) among several others.

The company understands the beverage market and has data to map seasons, geographies, and other metrics to customer purchases — allowing Costa to enter new markets, draw up ideal customer personas to market to, and even create more targeted advertising.

In fact, Costa Coffee could even follow in Starbucks’ footsteps and venture into the retail market, all on the strong shoulders of Coca-Cola.

Here are a few technologies that Coca-Cola uses — that Costa could borrow and benefit from in the future:

# 1 | AI-driven proof-of-purchase for loyalty program

One reason why Starbucks has been able to collect mountains of customer data is that they offer a great loyalty program. In fact, since their loyalty program runs on an app, the company is able to send targeted messages and offers as well.

Costa could ape the loyalty program that Starbucks offers, and it could make it better by incorporating features that award points for the purchase of ready to drink coffee products from supermarkets and retail outlets.

In order to do so, the company could use the AI solution that Coca-Cola developed in partnership with Google last year — which is now part of most of the campaigns run by the fizzy drink company in the US.

# 2 | AI-powered vending machine count

In the digital age, vending machines are a good alternative to retail outlets, especially for the cafe industry.

A large number of people across the globe wait in a queue every morning, only to take their coffee and bagel ‘to-go’. Having more vending machines could be a good way to solve the problem — especially if they’re stocked frequently.

However, the problem then would be checking when a machine needs to be refilled. If Costa is to go down this route, it could leverage a solution that Coca-Cola developed in partnership with Salesforce.

The ERP giant’s AI product had been trained to recognize, identify, and count the varieties and quantities of Coca-Cola bottles stored in one of its cooler display cabinets, simply by analyzing a photo taken with an iPad or iPhone.

Further, using AI, the system can factor in seasonal variations, weather information, and upcoming promotions, to automatically calculate when the machines need to be restocked.

# 3 | Big data to determine popular flavors

Coca-Cola created Cherry Sprite based on data from hundreds of thousands of self-serve soft-drink fountains.

It has developed strong big data capabilities and understand how to leverage data to determine how to create products that customers prefer.

Using this knowledge, and data from Coca-Cola’s Georgia and other brands, Costa could create the perfect ready to drink beverages for customers, propelling itself ahead of the competition quite quickly — especially with Coca-Cola’s distribution and supply chain intelligence to support it.