Coca-Cola (NYSE:KO) to Make Cold Coffee for Dunkin Donuts

On Thursday, the Coca-Cola Co. (NYSE:KO) announced that they will be partnering with Dunkin Donuts to offer a ready-to-drink coffee in the US market. This would be the company’s first initiative into this segment. Starbucks Corp (NASDAQ:SBUX) currently dominates this market.

The two companies have reached an agreement that Coca-Cola is going to make, distribute and sell these iced bottled drinks. They will be available at the Dunkin’ Donuts restaurants, convenience stores and groceries from early 2017. The bottled iced coffees will have sugar and milk in different flavors.

Specific terms of this deal have however not been disclosed.

Dunkin has been working with Coca-Cola since 2012, serving the beverages of Coke at their office chains in the US, and in some other countries as well.

Starbucks Dominates the Market Completely

Dunkin’s business rival, Starbucks, has sold canned beverages and coffee since 1994 in North America. PepsiCo started with the Frappuccino brand of Starbucks but expanded soon into other products.

Thanks to a 50-50 association with PepsiCo, the company controls around 97 percent of the ready to drink coffee market. This is almost complete dominance. Last September, Starbucks announced an impressive $2.1 billion from their coffee and packaged drink sales for the fiscal year.

So with this agreement with Dunkin, Coca-Cola will also be able to take on their business rivals, PepsiCo, that work with Starbucks.

According to Nielsen data, the ready-to-drink coffee market has an annual sale of $2.3 billion dollars. But that market is slated to grow quickly, thus creating the space for Dunkin and Coca-Cola (NYSE:KO). Besides, many of the existing customers of Starbucks might also want to try out the different flavors offered by Dunkin.

Need to Create a Separate Brand Identity

Nigel Travis, the Chief Executive of Dunkin Donuts revealed that this new brand will appeal to the company’s existing customers. However, they want this brand to have its own distinct brand recognition too with time. “Some of our Dunkin’ consumers were drinking other people’s products because we weren’t there”, he says. “We want to change that”, the CEO added.

He, however, declined to comment when asked about the likely sales figures of this new drink. Both the companies have remained silent on this.

Profit made by selling the coffee will be shared with the franchisees of Dunkin. It was learned that franchisee operators that give the maximum revenue will receive the highest percentage.