• by Nina Lentini  @Nina_Lentini, January 12, 2007

The second-largest Coke bottler is going national with Cinnabon Premium Coffee Latte, and will market it against Coke's own Godiva Belgian and Pepsi's Starbucks Frappuccino as the $900-million, ready-to-drink coffee wars really start to perk up. The product will be distributed via Cadbury-Schweppes Americas Beverages.

As the market for carbonated soft drinks continues to go flat, Coke franchisees are increasingly looking outside the "family" for new products. Some Coke bottlers worry about a dearth of product leaders in the non-carbonated category. Now, at least one bottler is going outside its franchise area to compete with Coke itself. Plus, the product will be distributed by a major Coke rival, Cadbury.

"It's a tangled mess," said Gerry Khermouch, executive editor of Beverage Business Insights, a trade publication. "It's getting so you can't tell who's a friend and who's an enemy." Khermouch likened the unique and aggressive move to a "jailbreak. It's a slap in the face for Coke."

Coke's largest bottler, Coke Enterprises, is out there making its own deals as well. It is now marketing Bravo Foods' Slammers line of milk beverages and some flavors and sizes of Arizona iced teas.

Coke Consolidated expects to be in 41 states, or 65% of the U.S. by mid-April, said Norm George, president of Consolidated's BYB Brands unit, a 6-month-old start-up. Most start-ups, such as Arizona Tea and Red Bull, for example, take up to 12 years to infiltrate that market size. "We're operating on a new business model," said George. "Behind the curtain we have a terrific venture capitalist, Coke Consolidated. We're able to focus and move fast."

BYB also has deals with Anheuser-Busch and Miller Beer distributors to move the Cinnabon into the Northeast and Florida.

In its own 10-state territory, Coke Consolidated already markets Cinnabon. On Monday, it will begin marketing Respect, an isotonic beverage in that territory, and plans to take that product national as well.

The deal makes the Coke bottling group a brand owner and national player. "It's kind of a shock," said Khermouch, who recalled seeing the "huge booths" of Anheuser-Busch, Pepsi, Cadbury and Coke lined up last fall at the National Association of Convenience Stores conference in Las Vegas. "And there's the slightly less huge but still large BYB booth right next to them." In a recent report, Khermouch said scanner data suggests Cinnabon is outperforming Coke Godiva on a per-SKU basis.

Atlanta-based Coca-Cola owns 27% of Coke Consolidated, which bottles about 7% of all Coke sold in the U.S. Coca-Cola Enterprises, Coke's primary bottler, handles more than 77% of Coke's U.S. volume.

BYB Brands licenses the Cinnabon brand name from the cinnamon bun company familiar in malls and shopping centers. The coffee, which comes in Mocha Latte, Cinnamon Vanilla Latte, Caramel Nut Latte and Espresso & Cream, was developed by BYB Brands.

A Coca-Cola spokesperson said that BYB, while a subsidiary of Consolidated Coke, is not connected to Consolidated's Coke business. "Consolidated Coke is a great partner and we continue to look forward to working with them," he said.