At this time, I'd like to welcome everyone to The Coca-Cola Company's investor conference call. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be on listen-only mode until the formal question and answer portion of the call. I would like to remind everyone that the purpose of this conference is to talk with investors, and therefore, questions from the media will not be addressed. Media participants should contact Coca-Cola's media relations department if they have any questions. I would now like to introduce Mr. Tim Leveridge, Vice President and Investor Relations Officer. Mr. Leveridge, you may now begin.
Good morning. Thank you for joining us today. I'm here with James Quincey, our Chief Executive Officer, and Kathy Waller, our Chief Financial Officer. Before I begin, I'd like to inform you that you can find webcast materials, including the copy of the presentation that we'll be going through this morning in the Investors section of our company website at www.coca-colacompany.com that supports our opening remarks today. This conference call may contain forward-looking statements, including statements concerning long-term financial objectives, and should be considered in conjunction with cautionary statements contained in our press release this morning. Following the opening remarks, we'll turn the call over for your questions. Please limit yourself to one question at a time. If you have more than one, please ask your most pressing question first and then reenter the queue from there. Now let me turn the call over to James.
Thanks, Tim. Good morning, everyone. I'm going to make a few opening remarks that follow along the presentation materials that Tim just referred to that are being posted. If you want to follow along, I'll call out the page numbers as we go along. Otherwise, the comments will be self-standing anyway. Obviously, we've announced this morning the proposed acquisition of Costa Limited. I want to talk about four things this morning. Firstly, a little bit on what was the strategic context. How do we see the overall environment? Secondly, what's our strategy? How do we see value creation potential for Coca-Cola? Third, what are the basic details of the transaction? Fourth, what are the next steps? What's the headlines? This, we believe, has a very compelling strategic rationale.
Coffee's a significant, on-trend, fast-growing and profitable category, as I'm sure most of you, if not all of you, are well aware of. Costa is a strong consumer proposition. It's got a scalable coffee platform to engage with consumers across multiple formats and channels. In the end, this is a coffee strategy, not a retail strategy. There's opportunity for great value creation through the combination of Costa's capabilities and Coca-Cola's marketing expertise and global reach. Let me say a little more about the context. This is page five in the deck. We've traditionally talked about the non-alcoholic ready-to-drink beverages industry, $0.8 trillion, of which we have a strong market share overall, and we lead or are a strong number two in all of the categories and subcategories, including ready-to-drink coffee and tea.
As we look forward, as I've talked about in the context of Beverages for Life and the underlying central core logic to Beverages for Life, which is wherever you look at the leading edge of economies and culture and development and what millennials or young adults are doing, you always come to the same point, which is they're interested in beverages. The commercial beverages market continues to grow. They're looking and they're happy to spend money on the right beverages. They just want more diversity. They want a broad range of beverages. As we look forward, we of course then are expanding our vision beyond non-alcoholic ready-to-drink. The obvious logical next step is hot and cold beverages. When you bring that piece of the equation in, the addressable market goes up from $0.8 trillion to $1.5 trillion.
The hot beverages piece is growing at about 6% in revenue. It's large and it's fast-growing. On page six, just looking at the coffee market for a second, the global coffee and tea market. The reality is we've been competing, actually leading, but competing in one of the smaller bits of the total coffee market. In summary terms, it kind of breaks down into four pieces. There's the out-of-home coffee business, which is partly coffee shops, which is about 20%. 80% is other out-of-home, immediate consumption channels, which represents the majority of the out-of-home. Then there's the non-ready-to-drink piece, which is largely at home. Then finally, there's the ready-to-drink, where we have about a 15 share. In simple terms, coffee breaks down through four formats, four big clusters of channels.
We see an opportunity for a global brand to reach over all four pieces of the coffee market that then build and are synergistic between each other. Turning to Costa. If that's the overall context of the coffee strategy, we need a brand that can compete across multiple formats and be a platform. Does Costa fit the bill? Well, if we look at Costa, and here this is a snapshot of what Costa is today, on page seven. It's a multinational coffee shop business, largely based in the U.K. You can see the sales mix there. It's about a quarter U.K. coffee shops, international, and then express is the vending machines that they have, mainly in the U.K., but in some other countries. You can see the presence of their stores, as I said, mainly the U.K., but also China, and other parts of Europe.
The U.K. is smaller in terms of the total number of stores, because obviously the ones outside the U.K. have a higher percentage of franchises than the ones in the U.K. This is a business that has got a good track record of growing the top line. The top line's been growing just over 12% in the recent years. This is a vibrant and growing business. As we think about where we're going to take it, we need something that can deliver, as I said, against the platform. Our vision is, in a way, demonstrated on page eight, is four concentric circles. We need a brand and a coffee capability that can win in the coffee house market, but can build the brand. Here, it's not about being the largest number of stores.
Here, it's about the right number of stores to create the brand profitably in the places we want to be. Synergistically work across those four coffee segments. Having machines or beans in machines that can help us win with the immediate consumption channels, we will be a much better total beverage partner for those customers. We can also expand our ability to compete in ready to drink, whether hot or cold, and we can enter the at-home market. This brand can go across all four basic market segments, leveraging our global reach. The reason that coffee fits that bill is it's got the right ecosystem and the right credentials to get it done. I'm going to start in the bottom right of page nine here.
It's got U.K. leadership, I think what's interesting about the U.K. leadership, apart from being a number one, which it's always easier to take a winning company and expand it globally than a fixer upper. It's number one in the U.K., but it's actually been the most preferred coffee shop brand basically for the last seven or eight years. It's been able to win. It's been able to demonstrate good brand strength. They've done a great job on quality. They've done a great job of customer loyalty through the coffee club membership. They've got the brand credentials, the Italian roots, the Europeanness of the coffee, and it's got the credibility. This is a brand that is a proven winning capability.
They've got a retail footprint that allows us to build the consumer experience, they've got the retail management knowledge that, of course, we will retain because that's not where we come from. That will allow that leg of the four-legged stool to work. They have, clearly, the coffee capability. It's a winning business in a part of the world that can be combined with The Coca-Cola Company's global reach to win across the four parts of the coffee business. Clearly, we're not going to try and do all four parts in all corners of the world at the same time. We'll be prioritizing, but it gives us the platform to get it right. How are we going to do that? If we just delve down a little bit into that strategy, we'll use the retail stores to build the brand and drive the experience.
A lot has been written about the idea of the third place, we think that the stores help and it can be integrated with the coffee club membership and the digital capabilities. Interestingly, as a side note, this will be effectively the first Coke business where there is a direct consumer to sales potential relationship. I think that'll be interesting learning for the rest of our business. The second piece, particularly important in certain parts of the world, is actually the opportunities to be an even better total beverage solution to our existing customers and to our existing channels. Whether that be through the vending machines or the beans or the roast and ground or other forms of coffee capability.
We have a huge business in servicing food service or in convenience retail to petrol stations, other forms of convenience, and we can be a better beverage provider to them. The last opportunity is clearly to launch ready to drink, hot and cold, and at-home beverages, too. As we think about that and just kind of one more click down on each of those ideas. Using the retail presence, I think what's exciting about this is the opportunity for the real time nature of the ritual building, the reinforcing of the brand reputation, the crafting and the sustainability. A lab for understanding what's happening with consumers and testing innovation. The stores have an attractive return profile.
They have a good return on capital, they're even allowing for reinvestment, a good source of capital to drive the investments in stores in other parts of the world, maybe Asia and in the other formats of the coffee. As we think about how we can use Costa as a platform to reimagine our beverage solution for customers and channels. Here it's about four big areas. Firstly, the capabilities we bring is world-class roasting facilities. They've got a brand-new roaster with significant additional capacity, so we have a lot of roasting capacity to be able to use. They have a good coffee vending business, which is great in things like convenience stores, cinemas, at work, and in transit. That's clearly something that is a proven vehicle.
The coffee, the beans as a total beverage solution, whether it's to hotels, cafes, quick service restaurants, fine dining, we can be a much better partner. Lastly, on the food service chains, beans and machines. I think here that they have developed the pieces of the puzzle that will allow us to put them together with the rest of our portfolio, whether it's bottles or whether it's fountain, or whether it's our own vending, and be a much better total beverage provider to our customers in many channels.
Lastly, on the at home, on the new consumption occasions, we think that as we look around the world, obviously, we'll be able to bring a lot of our existing marketing insights and capabilities to help launch into the ready to drink categories, expanding cold ready to drink, potentially even expanding into hot ready to drink like our Japanese business. Expanding their at-home solutions, which they've got a few of, but there's much more opportunity there. Even expanding the brand into adjacent categories. It's a brand and a platform and a set of capabilities that is ripe to be expanded globally. Let me switch to some of the transaction details. Obviously, the plan is, the proposal is to acquire all the shares in Costa Limited. GBP 3.9 billion is the price. At the exchange rate we used, that's $5.1 billion.
We expect it to be slightly accretive in the first full year to earnings, and then getting better. Obviously, we've got the cash on hand to do so. From a direct point of comparison, the price would be approximately equal to 0.3 decimals of net debt leverage increase if that were the way that we actually did it. Next steps. Whitbread has to obtain shareholder approval. We expect that to happen by the end of October. Clearly, there are some antitrust competition approvals required, principally the EU, including the U.K. and China, and we are expecting collectively that the transaction would close towards the end of the first half of 2019. In summary, we think that Costa unlocks the entrance for us into the fast-growing half trillion dollar beverage category that's coffee. It's a great brand with great tasting coffee.
Costa is the platform that crosses multiple formats and channels, there's an opportunity for tremendous value creation by combining that platform with their brand capabilities, our marketing expertise, and global reach. It's been good news for the Whitbread shareholders, and it's great news too for The Coca-Cola shareholders. With that, let me open it up for questions.
Ladies and gentlemen, if you have a question at this time, please press the star, then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, that's star then one to ask a question. Our first question comes from Dara Mohsenian with Morgan Stanley. Your line is now open.
Hey, good morning.
Morning.
Morning.
James, I was hoping for a bit more detail as you think about the value from this deal going forward. Where's the biggest expansion opportunity over time, both from a format and geographic perspective? Is the value more in retail expansion or the express format or the RTD opportunity or even beans? Geographically, what are the focus markets as you look out over the next few years here and look to expand beyond the U.K.? What gives you confidence that the brand can travel well outside the U.K.? Thanks.
Sure. Well, in reverse order, I think the brand can travel outside the U.K. because one, it's proven it can win in the U.K. We've had experience where brands that have done well in the U.K., like innocent, have been demonstrably able to win in the rest of Europe. Still a work in progress taking innocent elsewhere. We think that brands that can win, and the U.K. is a very open marketplace in the sense that there are local competitors and global competitors. Winning there, whilst not for certain sure that it's exportable, certainly is a good indication. Costa has done well in the other 30 countries that it's been in. I think that's another good sign that it can travel. Clearly, we're going to have to work. We know from our global business that the world is not flat.
There'll be nuances, there'll be twists and turns. That is as much about positioning the brand as which of the formats to emphasize by geography, which was the first part of your question. It would seem to us at the moment, and clearly we're going to have much more time to perfect our plans together prior to closing, that as we look around the world, the exact mix of what to do across those four platforms could vary. From one end of the spectrum, you start perhaps in the U.S., where there already are a lot of coffee stores.
We have a great food service and immediate consumption channel partnership with many customers, and I think formats like the vending, formats like the beans and machines, formats like the pod, can help us be a much better total beverage provider to many of our existing customers, and we can do a better job for them. Clearly, that would be an easier route depending on where the U.S. ends up in priority order. In terms of formats, that would clearly be preferred rather than stores, which doesn't seem to be the way that one would approach the U.S. You go internationally, you go over to Asia, clearly we would try and execute across the full format bundle because we need to build the brand.
The coffee shop culture is less developed in Asia, so there's part of it that needs to be built by having some of the stores. It's a brand-building and a ritual-building part of the brand and the category. There'll need to be some stores, but we'll need the other formats as well. I think you're likely to see, across in the markets that are less developed, the full bundle being executed, and in the more developed markets, perhaps only parts of it, and more towards being a total beverage provider to our customers.
Thank you. Our next question comes from Bryan Spillane of Bank of America Merrill Lynch. Your line is now open.
Hey, good morning, everyone.
Good morning.
I guess my question's just related to, James, what gives you the confidence that The Coca-Cola Company can operate a retail format, right? It's a different capital allocation question sometimes in terms of adding a store versus maybe some other asset allocation decisions you'd be making at Coke. Operating these businesses, the stores have to be clean. There's got to be product quality. It's just a very different business. I guess I'd just like to understand what gives you the confidence that you can operate this business in a way that's competitive with other operators who are really just focused on especially operating the retail concept.
Check. Look, I think the first starting point is to recognize exactly what you said, that retail is different. Quite simply, our strategy here is to retain and leave in place and let the existing management who have done a great job in running the retail formats, let them run the retail formats. They're the ones who know what they're doing. If and as we expand, they need more of the same capability, they'll do a great job of recruiting more people to help them out. We've got to leave the people who know what they're doing to do what they know how to do. I think that's really important in this overall strategy, that we recognize that.
I think that's part of our experience over the years of bringing in acquisitions that aren't exactly like the base business, whether it's something like this or some of the chill businesses we brought in. We've taken the approach that you could call it many things, but we've called it connected but not integrated. In other words, we're not trying to subsume the business into the general business. We're trying to focus on keeping it going and where it chooses to connect to the base business to draw on things, that's where we'll create the maximum value. There's a strong understanding that what's different needs to be preserved and done properly. As it relates to capital allocation, this is a business that is not capital balance sheet intensive. Even the stores that they own, inverted commas, are generally leased. Actually, they're all leased, relatively short leases.
This is not an entrance into a capital-intensive industry. There's proportionately higher CapEx, perhaps, than there is versus the soft drink business, but it's inherent in the model. They have, clearly, generation of cash flow. We're getting more cash flow than is needed in terms of capital, at least the business as it currently stands, and it generates very attractive returns. I think as we look about capital allocation, we're going to allocate it to the best opportunities to generate returns, and this comes with a very good track record of strong return on capital.
Thank you. Our next question comes from Bonnie Herzog with Wells Fargo. Your line is now open.
Thanks. Good morning, everyone.
Good morning.
Hi. I have a bit of a follow-on question, but maybe asked differently. I guess I really want to understand why retail now. This is something that your company hasn't explored in the past, so I really want to understand what's changed and why now is the right time for your company. Then curious to hear your thoughts on Costa's position relative to Starbucks and what their competitive advantages may be. Thanks.
Well, I think the first headline on the first part of the question is, this is a coffee strategy, not a retail strategy. Yes, of course, part of the coffee strategy includes retail outlets, but those outlets, apart from being a great business because they have a great return on capital, build the brand and are a part of building the whole category of coffee. Some parts of the world, that whole modus of drinking coffee has already developed, so we don't need to invest in the stores necessarily other than for brand-building. Other parts of the world, the habit is still need to be developed. I don't think this is about we weren't in retail and now we want to be in retail.
This is about a coffee strategy that sits on four pillars, of which retail is part of, and we're going to make sure we bring in the right capabilities to manage the retail. In the same sort of way, you could say we weren't in chilled before, and now we are in chilled beverage distribution. At some point, as you want to serve the consumer with a broad diversity of beverages, you need to bring in new capabilities. As we sit here with the journey of Beverages for Life, we've been focused first and foremost, on reinvigorating the sparkling category. The numbers for The Coke Company don't work unless the sparkling category grows. We invested a lot of time and effort over the last number of years on reinvesting, on reformulating, on innovation, on smaller pack sizes, on reducing the sugar.
We're starting to see the results of that with not just revenue growth in the sparkling category, but with volume growth in the sparkling category. We've also been sharpening the pencil in some of the other categories, killing off the zombies, betting more on the ones that are more likely to be winning in the long term. Now we feel we have a little bit of momentum, that now is the time to broaden out the portfolio into coffee. Of course, part of this is there was an opportunity to acquire the company that was best suited to help us win from where we start from. We don't want to start from the first coffee shop. We're not going to build that organically from zero. We don't want to buy a fixer-upper. It suits us best to buy a category leader.
It's a company that's proven to win in the U.K. marketplace versus all comers. Therefore, buying something that's a winner regionally and taking it globally suits us much better. They really have great-tasting coffee, and I think that's what's helped them win. Great-tasting coffee, great stores, great brand experience, and they've been able to win, and they've complemented it, as time has gone on with these other formats, whether it's the vending, the beans. They're right on the cusp of doing more at home, ready-to-drink coffees right in front. They can easily be done from where we are. I think that's what it's all about. It's a coffee strategy, not a retail strategy.
Thank you. Our next question comes from Steve Powers with Deutsche Bank. Your line is now open.
Thanks, everybody. Good morning.
Good morning.
Hey, my question really focuses on how the business, as an operating unit, will be integrated into the system, and I guess really from two perspectives. The first one is how it will be managed as part of The Coca-Cola Company. Will it be kept separate, similar to the VEB group? Will it be more integrated, or is it somewhere in between where retail is kept separate, but the brand itself is integrated? Then secondly, how it will interact with the bottlers, like CCEP, for example, or others as it expands, both in terms of just day-to-day execution, who do you envision running the convenience store and the vending operation over time, for example, and also in terms of the economic split. Do you think it requires any kind of rethink or an addendum to existing bottler agreements? Thanks.
Great. I'll let you off on the fact that that's more than one question, Steve. They all seem to be basically very related.
They're thematically relevant.
Thematically relevant, a large overlap in the Venn diagram of what the question was there. Look, I think how we're going to run it. Actually, let me back up. We got a lot of work left to do. We have been focused in the last few months on what's the strategy and how do we get the deal done. This has all happened pretty quickly. There's more stuff that we need to work out, exactly where, which countries, and in which formats, and in which order. We have an idea, but clearly, that needs to be done with a sharper pencil. Same with how do we integrate and how do we connect with our partners, the bottlers, the other partners we have. In the end, the overarching idea is connected, but not integrated. We need to do justice to the coffee strategy.
In the past, at Coke, we have at times bought things and tried to make them fit into the existing system. Then we have not done justice to what needs to be done to win in the category or the marketplace that we're talking about. The starting point for this is what needs to be done to win with the coffee strategy. Now, under that, there are clearly slightly different success factors and levers, whether it be retail or vending or beans in machines or at home, going to grocery, et cetera. Therefore, there can be different roles for different people in those different channels, in those different formats. By country, it will depend on the capabilities. Let's remember, the market structures of channels are quite different by geography.
It's not going to be a one-size-fits-all answer because actually what needs to be done, where the best value is actually is slightly different when you start to look around the world. Coming back in a way to the, is it going to be integrated? Is it going to be VEB, or is it going to be somewhere in between? It's likely to be somewhere in between. We've got to focus on making sure that everything stays organized in the coffee space. In the end, we've got broad, we've got good capabilities in Costa and in the Coke system, and I'm sure we can marshal them with focus to do justice to win in the right way, in the coffee strategy.
Thank you. Our next question comes from Ali Dibadj with Bernstein. Your line is now open.
Hey, guys.
Hey.
I do have a couple questions. One is just to really I guess I'm having trouble strategically tying, on the one hand, there's so much expansion opportunity for this brand, there's so much white space, there's so much potential. On the other hand, we're buying a leader, and that's why we're buying something. Subtext, why we couldn't or didn't do it organically. I'm trying to understand how you guys brought those together. Why do you think the brand resonates outside of Costa's current footprint? If you're going to do vending, as I think you mentioned, for example, in the U.S., why was it a failure in Canada and, why is it something you think you can do better? All that ties then down to a valuation, which seems quite high to me.
16 times, looks like on EBITDA relative to some of the other compares that you look at in the marketplace, like a Starbucks at 13 or others. I guess I'm having trouble pulling all of those threads together. If you could help, that'd be great.
Sure. Let me start on the valuation end, Ali. Clearly, we're having to pay a control premium, to acquire the asset. As you look at EBITDA ratios or any other ratios for other people in a similar space, clearly we're paying more than that, for the control premium. Whitbread are not going to sell it without the control premium, as no one else would either. Of course, they're getting a good deal out of this, and I think they're happy with the valuation they're getting. Our objective is to take that, even though we're paying the control premium, and drive much more synergy that only we could drive. We have the global scale. We have the capabilities and the places we can expand Costa further and faster that Whitbread couldn't do.
In the end, it's a win-win for us and Whitbread because they get a great deal on selling the asset, yet it's an asset that even at that price with the control premium, we can do much more with around the world. As we think about what it is that we can do around the world, we've got to recognize we're getting a platform, not just a brand. I think the brand is great. It's got great tasting coffee. It's been voted U.K.'s favorite for about eight years in a row. It's a brand, but it's a platform. I think as we look around the world and you compare to why couldn't you do it organically, it's because whether you look at our the attempts we made in coffee that weren't ready-to-drink coffee, and we've had pilots and some attempts around the world.
Frankly, we didn't have the package of the capabilities and the platform to get it right. That's why we're buying this thing. It requires a broader set of capabilities to be brought to bear than many of the other categories. So finding something that is regionally successful, but with global potential and has inherently all the capabilities needed to win as a platform globally but hasn't yet got there is the value creation opportunity to the Coke system. We can help them go global. Therefore, they have the solution to the things that we couldn't build over time or didn't have the patience and the focus and the dedication and didn't want to invest the resources to lose money trying to build those one piece at a time. I think it gets us there in a very simple way.
Thank you. Our next question comes from Nik Modi with RBC. Your line is now open.
Yeah. Thanks. Good morning, everyone.
Morning.
Good morning. The question I have is really around management retention. Obviously, part of buying this asset is getting that core capabilities and expertise of the people running it. James, maybe you can talk to how you plan to make sure retention of the key personnel.
Sure. I think firstly, Whitbread has done a good job over the years of pulling together a strong management team for this business, and that management team of Costa have been continue to grow and reinvigorate the business over the years. Clearly, it's a team that we'd like to see continue to run and drive this business into the future. We've had conversations with key managers, and we'll of course, be putting in place retention mechanisms to make it attractive for them to stay in the near term and run the business and be motivated and excited. I think, over and above, any amount of retention award that one can give monetarily in the short term, which of course, has some impact and tends to work. In the end, most people also want a say when they can see a great growth story in front of them.
People don't just work for the money. They work because they want to be in a growth story, and they want to be in a winning company. The idea that they're in a winning company that can go global, I think is very exciting to them. We need to put all the pieces together to make that work.
Thank you. Our next question comes from Judy Hong with Goldman Sachs. Your line is now open.
Thank you. Good morning, everyone.
Morning, Judy.
James, as you think about a journey towards being a total beverage company, I guess I'm just curious how you think about the strategic importance of really being a leader in the hot beverage category versus getting bigger in the NARTD category. I guess in the context of an M&A really playing a key role as you think about the hot beverage category, do you think that we will continue to see more of a large-scale acquisition, given that you have a relatively small presence there and it's, I guess, more market share to be gained in that category? First, just in terms of strategic priorities, being a leader in the hot beverage category and the M&A role in that effort. Thanks.
Okay. Thanks, Judy. You've given me my opportunity to have my M&A answer, which is I couldn't possibly comment. Let me back up and say a little bit about the importance of being a leader. In the end, and we talked a little bit about this at the investor day and other opportunities, in the long run, being the leader is the greatest source of scale and profitability and return on capital. Therefore, as we plot our journeys, whether it's the coffee strategy or any of other category strategies, getting towards leadership is always something we need to bear in mind. That's built country and channel and at a time. It's better to be the leader in half the world than number three in all of the world from a scale and profitability point of view.
You can probably drive yourself to a better global leadership, if you win in countries and then keep expanding rather than be an also-ran everywhere. I think the important thing here to focus on is how do we build strong brands with strong capabilities that win either in the marketplace or in the channels and the formats that we're focused on, so they have defendable competitive advantage that leads to good scale and good margins. As the world moves forward, just looking at category share overall, I think it'll get more complicated because it'll be about do we have the right beverage offering to command leadership channel by channel. Does that add up to leadership in a country? Because the two things work together, because leadership by channel ends up synergizing to be leadership as a brand in the country and then, of course, into more countries.
Leadership matters, but it'll be built over time.
Thank you. Our next question comes from Carlos Laboy with HSBC. Your line is now open.
Yes. Good morning, everyone.
Morning.
Good morning.
James, you do a great job in your midday occasions, this transaction obviously addresses some of the morning occasions that you are missing. What else are you missing for these morning occasions, and how do you think that this transaction helps you close those gaps? Also, if you could expand on how the bottlers fit into that answer.
Sure. From a morning occasion point of view, this was the missing piece, was coffee. It's not that we have everything everywhere, but somewhere we have the thing we need. We have great juice businesses, ambient, and especially we have great chilled businesses in parts of the world. We have some investments in some really exciting dairy businesses in parts of the world. We're making these coffee investments. I think we have the pieces out there. What we need going forward is the deliberate implementation and allocation and stewardship of capital to expand those strong positions in a few countries into more countries getting towards leadership. I think the category pieces are there. I think it's about expansion of the leadership positions into more countries. I think that's what the Coke and the Coke system has been good at.
As regards to bottlers, a bit as I said in the difference, there's clearly going to be value creation opportunities with the bottling system. It might look, in the end, different by different parts of the world, given the market structures are different, the channels we want to go after, therefore the relevance of different platforms is, or certainly the weighting of different platforms and their relevance will be different in different parts of the world. That's something we're going to solve with our bottling partners as we build the plans to winning coffee.
Thank you. Our next question comes from Brett Cooper with Consumer Edge. Your line is now open.
Good morning.
Good morning.
Just a quick one. Why is coffee, given its fragmentation on a global basis, different than what you've done in juice? Why can you take one brand globally when you've used multiple brands in a juice category? Thanks.
Yeah. I think in the juice category, we pursued an approach in an industry that, and I'm particularly referring here to the ambient juice business, that largely existed. It was an existing category and industry that could be improved and upgraded and renovated. I think when you look at what we bought around the world, and I'm thinking particularly my experience in Latin America, we tended to buy a set of regional brands. Some were number 1, but many of them were number 2 or number 3 in the category. We put them together, we renovated them. We basically ran them as though it were one brand, even though the name in each country was slightly different. The look and feel and the advertising is all actually the same, we shared all the recipe knowledge. It was like a consolidation play of existing businesses.
In the case of coffee, it does exist in some parts of the world. In many parts of the world, the idea of espresso-based drinks, the idea of coffee shop-type drinks, the idea of being able to get that immediate consumption channels, is much less developed than the juice industry was. I think there's some development that needed to be done. In a way, think of it more like what happens, if you want to take juice as the example, of the chilled juice business, where we've actually not bought a whole set of regional brands. For example, obviously in the U.S., we created the Simply brand, then with innocent, we got a lot of synergy between these two businesses. For both of them, we used the same global partner in terms of buying many of the juices.
We took the innocent brand from the U.K., we drove it across Europe. When we invested in innocent, it was 20% of the size of the leading chilled juice and smoothie brand in Europe, now we are the market leader in Europe in chilled juice and smoothie. I think one can differentiate the business context and opportunity between, are you consolidating existing businesses and categories and fixing them up, or are you taking a winning brand and driving it into a wide space?
Thank you. Our last question comes from Kevin Grundy with Jefferies. Your line is now open.
Thanks. Good morning, guys, congratulations on the deal.
Good morning.
First, Kathy, point of clarification. Growth expectations going forward for the Costa business, I don't think we touched on that. It appears to be all about revenue synergies. I don't think there's any cost synergies included here in the return outlook. If you could just clarify on that. James, strategically, we touched on the expansion part of this, but just to ask it a bit differently, just to clarify the key criteria that you'd like to see before moving forward with expansion into new geographies, most notably North America or South America. You mentioned, James, this is a coffee strategy, not a retail strategy, but is it possible that retail would be part of that strategy in the U.S.? Thank you for that.
Do you want to start?
Sure. Yes. The synergies are primarily the revenue synergies, but it's early days. Obviously, we've got a lot of work to do, but this is not about cost synergy play at all.
Yeah. Is retail part of the strategy? Yes. The first thing we need to do is work out, obviously, we have a draft idea of where we want to go with which formats within the platform. Are we likely to see stores expansions in parts of Europe and the Middle East and Africa, and particularly Asia? Yes, because it's part of the brand-building and the ritual-building of the whole coffee category, as seen as the espresso-based drink. Absolutely, the more east you go, the more part of the total coffee strategy stores will become. Do I think it's a priority or even likely in the U.S. that we will open any material numbers of stores? You might have your flagship store. No, I don't, because there's a lot of developed coffee shops here, both in terms of physical outlets and in terms of ritual and habit.
I think the opportunity in the U.S. is more about increasing our ability to be a total beverage provider to the immediate consumption channels in all their different forms. We'll use the whole rest of the platform to be able to do that because the concept of the category already exists in the U.S. I think, again, it's about understanding the starting point of the market. Of course, it'll be about prioritization and use of the capital. We want to deploy the capital that we're going to deploy to the most attractive opportunities. Wide spaces with great brands tend to be easier to do than trying to enter an overdeveloped competitive area. I think that's how we see it at the moment. With that, let me just sum up and saying, thanks for coming on the call this morning.
I know we gave you one last thing to do before you head off on Labor Day weekend. Let me just reiterate, I think this is a great opportunity for The Coca-Cola Company to enter the fast-growing coffee category. Costa is a strong brand, a winning brand with great-tasting coffee. It's a platform that crosses multiple formats and channels, and it's a good opportunity for Coke to create value combining Costa's brand capabilities, platform capabilities, Coke's marketing expertise, and the global reach of our system. With that, thank you very much. Everyone, have a great day and a great Labor Day weekend. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.