COSI - BEVERAGE INNOVATION THAT WILL GET ATTENTION

Conclusion: I continue to like COSI from a long-term perspective.  Management continues to follow through on focused revenue-driving strategies such as the “Freestyle” beverage dispensers and continued development of online systems.

 

Cosi Restaurants and Coca-Cola recently hosted a blog event in Chicago where Cosi was introducing their fall sandwiches and Coca-Cola was demonstrating their Freestyle beverage machine.

 

Coke has selected COSI to launch the Freestyle equipment in the Midwest (currently COSI has it in three locations.) The Freestyle dispensers each contain 30 cartridges of flavorings that mix up 100 different drink combinations.  The new system will give COSI more accurate inventories of the beverages they serve.   The stores will be able to view graphical drink consumption reports that rank drinks sold during specific day-parts on an e-business portal Coke has set up.  Traditionally, most fast-food restaurants collect data using point-of-sale systems that only capture beverage cup size and the number of cups sold each day.

 

For the short-term, at least, the new Coke freestyle machines will give the concept an unique advantage over the competitors in the Midwest. 

 

COSI is due to report earnings on November 11th after the market close.  The company also reported that that system-wide same-store sales for 3Q10 increased 5.2%; company-owned stores rose 6.6% and franchise-operated stores rose 2.9%.  Late in the third quarter, the company started rolling out online ordering for the company store base with which will likely accelerate growth in same store sales during 4Q.  For the quarter, we expect the company breakeven on an EPS basis and possibly even register a modest profit.  The stock is currently trading at $1.29, registering a 9% gain over the past week.

 

COSI - BEVERAGE INNOVATION THAT WILL GET ATTENTION - cosi beverage

 

Howard Penney

Managing Director