Coca-Cola is buying Costa as the United Kingdom hits peak coffee

Anna Jefferson
August 31, 2018

Whitbread bought the chain back in 1995 when it was just made up of 39 outlets.

The proposed deal is expected to close at the end of summer 2019, Coca-Cola said, if it gains regulatory approval in the European Union and China.

The soda giant said Friday it is spending 3.9 billion pounds ($5.1 billion) in cash for Britain's biggest coffee company.

The two companies said on Friday that Coke, one of the biggest soft drinks groups in the world, would buy Costa's nearly 4,000 outlets across markets such as Britain, Europe and China after Whitbread's board unanimously backed the deal.

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Costa gives Coca-Cola a global coffee footprint with almost 4,000 retail outlets in more than 30 countries. It is second most popular in the Chinese market with over 400 coffee shops around the most populous country in the world. "Costa gives us access to this market through a strong coffee platform", Coca-Cola chief executive James Quincey said in a joint statement.

Costa, which doesn't now have a presence in North or South America, was the third-largest coffee shop chain globally in 2017, according to market research provider Euromonitor International, just behind McDonald's McCafe outlets but well behind Starbucks. Coca-Cola's chief rival Pepsi announced earlier this month that it would buy Israeli DIY seltzer company SodaStream for $3.2 billion. Premier Inn has 785 hotels in the United Kingdom and a sprinkling of others in Germany and the Middle East.

Whitbread said in April that it would divest Costa, after pressure from activist investors who said the business should be separate from its hotel operations.

She said the money from the sale would be used to expand the Premier Inn chain, return some cash to shareholders, pay down debt and boost the pension fund.

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For Costa, Hyett said Costa will get "lots of care and attention" from Coca- Cola.

Shareholders in Whitbread were impressed by the deal and the company's share price soared 16 per cent in morning trading in London.

Hot beverages, he said, is one of "the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand".

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