Coca-Cola buys Costa Coffee for £3.9 bln

Coca-Cola buys Costa Coffee for £3.9 bln

The U.S. beverage titan said Friday that it planned to buy Costa, one of the world's biggest coffee chains, for $5.1 billion in cash. The Whitbread board unanimously backed the deal, which is expected to close in the first half of 2019.

For Coca-Cola, the agreement is a new effort to move away from soft drinks towards healthier options for consumers increasingly aware of a healthy diet. "Its global reach should turbo-charge growth in the years to come, and hot drinks are one of the few areas of the wider beverages sector where the soft drinks giant doesn't have a killer brand".

The Costa Coffee chain has been bought from Whitbread by Coca-Cola for £3.9 billion, it was announced yesterday. Last year, it started selling Coca-Cola Coffee Plus in Japan and Australia, expanding it to Vietnam this year.

Coca-Cola plans to use its existing global infrastructure to expand Costa's business lines, which include retail outlets, vending machines and coffee for use at home.

The deal, announced Friday morning, would give Coca-Cola a strong, global coffee platform with a footprint in more than 30 countries and potential for future growth, the company said. Still, the Atlanta-based company is entering the coffee-shop market at a time when competitors such as Starbucks Corp. and JAB have already cornered many key locations. She further said the price paid by Coca-Cola is much higher than what the Whitbread would have earned by demerging Costa as a stand-alone entity on the stock market.

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Coke is under pressure to establish itself in new markets, with annual sales that have been in decline since 2012.

"The Costa team and I are extremely excited to be joining The Coca-Cola Company", Costa Managing Director Dominic Paul says. Whitbread had been in the process of demerging Costa from its hotel group Premier Inn, and the sale marks the latest transformation in a business that was established in 1742 as a brewer and which has also owned sports clubs and restaurants.

Then in May, the Luxembourg based JAB, a holding company that owns brands such as Krispy Kreme as well as Peet's Coffee, bought over Pret A Manger, the United Kingdom based sandwich and coffee retail chain.

"This transaction is great news for shareholders as it recognises the strategic value we have developed in the Costa brand and its worldwide growth potential and accelerates the realisation of value for shareholders in cash" says Whitbread's Chief Executive, Alison Brittain.

Nestle joined the trend of coffee giants taking aim at smaller niche producers, buying Blue Bottle Coffee and Chameleon Cold Brew.

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