Sat, Sep 01, 2018 - Page 10 News List

Coca-Cola to buy Costa Coffee in deal worth £3.9bn

HOT COMMODITY:The US beverage giant has no global brand in coffee, which is still growing as sugary soft drink sales are stagnant due to health-conscious consumers


A customer enters a Costa Coffee shop in London on Nov. 15 last year.

Photo: AFP

Coca-Cola Co has agreed to buy the world’s second-largest coffee chain, Costa Coffee, from Britain’s Whitbread PLC for an enterprise value of £3.9 billion (US$5.1 billion), opening a new front in its push away from traditional sodas.

Whitbread yesterday said in a statement that the deal, which is to give Coke almost 4,000 coffee outlets in the UK and across Europe, has been agreed unanimously by the Whitbread board as in the best interests of shareholders.

Whitbread, which had been in the process of demerging its coffee business from its hotel chain, acquired Costa in 1995 for £19 million when it had only 39 shops.

For Coca-Cola, the deal adds to its efforts to move away from fizzy drinks toward healthier options for increasingly health-conscious consumers.

“Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand,” Coca-Cola chief executive officer James Quincey said. “Costa gives us access to this market with a strong coffee platform.”

Makers of soft drinks are branching out as consumers seek alternatives to sugary sodas. Earlier this month, PepsiCo Inc agreed to pay US$3.2 billion for SodaStream Ltd, which makes carbonated-water dispensers.

Costa outranks Starbucks Corp in the UK and is expanding in markets such as China. The company was one of the few big coffee chains up for sale after Nestle SA and the Reimann family’s investment company JAB Holding Co both went on an acquisition spree in the segment.

Coca-Cola sells coffee under the Georgia brand in Japan and has some other local products for specific markets.

Whitbread said it would reduce debt and contribute to the pension fund with the proceeds from the deal, and further expand its hotel chain Premier Inn in the UK and Germany.

“The announcement today represents a substantial premium to the value that would have been created through the demerger of the business and we expect to return a significant majority of net proceeds to shareholders,” Whitbread chief executive officer Alison Brittain said.

Additional reporting by Bloomberg

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