Business / #ForbesBusiness

September 2, 2018,   11:00 AM

Coca-Cola Buys Out Costa Coffee for $5.1 Billion

Abisola Owolawi

I write about business, entrepreneurship, innovation, wealth and culture with a focus on global impact. Innovative, groundbreaking ideas and the structures that drive them over time, inform my subject choices. I cover industries that span manufacturing, service, technology, entertainment, healthcare and aviation among others, across Africa for Forbes Middle East. I have previously worked as Forbes Africa’s West Africa Correspondent, a wealth contributor on the annual Forbes rich list and as a CNBC Africa business contributor. FULL BIO

shutterstock 1165005547 sorbis

In what could be one of its largest-ever acquisitions, American beverage giant Coca-Cola has announced that it will purchase Britain’s biggest coffee shop chain, Costa Coffee for $5.1 billion, expanding the soda company's reach into the lucrative global coffee market.

The deal is expected to be completed by the first half of 2019.

Britain’s hospitality company, Whitbread Plc., owners of the Premier Inn budget hotel chain, acquired Costa Coffee in 1995 from the chain’s founders, Sergio and Bruno Costa for £19 million ($24 million) when it had only 39 outlets.

Today, Costa Coffee has over 2,400 coffee shops in the U.K. and another 1,400 across international markets. The chain also manages over 8,000 Costa express self-serve machines in eight countries.

In announcing the chain's sale to Coca-Cola, Whitbread stated that the deal is in the best interest of shareholders and would allow the company to focus on Premier Inn, which has about 785 hotels across the U.K, Germany, and the Middle East.

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

Coca-Cola President and CEO James Quincey said the deal presents new capabilities for the company.

“Our system can create opportunities to grow the Costa brand worldwide. Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand,” he says in a statement.

For Coca-Cola, whose annual sales have been in decline since 2012, the acquisition opens up a great opportunity to diversify its offerings away from its namesake product line as demand for sugary drinks continues to fall in markets such as the United States.

Recent years have seen traditional soft drink makers making forays into healthier alternatives, with PepsiCo Inc. announcing a deal to buy Israel-based SodaStream Ltd., makers of carbonated water dispensers for $3.2 billion earlier this month.

Coca-Cola is betting top dollar that its vast distribution network will serve as the necessary impetus and structure to follow this trend successfully.

Costa Coffee was one of the few big coffee chains up for sale as consumer foods giants such as Nestle SA and JAB continue to search for acquisitions in the segment.

Recommended Articles