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Coca Cola buys Costa Coffee for £3.9 billion

31 August, 2018, 20:42 | Author: Shawna Walton
  • Daniel Berehulak  Getty

Costa was one of the few big coffee chains up for sale after Nestle SA and the Reimann family's investment company JAB both went on an acquisition spree in the segment.

"Costa also provides Coca-Cola with strong expertise across the coffee supply chain, including sourcing, vending and distribution", the soft drinks giant added.

The move is Coca-Cola's latest diversification as health-conscious consumers, at least in America, move away from traditional soda.

Coca-Cola's planned purchase follows Nestlé's $7 billion licensing deal to sell Starbucks coffee in grocery stores around the world to revitalize its hot-drink business, which experts say has stagnated, especially with younger customers.

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

"However, the growth story needs to be looked at because Whitbread has chose to change tack, shifting away from a demerger that it said would let the coffee and hotel chains grow more rapidly in favour of a quick sale".

Since being bought by Whitbread in 1995 for just £19m Costa has grown to become the UK's largest coffee chain and the second largest internationally behind Starbucks, with 2,400 outlets and a further 1,400 scattered around the world in 31 foreign markets.

Costa has over 2,400 coffee shops in the United Kingdom and another 1,400 in more than 30 global markets.

Still, Costa outranks Starbucks in the United Kingdom - it also operates a business of 8,000 self-service machines - and is expanding in markets such as China. Earlier this year, the British newspaper the Guardian ran a story titled "Have we reached peak Costa Coffee?"

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

Proceeds of the deal will be used to pay down debt and boost the pension fund.

"I would imagine they would be as delighted and surprised as anybody else this morning", she told reporters.

Whitbread said that the sale of Costa to the maker of Coke and Fanta had been struck at "a substantial premium" to the value that would have been generated by a demerger.

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