Coca-Cola digs into coffee with $7b Costa purchase

Coca-Cola digs into coffee with $7b Costa purchase

On Friday, the company announced that it has agreed to buy United Kingdom coffee chain Costa Coffee for $5.1 billion.

Quincey added that Costa offered an attractive global supply chain, taking coffee beans from roasting through to customers in multiple formats. Costa has close to 4,000 retail outlets worldwide and is described by Coca-Cola in its statement as having "highly trained baristas" and "state-of-the-art roastery".

Costa gives Coca-Cola a global coffee footprint with almost 4,000 retail outlets in more than 30 countries. "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 has over 500 brands in its stable including Fanta, innocent smoothies and Powerade sports drinks.

Whithead had acquired Costa Coffee in 1995 for £19 million (Rs 1.75 billion), when the chain had only 39 stores in the United Kingdom. Whitbread has stated that the sale of Costa Coffee will allow them to boost the company's pension fund, pay down some debt and expand the Premier Inn chain.

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A woman looks at the screen of her mobile phone in front of an Apple logo outside its store in Shanghai, China July 30, 2017. Ars will be at Apple's September event reporting on all the news, so be sure to check back for the latest on September 12 .

The deal, worth £3.9bn, has been unanimously approved by Whitbread shareholders.

The current owner, Whitbread, announced a plan to spin off Costa earlier this year. "I'm sure it would be nice for them to say, 'You can try all of our new Coke products there'".

"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", Chief Executive Alison Brittain said.

Whitbread previously said in April it would split Costa off as a separate firm from Premier Inn.

Whitbread shares closed up 14.3 percent on Friday in London as analysts praised the price tag that Costa had fetched, which values the chain at 16.4 times its latest annual earnings.

"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".

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