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COCA-COLA TO ACQUIRE COSTA COFFEE

COCA-COLA TO ACQUIRE COSTA COFFEE



Whitbread PLC has entered into an agreement for the sale of Costa Limited to The Coca-Cola Company for £3.9 billion.

Alison Brittain, Whitbread Chief Executive, said, “I am delighted that we have agreed the sale of Costa to Coca-Cola. 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.

“The announcement 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 will also reduce debt and make a contribution to its pension fund, which will provide additional headroom for the expansion of Premier Inn.”

James Quincey, President and CEO of The Cocoa-Cola Company, said “We are continuing to evolve as a total beverage company. This means we sell Coke, of course, but also so much more. Today, we’ve taken another important step toward becoming the total beverage company we aspire to be.”

Mr Quincey said the deal “helps us get into hot beverages.” He said, “Coffee is one of the fastest-growing beverage categories in the world. It’s also a category with many different elements, from vending to coffee shops to roast-and-ground to instant to pods and capsules.

“In short, coffee is a big business with many formats. It’s also a remarkably fragmented business. No single company in the world has a strong foothold across all parts of coffee. And that includes Coca-Cola. We have great brands like our ready-to-drink Georgia coffee line-up in Japan, but Coca-Cola doesn’t have a broad, global portfolio in this growing category.

“Today, with the growth in coffee and hot beverages, it’s more important than ever that Coca-Cola make a serious and significant investment in the category, because it’s the right thing to do to serve our consumers with more of the drinks they want, which in turn helps our customers.

“There are a couple of elements that are valuable here. Retail shops are important for sales of course, but they’re also pivotal in building a brand so it can have even more success beyond its own stores, like in immediate consumption channels.

“Costa has a fresh espresso-based system called Costa Express. There are currently more than 8,000 machines already in-market. We see opportunities to expand this system in immediate consumption and experience channels.

“Costa has great roast and ground beans for restaurants and cafes. The Coca-Cola system has enormous reach in many channels, and we see the potential to expand and offer these high-quality Costa coffee solutions to our existing customers. This great coffee capability will also allow us to expand at-home offerings.

“Finally, Costa offers great opportunities in ready-to-drink beverages. Coca-Cola has bottled and canned coffees in a few markets. The Costa brand has potential for expansion into ready-to-drink coffee across many markets globally. So, Coca-Cola and Costa have remarkably complementary businesses. Costa offers Coca-Cola the best opportunities to create value in coffee. We can be better together.”

Whitbread acquired Costa in 1995, for £19 million when it had only 39 shops and successfully grew the business to be the UK’s largest coffee shop company.

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