Coca-Cola to purchase Costa Coffee

Coca-Cola, the world’s largest soft drinks producer has now made public their intension to purchase UK coffee chain Costa Coffee for a cool £3.9 billion. The chain opened their first coffee shop in 1971 through brothers Bruno and Sergio Costa. Over the next two decades their business grew to 39 outlets before its current owner, Whitbread, purchased the business for £19m in 1995.

Today the brand has 2,400 UK coffee shops, as well as some 1,400 outlets in 31 overseas markets. They currently stand as the UK’s largest coffee chain, pipping their closest competitor Starbucks by around 300 outlets.

Costa also boasts one of the industry’s largest networks of coffee vending machines, operating 8,237 worldwide. All of these outlets have help Costa raise revenues to £1.29 billion in 2017, attracting a whole host of potential suiters.

The sale of the brand has come following a decision to separate Premier Inn and Costa, who operate in partnership under the same business. This move has been chased by investors for some time with many feeling the two brands are able to stand on their own feet. Elliott Management, an aggressive, deep-pocketed US hedge fund with a track record of shaking up big companies managed to buy a majority stake in the business turning up the heat on a potential demerger.

The plan had been to separate the businesses over the next two years, but Coca-Cola had other ideas making the board an offer far too lucrative to reject. It may be some time before the deal is completed, but once complete Whitbread will focus on its Premier Inn business in the UK and Germany.

This is Coca-Cola’s first move into the hot drinks industry and will come as welcome relief to its large pool of investors. We will be watching the brand closely over the next 18 months to see what impact this new acquisition could hold.