US-based beverage maker Coca-Cola has reportedly agreed to buy out coffee chain Costa Coffee from UK drinks and hotels group Whitbread. The amount of the deal is worth $5.1 billion including debt.
This move has been taken primarily to extend its push into healthier drinks as the demand for aerated and soda drinks is falling. Also, the company is trying to take on the likes of Starbucks and Nestle as the global coffee market is getting a boost.
Costa has nearly 4,000 stores across 32 countries. It will give Coca-Cola “a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion,” Coca-Cola stated.
Coca-Cola will use its distribution network to supercharge Costa’s expansion as it is currently behind the predominant coffee chain market leader Starbucks and its almost 29,000 stores across 77 markets.
However, Coke will also face a tough fight as the competitors are bulking up in a fragmented market, willing to attract young people prepared to pay out for barista-made drinks and developing tastes for ever more exotic coffees.
Whitbread acquired Costa in 1995 for 19 million pounds when it had only 39 shops. The owner stated that the company will use proceeds from the sale of the coffee business to expand its other big brand, Premier Inn hotels.
“This transaction is great news for shareholders as it recognizes the strategic value we have developed in the Costa brand and its international growth potential and accelerates the realization of value for shareholders in cash,” Whitbread’s chief executive Alison Brittain said.
The deal, however, still needs to get approval from shareholders and regulators, and is expected to be completed in the first half of 2019. Hot beverages are one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand, but, with this acquisition, it may heat up with the competition with the brand name of Costa Coffee.