The Strategist

Coca-Cola buys Costa Coffee for $ 5 bln

08/31/2018 - 14:52

Coca-Cola acquired the largest British chain of coffee houses Costa Coffee for $ 5 billion. This transaction reflects Coca-Cola’s desire to enter a new coffee market, as well as a broader trend - the desire of soft drinks producers to seek new directions of activity due to a decrease in popularity of traditional sweet drinks.

Jonathan Billinger
Jonathan Billinger
The American beverage producer Coca-Cola Company announced purchase of the British coffee chain Costa Coffee. The deal amounted to $ 5.1 billion. It is expected to be completed in the first half of next year. Coca-Cola said that the agreement will leverage development of the company as a beverage producer: the corporation will enter the hot drinks market through the acquisition. "Coffee is one of the fastest growing categories of drinks in the world. In short, coffee is a big business with many formats. It is also an extremely fragmented business," - Coca-Cola said in a statement. According to James Quincey, the corporation’s general director, "coffee is one of the few segments in the beverage market where Coca-Cola does not have a global brand." "Costa gives us access to this market through a strong coffee platform," he said.

Costa Coffee was established in 1971. Earlier, the chain belonged to the British company Whitbread, which own several hotels, restaurants and coffee shops around the world. In April, Whitbread announced allocation of Costa in a separate company. Costa is the largest network of coffee houses in the UK: it has 2,500 coffee shops and stores in the UK and 1,400 in other countries. In total, the company operates in more than 30 countries in Europe, Asia and the Middle East, including China.

The example of Coca-Cola is far from being the first major deal in the coffee market over the past few years. This market remains rather fragmented, but now it has attracted attention of large corporations. In September last year, Nestle Corporation bought a controlling stake in the American premium network of coffee houses Blue Bottle Coffee. Already this year, Nestle acquired the right to sell Starbucks coffee in stores. In addition, the current deal reflects the desire of carbonated beverage producers to find new markets amid a continued decline in consumption of high-sugar beverages. Earlier this month, Coca-Cola's main rival, PepsiCo, announced purchase of SodaStream, an Israeli maker of home-made soda-filling machines for $ 3.2 billion, which positions itself as a producer of healthy beverages.