Arthur J. Villasanta – Fourth Estate Contributor
Atlanta, GA, United States (4E) – The Coca-Cola Company has assumed ownership of Costa Coffee, the largest coffee chain in Europe and the world’s second largest after Starbucks.
Costa Coffee has operations in 32 countries but not in the United States. That will change with Coca-Cola’s acquisition of this British company.
The $5.1 billion acquisition of Costa sCoffee, which is based in the United Kingdom, will give Coca-Cola its first coffee brand and a huge worldwide presence in the popular coffee house business. Costa Coffee currently owns 4,000 Costa coffee houses in 32 countries. More than 2,400 of these stores are in the U.K., along with more than 8,000 self-serve Express machines.
Before its acquisition by Coca-Cola, Costa Coffee was a wholly owned subsidiary of Whitbread, PLC, a British multinational hotel, coffee shop and restaurant company based in Bedfordshire. Whitbread also owns Premier Inn, the largest hotel brand in the UK.
Acquiring Costa Coffee will give Coca-Cola a huge foothold in one of the world’s fastest-growing drinks categories. The global coffee shop market is worth more than $165 billion and growing.
Coca-Cola CEO James Quincey said hot beverages are one of the few drinks categories where the company doesn’t own a global brand. He said Costa gives Coca-Cola access to this market with a strong coffee platform.
Coca-Cola’s acquisition of Costa Coffee, however, does carry some baggage. Experts note the coffee market in the U.K. might be close to saturation. From 10,000 shops in 2007, that number has more than doubled to 24,000 today.
On the other hand, Coca-Cola can count on there being nearly twice as many Costa Coffee branches in the U.K. as there are Starbucks. Costa Coffee also has four times more branches than Caffè Nero, another top British coffee house.
Coca-Cola might still benefit from the fact that demand for coffee is still growing faster than soft drinks. Coffee demand is rising six percent annually, far larger than soft drinks. The coffee culture is still in its infancy in huge markets with potentially huge growth such as China, which has the second largest number of Coffee Costa branches after the UK.
Costa Coffee CEO Alison Brittain noted that Coca-Cola has no coffee in its entire product range. She said one can see Costa absolutely everywhere in the UK: in hotels, restaurants, pubs and cafes. Costa is in all the places one sees Coke today, she said.
This masive deal was completed in all of five weeks, a rapid pace underscores Coca-Cola’s desire to reduce its reliance on sugared drinks such as Coke, Sprite and Fanta.
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