Coca-Cola said Friday it will buy the Britain's biggest coffee company Costa from Whitbread for 3.9 billion pounds ($5.1 billion) in cash. It's also a remarkably fragmented business. Costa Coffee in India is operated by rival PepsiCo's biggest and long-standing, exclusive bottling partner RJ Corp, which operates about 70 outlets.
The announcement comes three days after Nespresso maker Nestle said it sealed a deal to market the products of USA coffee giant Starbucks around the world, outside of its cafes. Coke sells Georgia coffee in Japan, but wanted a bigger platform.
And once coffee becomes part of people's routine, they may be more inclined to buy Costa's beans and iced coffees, Stanford noted. Any potential deal will depend on the valuation Costa Coffee offers to RJ Corp. As such, Whitbread was planning to demerge Costa from the parent company, spinning it off into a firm of its own.
For carbonated drinks, sales are expected to rise by a smaller 5.7% to $171.4bn in 2022, and for cola that growth is even smaller at 4.4%.
This is the second transaction involving a consumer products company and a coffee retailer after Nestlé struck a $7.15 billion global deal in May to sell Starbucks' coffee products outside its cafes, in shops and supermarkets.
The deal will benefit Costa, too, says Rosenzweig.
Scott Ferguson, managing partner and portfolio manager at Sachem Head, said that his fund was "very pleased with the transaction, and credit management and the board for thoughtfully maximizing value for shareholders". Jaspal Sabharwal, private equity veteran and cofounder of online food industry platform TagTaste, said the development could mark an opening for DIL.
SodaStream makes machines that carbonate home tap water.
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More retail stores could help people develop a taste for coffee in those regions, Quincey said.
"Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand", Quincey said.
"The prize of Costa [for Coca-Cola] lies not in the mature United Kingdom market but in its worldwide potential", said Jonny Forsyth, a Mintel analyst.
London-based Costa serves its drinks in more than 30 countries in Asia, the Middle East, Africa and Europe but does not have a presence in the United States. Coke's current RTD coffee portfolio in the USA includes products from premium Italian roaster illy, cold brew coffee from Gold Peak, and a line of bottled iced coffees and frappes produced under partnership with the McDonald's McCafe brand.
Coca-Cola's first overture came in June, Whitbread CEO Alison Brittain said on a call with journalists.
Whitbread will now focus on its Premier Inn hotel chain.
Founded 276 years ago as a brewery by Samuel Whitbread and Godfrey and Thomas Shewell, Whitbread grew into a sprawling group that had interests spanning pubs, fitness clubs, casual dining chains and Costa, which it bought for £19-million in 1995.