What Whitbread’s planned sale of Costa Coffee to Coca-Cola means


U.K. leisure group Whitbread is set to sell Costa Coffee chain to U.S. soft-drinks maker Coca-Cola for roughly £4bn (or $5.2 billion).

With 4,000 stores in 32 countries, Costa is the second-largest coffee shop in the world after Starbucks.The deal allows Coca-Cola Inc.

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 to diversify away from fizzy and sugary drinks and expand into healthier offerings. Costa is aiming to triple its store presence in China.

Credit-rating firm Fitch forecasts that coffee consumption will rise by 2.1% year-on-year in volume terms in 2018, reaching 156 million tonnes globally. The sector has been in a mergers-and-acquisitions frenzy in recent years as fast-moving, consumer-goods companies rush to gain exposure to the high-margin sector.

In May, Nestle

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the world’s largest food and drinks group, paid Starbucks Corp

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  $7.1 billion to sell its coffee products such as Nespresso after activist investor Dan Loeb pressured the company to boost its margins.

JAB, the investment company which manages the fortune of Germany’s Reimann family, has spent billions to acquire coffee brands around the world including Keurig Green Mountain

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  (which merged with Dr Pepper Snapple Group earlier this year) and Peet’s Coffee & Tea. In June, JAB shelled out £1.5 billion for British food chain Pret a Manger.

Whitbread PLC

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  said it would distribute a significant amount of the proceeds from the sale to shareholders.

Pending regulatory approval in Europe and China, the sale will close during the first half of next year.

Shares in Whitbread fell 1.5% in London on Tuesday after the deal was announced and as the company reported its quarterly results.

Analysts at AJ Bell said the focus for Whitbread would now be on its chain of Premier Inn hotels.

“The bigger question longer term will be whether the UK really needs so many more hotels,” analysts at AJ Bell said. “The industry continues to build and build, plus there is the additional factor of Airbnb offering plentiful supply of accommodation,” they added.

Following the sale of Costa, Whitbread will be a focused hotel businesses in the UK, the Middle East and Germany, which is shifting from independent hotels to branded hotels, and could become a bigger focus for Whitbread in the future.

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Source : MTV