Coca-Cola is a giant in the soft drinks industry, and now they’re stepping up by extending their reach into the coffee industry. Previously, the brand has been dabbling with coffee flavour, trialling Coke Plus Coffee in several countries around the world. Now it appears that Coca-Cola is acquiring the Costa Coffee chain in a multi-billion pound deal with Whitbread. Costa is arguably the British equivalent of Starbucks, having at least one of their instantly recognizable coffee shops on what seems like every high street.
Why is Whitbread selling Costa Coffee?
The Whitbread group originally bought the chain from the Costa brothers in 1995. There were only 39 shops then, in comparison to around 4,000 stores and franchises today. Like many retailers in the current economic climate, Costa Coffee had been struggling lately. Plans were in the works to demerge Costa Coffee from the Whitbread group into its own separate company. This would allow them to focus on growing their Premier Inn hotel chain as well as the London food chain Pure. Now, selling the brand to Coca-Cola means that the company can use the money to pay debts and appease shareholders. Whitbread’s shares jumped by almost 19% following the news of the sale to Coca-Cola, whose own shares increased by 1%. Coca-Cola is paying almost a billion more than analysts were anticipating, which is excellent for Costa.
Is Costa Coffee closing down?
Some branches of Costa have been shutting in some towns, but this is due to local circumstances. While Costa Coffee did suffer a drop in high street sales this year, they were still working on ways to continue expansion. Compared to the number of high street names going into administration or completely closing down, Costa is in nowhere near as bad a position. This sale could be saving the chain from facing difficulties like those a few more years down the road. At the moment, the only change to Costa shops is the introduction of their new autumn menu. It includes a range of seasonal “Bonfire” drinks with toffee and spice flavours. They are also adding ten new snacks, which include vegetarian goat’s cheese focaccia and vegan Thai curry pots. There is also a pecan cookie for vegans, but the “Bonfire” range contains honey.
What will Coca-Cola do with Costa Coffee?
The deal will not actually complete until the first half of 2019, so there will not be any major announcements about the future of Costa Coffee just yet. When we do hear about them and eventually see their plans implemented, Costa could be as ubiquitous as Coke. Hot beverages, and especially coffee, represent a trendy and growing market which Coca-Cola wants to get in on. Coca-Cola has the reach and power to grow Costa Coffee into a truly global brand like Coke itself. Think vending machines and stock in every potential type of retail establishment, not just airports and train stations but hotels, pubs, restaurants, cinemas, even bowling alleys and similar venues. Coca-Cola can help Costa to break into other international markets that it hasn’t been able to crack yet, and give Starbucks a run for its money.