Coke into coffee: Coca-Cola buys United Kingdom coffee chain Costa for $7 billion

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Whitbread has struck a deal to sell the Costa Coffee chain to Coca-Cola for £3.9 billion. Costa has close to 4,000 retail outlets worldwide and is described by Coca-Cola in its statement as having "highly trained baristas" and "state-of-the-art roastery".

Analysts said the deal will give Coca-Cola a scalable coffee platform across parts of Europe, the Asia-Pacific, the Middle East and Africa, with the opportunity for additional expansion, besides expertise in coffee supply chain, sourcing, vending and distribution.

The Coca-Cola Company is buying United Kingdom -based Costa Limited, a global coffee chain with nearly 4,000 retail outlets, for $5.1 billion, it announced today. Coca-Cola CEO James Quincey said the Costa deal is a "serious and significant investment" in hot beverages, a market that still remains largely fragmented.

The US beverage giant Coca-Cola is buying the British coffee-shop chain Costa Coffee in a surprise acquisition.

Coca-Cola made its first formal approach to Whitbread in late June and the negotiations progressed quickly, with a deal signed at 6:52 on Friday morning, 8 minutes before it was announced to the stock market, Ms. Brittain said. The chain is now the most popular coffee shop in the United Kingdom with 48% of consumers buying a hot drink from Costa in the three months to October 2017, with consumers aged 18 to 24 most likely to have bought a hot drink from Costa.

In one motorway service station between York and Leeds in the north of England, there are no less than seven different outlets where one can buy Costa Coffee.

Whitbread, which had been in the process of demerging its coffee business from its hotel chain, acquired Costa in 1995 for 19 million pounds when it had only 39 shops.

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Coca-Cola needed a coffee fix, but it could have gone for a better brew. With the Costa acquisition, Coke will aim its expanded products at the millions of vending machines and convenience stores that cover the USA, especially as consumers turn away from the sugary sodas that they used to purchase from the very same locations. JAB, the Luxembourg-based holding company that owns brands like Krispy Kreme and Peet's Coffee, bought United Kingdom sandwich and coffee chain Pret A Manger in May.

In the key U.S. market, an expansion of Costa shops into the country would be a threat for Starbucks, McDonalds and JAB, which owns a string of chains including Peet's and Caribou. Earlier this month, PepsiCo Inc. agreed to pay $3.2 billion for SodaStream Ltd., which makes carbonated-water dispensers.

Coke could also potentially use the stores as a pick-up location for customers who may want to order products directly from the company's website, Lawrie said.

Nestle and Starbucks agreed to a $7.2 billion global coffee alliance.

"The acquisition will help scale up Costa, as Coca-Cola is a large player here and has a good understanding of the Indian market and consumer".

Analysts cited industry rivals, including Intercontinental Hotels Group, Marriott and Accor, as potential suitors, while some suggested that Premier Inn's £5.4 billion of assets could interest property investors such as Blackstone Group.

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