CAFFEINE HIT FOR COCA-COLA

Soda giant buys Costa coffee chain

LONDON — Coca-Cola is hoping for a caffeine-fueled boost with the acquisition of British coffee chain Costa.

The soda giant said Friday it is spending $5.1 billion in cash for Britain’s biggest coffee company. Costa has more than 2,400 coffee shops in the U.K. and 1,400 others in more than 30 countries, including around 460 in China, its second-biggest market.

It’s Coca-Cola’s latest move to diversify as health-conscious consumers, at least in America, move away from traditional soda. The company also recently said it’s buying a stake in sports drink maker BodyArmor. Coca-Cola’s other investments in recent years have included milk that is strained to have more protein and a push into sparkling water.

Rival PepsiCo, meanwhile, recently bought carbonated drink maker SodaStream, which produces machines that allow people to make fizzy drinks in their own homes.

Coca-Cola already owns the Georgia and Gold Peak coffee brands, which make bottled and canned drinks. But the Costa acquisition gives it a much bigger piece of the coffee market, which is growing by 6 percent a year, according to James Quincey, Coca-Cola president and CEO.

“Hot beverages is one of the few remaining segments of the total beverage landscape where CocaCola does not have a global brand,” Quincey said.

The coffee market itself is hot at the moment. JAB Holdings, an investment holding company, has been buying up businesses and brands associated with Peet’s, Caribou, Stumptown and Krispy Kreme Doughnuts. And in May, Nestle paid more than $7 billion for the rights to sell Starbucks coffee and tea in supermarkets and other stores outside its coffee shops.

Costa, which doesn’t have a presence in North or South America, was the third-largest coffee shop chain globally in 2017, according to market research provider Euromonitor International, just behind McDonald’s McCafe outlets but well behind Starbucks.

Without being specific about expansion plans, Quincey said in a video posted on Coca-Cola’s website that the company would “over time” look to take Costa “to more people in more places.”

In addition to its shops, Costa has self-serve coffee machines in grocery stores and gas stations. Quincey indicated that one potential early expansion route would be to use Costa’s vending operation and expand the company’s ready-to-drink products.

Nicholas Hyett, an equity analyst at London-based stockbrokers Hargreaves Lansdown, said Costa will get “lots of care and attention” from Coca-Cola.

“Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand.”

–JAMES QUINCEY, COCA-COLA PRESIDENT AND CEO