Coca-Cola bets $5,1bn deal for Costa

LONDON. — As consumers shy away more and more from sugary soft drinks, Coca-Cola has found a new way to cater to them: serve them coffee.

THE American beverage titan said on Friday it planned to buy Costa, one of the world’s biggest coffee chains, for 3,9 billion pounds, or $5,1 billion. Soda purveyors have sought for years to find new products as consumer tastes have changed: PepsiCo, for instance, has refocused on healthier snack offerings, and earlier this month agreed to buy SodaStream for $3,2 billion.

The deal puts Coke squarely into a redhot battle in the coffee world, one that until now had been dominated by two food giants.

One is Nestlé, which owns Nescafé and the high-end Blue Bottle chain.

The other is JAB, the acquisitive European conglomerate that has snapped up Peet’s Coffee, Caribou Coffee, Stumptown and more.

Now Coke has joined the fray, by making one of its largest-ever acquisitions.

In its sights is the fast-rising consumption of coffee around the world, as well as the myriad ways that java can be served, from coffee shops to pods. The company is betting that its vast distribution network can help it muscle into the business, serving up at-home products as well as stores.

“It’s more important than ever that Coca-Cola make a serious and significant investment in the category, because it’s the right thing to do to serve our consumers with more of the drinks they want, which in turn helps our customers,” James Quincey, Coke’s chief executive, wrote in a corporate blog post.

Its bet on coffee is to buy Britain’s biggest coffee chain. Founded as a roastery in London 47 years ago by two brothers, the company now trails only Starbucks and McDonald’s in its number of worldwide coffee locations. It has more than 2 400 stores in Britain and 1 400 in other markets around Europe and Asia, as well as 8 000 Costa Express self-serve machines.

Coke itself had flirted with buying a coffee company before, in a way. It invested $1,25 billion in the maker of Keurig home coffee makers, to help pave the way for a Keurig Kold line of at—home soda machines.

But that partnership faltered two years later, after the Kold proved a bust. (Keurig is now owned by JAB, which combined the business with its Dr Pepper Snapple arm.)

Costa’s current owner is the British hospitality company Whitbread, which acquired the coffee chain in 1995, when it had just 39 stores. Since then, Whitbread has focused on expanding the business internationally.

But in April, Whitbread said that it was considering spinning off or selling the business — amid pressure from activist shareholders like Elliott Associates — to focus on its faster-growing Premier Inn line of hotels.

Most of the proceeds from the transaction will go to Whitbread shareholders, the company said in a statement. — New York Times.