How Coke brewed a Costa deal in secret
Initial contact with the UK coffee chain’s owner Whitbread took place in Seattle
Asecretive summit in Seattle began Coca-Cola Co’s whirlwind pursuit of Costa coffee.
The US beverage giant’s CEO James Quincey first spoke to his counterpart at Costa’s British parent company in May about adding coffee to the soda pioneer’s line-up, according to people familiar with the matter. Quincey and Alison Brittain, who heads up Whitbread Plc, were at the Microsoft CEO Summit, an exclusive meeting of business leaders.
Held in the tech giant’s hometown, the city just happens to be the headquarters of Costa’s largest rival Starbucks Corp.
This account of how the approach, which culminated on August 31 with the companies announcing a transaction eight minutes after signing on the dotted line, is based on public statements and interviews with people familiar with the discussions.
“We just had an absolutely stonking deal that we needed to announce,” Brittain told analysts, using a British colloquialism for impressive.
Negotiations had been under way for months, she said.
Quincey, who had been weighing an expansion into java since he took over last year, had spent the better part of a year studying the industry before zeroing in on Costa, a business that will give it instant heft in the coffee industry, with 3,800 stores in 32 countries and a foothold in China.
Formal accord
A takeover proposal followed in June amid negotiations that were handled — for the most part — by the two CEOs, fellow Britons who grew up in the country and share a similar sense of humour.
Coke eventually hired advisers from Rothschild & Co, while Goldman Sachs Group Inc. led the team for Whitbread alongside Morgan Stanley and Deutsche Bank.
A formal accord was sewn up in five weeks — aided in part by the work Whitbread had already done to separate the Costa business.