Coca-Cola buys $5.1bn Costa for 'strong coffee platform'

Coca-Cola is buying high-street coffee chain Costa in a $5.1bn (£3.9bn) deal as it moves into the hot drinks market for the first time and eyes an expansion of the brand globally.

Coca-Cola buys $5.1bn Costa for 'strong coffee platform'

The deal, announced this morning, would "give Coca-Cola a strong, global coffee platform with a footprint in more than 30 countries and potential for future growth", the company said.

Costa, which was founded in London in 1971 and bought by Whitbread for £19m in 1995, has grown into a global brand with an established presence in parts of Europe, the Middle East and Africa, as well as a growing footprint in China. It now has more than 2,400 UK coffee shops and 1,400 outlets in 31 overseas markets. 

Coke also values the brand for its Costa Express vending machines, which serve coffee at places like train stations and movie theatres, and it is seen as a clear opportunity to be expanded within Coca-Cola's global distribution network. Costa Express has 8,237 vending machines worldwide.

However, Coke believes coffee remains a "largely fragmented market" even though it is a significant and growing part of the global drinks market.

James Quincey, the president and chief executive of Coca-Cola, said buying Costa was part of Coke's "evolution as a total beverage company."

He added: "Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide.

"Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market with a strong coffee platform."

Costa, meanwhile, had already begun a journey of aggressive global expansion and earlier this year appointed Bartle Bogle Hegarty London as its first global ad agency to create a worldwide marketing proposition.

The brand kicked off a review in February, a week after hiring former Cadbury marketer Sarah Barron as chief marketing officer, and followed last year's appointment of Lida to create a global customer loyalty strategy.

The deal is expected to close in the first half of 2019 and is subject to shareholder approval from Whitbread, which is expected to happen by mid-October, as well as antitrust approvals in the European Union and China.