Coca-Cola Inks $5.1 Billion Coffee Deal

Joseph Lafave Contributor
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The Coca-Cola Company signed a $5.1 billion deal on Friday to acquire Costa, a chain of coffee shops popular in the U.K. and across the globe. According to Reuters, Coca-Cola plans to use its new business to compete against beverage giants such as Starbucks.

Costa, formerly owned by Whitbread, operates close to 4,000 stores across several regions. While Coca-Cola has a small presence in some regional coffee markets, such as Japan, this will be the company’s first move into global coffee.

With the recent acquisition, the coffee shops will now benefit from Coca-Cola’s vast distribution infrastructure. In return, the soda company now has a storefront from which to sell its extensive offering of beverages as well as Costa’s coffee processing and roasting facilities.

According to Reuters, Coca-Cola is also expected to expand Costa’s vending machine system.

“Coffee is one of the strongest growing categories in the world, and Coca-Cola needs to expand into coffee and hot drinks,” said Coca-Cola CEO James Quincey. Coca-Cola is just one of several big-beverage companies looking to bolster their position in the current market, which is struggling to attract younger consumers.

Despite the news, Coca-Cola shares went down by 0.4 percent this morning after the announcement.

“We do think investors will have questions surrounding the retail component of the business and lower operating profit margin versus legacy Coca-Cola,” said JP Morgan analysts while speaking to Reuters.