Coca-Cola buys coffee chain Costa for $5.1 billion

Coca-Cola on August 31, 2018 said it had agreed to buy global coffee chain Costa from its owner Whitbread for $5.1 billion. (File/AFP)
Updated 31 August 2018
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Coca-Cola buys coffee chain Costa for $5.1 billion

LONDON: Coca-Cola on Friday said it had agreed to buy international coffee chain Costa from its UK owner Whitbread, in a deal that gives the beverages behemoth its first global coffee brand.
“Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market through a strong coffee platform,” Coca-Cola chief executive James Quincey said in a joint statement.
The deal for £3.9 billion ($5.1 billion, 4.3 billion euros) comes as consumer demand for conventional carbonated drinks shrinks in the US and other markets owing to health and obesity concerns.
Earlier in August, Coca-Cola’s arch-rival PepsiCo. struck a deal to buy Israeli company SodaStream for $3.2 billion — in a pitch to consumers concerned about mounting waste from soda cans and plastics in landfills worldwide.
SodaStream makes machines that carbonate home tap water.
Coca-Cola’s purchase adds to its Georgia coffee brand in Japan and the US group’s coffee products in other countries.
“Costa also provides Coca-Cola with strong expertise across the coffee supply chain, including sourcing, vending and distribution,” the soft drinks giant added.
Coca-Cola hopes to close the deal in the first half of next year, subject to shareholder and regulatory approvals.
The announcement comes three days after Nespresso maker Nestle said it sealed a deal to market the products of US coffee giant Starbucks around the world, outside of its cafes.
Following pressure from activist shareholders, Whitbread revealed in April that it would spin off Costa, leaving it to concentrate on its hotel chain Premier Inn.
Whitbread was forced to act after US group Elliott became its biggest shareholder with a six percent stake.


“The announcement today represents a substantial premium to the value that would have been created through the demerger of the business and we expect to return a significant majority of net proceeds to shareholders,” Whitbread chief executive Alison Brittain said in the statement.
“Whitbread will also reduce debt and make a contribution to its pension fund, which will provide additional headroom for the expansion of Premier Inn.”
Whitbread’s share price was up almost 16 percent to £46.56 following the announcement, while London’s benchmark FTSE 100 index on which it trades was down 0.3 percent.
“This is a bitter sweet moment for Whitbread investors,” noted Nicholas Hyett, equity analyst at Hargreaves Lansdown.
“On the one hand £3.9 billion is an undeniably rich valuation and likely far better than Costa could achieve as an independently listed company, valuing its earnings higher than those of the mighty Starbucks.
“On the other, Costa has long been the jewel in Whitbread’s crown and some will be sad to see it go at any price, especially given the growth potential in China and elsewhere.”
Whitbread bought Costa in 1995 from founders Sergio and Bruno Costa and presently runs about 2,400 stores in the UK and some 1,400 around the world.
Costa also operates more than 8,000 Costa Express self-serve machines in eight countries, as well as placing its products in supermarkets.
Premier Inn has 785 hotels in the UK and a sprinkling of others in Germany and the Middle East.


UK core pay growth strongest in nearly 11 years, but jobs growth slows

Data showed the unemployment rate remained at 3.8 percent as expected. (Shutterstock)
Updated 16 July 2019
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UK core pay growth strongest in nearly 11 years, but jobs growth slows

  • Core earnings have increased by 3.6 percent annually, beating the median forecast of 3.5 percent
  • The unemployment rate fell by 51,000 to just under 1.3 million

LONDON: British wages, excluding bonuses, rose at their fastest pace in more than a decade in the three months to May, official data showed, but there were some signs that the labor market might be weakening. Core earnings rose by an annual 3.6 percent, beating the median forecast of 3.5 percent in a Reuters poll of economists. Including bonuses, pay growth also picked up to 3.4 percent from 3.2 percent, stronger than the 3.1 percent forecast in the poll. Britain’s labor market has been a silver lining for the economy since the Brexit vote in June 2016, something many economists attribute to employers preferring to hire workers that they can later lay off over making longer-term commitments to investment. The pick-up in pay has been noted by the Bank of England which says it might need to raise interest rates in response, assuming Britain can avoid a no-deal Brexit. Tuesday’s data showed the unemployment rate remained at 3.8 percent as expected, its joint-lowest since the three months to January 1975. The number of people out of work fell by 51,000 to just under 1.3 million. But the growth in employment slowed to 28,000, the weakest increase since the three months to August last year and vacancies fell to their lowest level in more than a year. Some recent surveys of companies have suggested employers are turning more cautious about hiring as Britain approaches its new Brexit deadline of Oct. 31. Both the contenders to be prime minister say they would leave the EU without a transition deal if necessary. A survey published last week showed that companies were more worried about Brexit than at any time since the decision to leave the European Union and they planned to reduce investment and hiring. “The labor market continues to be strong,” ONS statistician Matt Hughes said. “Regular pay is growing at its fastest rate for nearly 11 years in cash terms and its quickest for over three years after taking account of inflation.” The BoE said in May it expected wage growth of 3 percent at the end of this year.