The maker of the best-selling soft drink in history is targeting the hot beverage industry. The Coca-Cola Company has announced that they have reached a definitive agreement to acquire UK-based coffee company, Costa Limited, for $5.1 billion.
After this acquisition, Coca-Cola will have a strong coffee platform across Europe, Asia Pacific, the Middle East and Africa, with the potential to expand to other markets. With Costa having a presence in nearly 4000 retail outlets which include several cafés with trained baristas, Coke will now have a hand in the freshly prepared hot beverage category. In addition, the company will also have ownership over Costa’s vending operations, for-home products and Costa’s state-of-the-art roastery.
This business move allows Coca-Cola to have a scalable coffee platform with a company that has a lot of experience in the fast-growing coffee industry. Costa is also the leading coffee company in the UK with a growing platform in China and other markets. In addition to their well-known cafés, Costa’s on-the-go brand, Costa Express, has an expansive presence in a variety of quick stop locations such as gas stations, movie theaters and travel hubs. This means that Coca-Cola can expand Costa’s reach in a variety of formats.
“Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide,” said Coca-Cola President and CEO James Quincey. “Hot beverages are 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.”
However, Costa will not be the only coffee brand in Coca-Cola’s portfolio. The company already has a market leading coffee brand in Japan called Georgia. In fact, in 2017 the Japanese coffee line was the highest-grossing ready-to-drink coffee product in the world. So it seems that Coke also has experience in growing coffee sales.
Nevertheless, this acquisition comes as soda sales are at an all-time low. In an interview with Forbes Bill Sipper, managing partner at Ramsey, a New Jersey-based division of Cascadia Managing Brands, a global beverage consultant, said that nearly all of Coca-Cola’s products are losing sales.
“Almost every brand of Coca-Cola is down. Soft drinks are down. Vitamin water is down. Coconut water is down,” he said.
This acquisition allows Coke to have a bigger hand in one of the fastest-growing beverage categories in the world. Coffee sales have been growing steadily at six percent annually and the category is now valued at around $0.5 trillion. Considering Coca-Cola’s mission to become a total beverage company, it’s only natural that hot coffee beverages are the next step for the company.
“The Costa team and I are extremely excited to be joining The Coca-Cola Company,” said Dominic Paul, managing director at Costa. “Costa is a fantastic business with committed and passionate associates, a great track record and enormous global potential. Being part of the Coca-Cola system will enable us to grow the business farther and faster. I would like to say a huge thank you to our customers and to everyone in the Costa team who have helped us build the business to this position, and I look forward to the next exciting chapter in Costa’s vision of inspiring the world to love great coffee.”