'Hot beverages' is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand.
On the 31st of August, soft drink giant, Coca Cola agreed to buy Costa Coffee from UK drinks and hotels group Whitbread for £3.9 billion ($5.1 billion). The deal still needs to be approved by shareholders and regulators, it’s expected to be completed by the first half of 2019.
Costa is UK’s largest coffee chain, it is also the World's second largest (first being Starbucks). Costa has over 3800 outlets and 8237 vending machines all over the world; All of that will now belong to Coca Cola.
What does this mean for Coke?
This puts Coke in direct competition with Starbucks and Nestle! We think coke realised that rise in healthy eating meant that they’d have to branch out from soft drinks. And this was a solution that put them directly in the big leagues, seeing that their own venture into coffee, “Georgia” still remains small (and pretty insignificant).
This will also put Coke in a head-butting situation as Costa Coffee in India is operated by RJ Corp. RJ Corp is PepsiCo’s (Coke’s arch nemesis) biggest, longstanding and exclusive bottling partner. RJ Corp will either have to sell India right or buy the brand rights for the India Market. Either way, they’ll have to separate themselves from coke because these two won’t be working together under the same roof.
What does this mean for Costa?
Costa will be using the proceeds from the sale of the coffee business to expand its other big brand, Premier Inn hotels.
Meanwhile, in other news, arch nemesis PepsiCo announced earlier this month that they will be buying the Israeli DIY seltzer company SodaStream for $3.2 billion.