Financing

Coca-Cola buys Costa Coffee for $5.1B

The deal makes the beverage giant a more direct competitor with Starbucks.
Costa logo
Photograph courtesy of The Coca-Cola Co.

Starbucks Corp. is getting a giant new direct competitor: The Coca-Cola Co.

The beverage giant on Friday announced that it plans to acquire Costa Limited, a U.K.-based coffee brand that includes a chain of nearly 4,000 coffee shops, in a deal valued at $5.1 billion.

The deal “will give Coca-Cola a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion,” the company said.

Costa operations include its coffee brand, a coffee vending operation, at-home coffee formats and a roastery.

The Atlanta-based Coca-Cola said the acquisition of Costa gives it a scalable coffee platform “in a fast-growing, on-trend category.” It also gives the company a key, global brand in the hot beverage category.

Costa was founded in London in 1971 and has grown to become the leading coffee company in the United Kingdom. It also has a major presence in Europe and other markets and has a growing footprint in fast-growing China.

That takes it right up against Starbucks, which has viewed the Chinese market as critical for its future growth. Starbucks’ stock was up slightly Friday.

Coca-Cola has been getting more into the coffee business internationally, including its Georgia brand in Japan and coffee products in many other countries. “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide,” Coca-Cola CEO James Quincey said in a statement. “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.”

The deal is expected to close in the first half of 2019. Coca-Cola has more than 500 beverage brands in more than 200 countries and it is a major supplier to the restaurant industry.

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