Costa Coffee SOLD to soft drinks giant Coca-Cola in shock £4bn deal

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George Lawrie, principal analyst at Forrester Research, said that Coke can use Costa stores to help sell its other products, including juice and water, directly to consumers, rather than through a grocery store or gas station. It's the second-largest on-premise coffee operation in the world, behind Starbucks. In the year to March, it made an operating profit of 123 million pounds on sales of 1.29 billion.

Doing so, Whitbread said, would "provide headroom" to further expand the Premier Inn budget hotel chain in Britain and Germany. Coca-Cola chief executive officer James Quincey said the Costa transaction is a "serious and significant investment" in hot beverages, a market that still remains largely fragmented.

Following Coca-Cola's $5.1 billion purchase of the ubiquitous United Kingdom coffee chain, the company plans to target the fast-growing ready-to-drink coffee market in the USA, rather than set up stand-alone shops like new rival Starbucks.

"Costa is a lovely company and therefore there were clearly suitors for that company and we didn't think any of them were wearing the right suit and driving the right vehicle", she said, declining to identify the firms.

The Atlanta-based beverage giant described the proposed deal as a necessary entryway to the global coffee market.

According to a statement, Coke plans to retain the existing management team at Costa.

The cola giant announced today that it has acquired global coffee brand Costa in a $5.1 billion deal.

In the key United States market, an expansion of Costa shops into the country would be a threat for Starbucks, McDonalds and JAB, which owns a string of chains including Peet's and Caribou. While the vast majority of Costa stores are in the UK, Coca-Cola did mention the company's recent retail growth in markets such as China.

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Quincey said Costa could also potentially introduce ready-to-drink products across "many markets globally".

It seems Coca-Cola is mirroring Nestle's approach in hoping to bring a coffee brand to the world stage, with Quincey emphasising throughout the call that the acquisition will not focus on retail and that current management will be largely left to handle stores.

Coke is the biggest shareholder at Monster Beverage, a maker of energy drinks.

As well as hotels, its remaining Premier Inn business also runs the Brewers Fayre and Beefeater pub and restaurant brands.

Starbucks, Tim's and McCafe might soon have some new competition. Nestle has also delved into the coffee market, with its deal with Starbucks to market the U.S. coffee maker's packaged coffees and teas around the world closing on Tuesday (28 August).

Nestle and Starbucks agreed to a $7.2 billion global coffee alliance.

Outside of the retail cafes, Costa's true value may lie in its inherent synergies with Coke's existing businesses.

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