GLOBAL: Coca-Cola’s acquisition of Costa Coffee marks a significant move by the soft drinks giant into the hot drinks sector and opens up new distribution options and faster overseas expansion for the out-of-home 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,” said James Quincey, president and chief executive of Coca-Cola. “Costa gives us access to this market through a strong coffee platform.”

Costa Coffee currently operates more than 3,800 coffee shops around the world, almost two thirds of which are in the UK, the remaining 1,400 being spread across 31 international markets. These are a mix of owned, franchised and joint-venture stores; there are also more than 8,000 Costa Express vending machines worldwide.

Coca-Cola is buying into a strong brand: YouGov data shows that Costa Coffee is by far the UK’s favourite coffee shop, as, faced with a choice, 36% of consumers would choose to visit one of its stores ahead of Starbucks (13%) or Caffè Nero (11%).

The £3.9bn ($5.1bn) acquisition gives Coca-Cola a strong foothold in the out-of-home coffee market and observers expect that it will move quickly to build on that.

Alison Brittain, chief executive of Whitbread, which currently owns Costa Coffee, told the BBC: “You could see Costa absolutely everywhere, in vending machines, hotels, restaurants, pubs, cafes – in all the places you see Coke today.”

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, told Retail Times that, in addition to reaching a wider audience through Coca-Cola’s well-established distribution network, “it also offers intriguing possibilities for the Costa name to appear in new formats, such as chilled variants”.

And Felicia Rosenzweig, Partner at brand and marketing consultancy Prophet, pointed to the potential for overseas growth.

“The combination of an international superbrand and the UK’s biggest coffee chain will ensure continued product development, greater market share and potentially enormous and rapid growth expansion overseas,” she said.

Rosenzweig also expected that Costa Coffee will “regain relevance” as a result of the acquisition; Costa fell from 88th in the 2016 Prophet Brand Relevance Index to 127th in 2017.

Sourced from Whitbread, BBC, Retail Times; additional content by WARC staff