Costa Coffee are by far the biggest coffee shop brand in the UK, with over 2,200 stores across the country, as well as over 1,400 overseas stores across 31 international markets. Last week they officially announced plans to spin off the Costa Coffee brand from owners Whitbread PLC, who also own and operate Premier Inn hotels, and a string of restaurant brands such as Beefeater and Brewers Fayre.
Whitbread bought Costa Coffee from the brands founders Sergio and Bruno Costa back in 1995 and have turned it into the clear market leader in the UK, and the second biggest coffee brand in the world. Recent years have seen them make great strides to expand their international business, having purchased their Chinese venture partner last year.
The demerger announcement comes off the back of recent pressure from 2 activist investors, although Whitbread CEO Alison Brittain has stated that this only effected the timing of the announcement.
"It's not normal to announce something two years away and ordinarily we would have announced it next year for it to take effect in 2020," she said.
What does this mean for the brand?
While this is clearly big news for the brand and for the UK coffee industry in general, for the time being not a great deal is going to change. The split is not going to be completed for another 2 years so in the short term it looks like it will be business as usual for the coffee behemoths.
A 24 month process does seem like quite a long time, however there will be considerable work involved in separating functions that are joint throughout all of the Whitbread estate, such as IT and finance etc. Ms Brittain said of the timing:
“We have always said you wouldn’t sell your house at a time when you’ve got the roof off and you’re doing all the rewiring — and that is what we are doing at the moment.”
So while the future may look a little uncertain, the brand certainly aren’t going anywhere any time soon, and they are likely to continue their aggressive growth in the international markets while the demerger details are being discussed. Ultimately, it’s likely to result in a more valuable business for shareholders, but that will greatly depend on what happens over the next 2 years.