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The Coca-Cola Company has announced it will acquire UK’s Costa Limited in a £3.9 billion ($5.1 billion) deal, according to a Coca-Cola press release. It’s a merger & acquisition (M&A) move that certainly shouldn’t surprise those in the logistics industry, as Coca-Cola has continually grown its beverage portfolio over the years through similar means.
Costa was founded in London but has retail outlets abroad. So, this acquisition will give Coca-Cola a “strong coffee platform across parts of Europe, Asia Pacific, Middle East, and Africa” (via the same press release). To note, the deal isn’t meant to close until sometime in 2019.
While the main impact of this acquisition is in the beverage industry, we also recognize there are some interesting logistics implications here. We explore those below.
The established brand has a wide array of popular beverage products spanning the globe and segments. It has its many versions of Coke in carbonated beverages. There’s Dasani in water. There’s also Simply in juices. And of course, there’s many more.
However, adding Costa to its brand roster accomplishes several things for Coca-Cola:
According to James Quincey, CEO of Coca-Cola, coffee is the fastest-growing beverage category, growing at 6% and valued at $500 billion. That represents a prime market for Coca-Cola to tap into and expand its supply chain footprint.
While Coca-Cola is a conglomerate with multiple verticals, it is primarily known for its manufacturing and production of beverage products. Acquiring Costa adds thousands of properties to its real estate portfolio and complexity to its distribution network.
Coca-Cola is clearly good at distribution already, but it will benefit from Costa’s focus on the coffee segment. Specifically, getting insight into the particulars of the hot beverage’s supply chain will lead to greater efficiencies. Costa has in-depth knowledge and expertise of coffee sourcing, vending, and distribution, among other areas in having 4,000+ retail outlets (2,400 in UK; 1,600 abroad). No surprise as to why it’s the leading coffee company in the UK, ahead of major competitor Starbucks.
As an unbiased coffee retailer, Costa previously stocked products from both Coca-Cola and Pepsi. Naturally, after Costa signs on with Coca-Cola, Pepsi products will no longer be welcome. And while Pepsi will continue distribution through Starbucks, the loss of Costa’s 4,000+ retail outlets still represent a significant blow to Pepsi’s EU supply chain and market presence.
There’s often a twist or two in these M&A deals, especially ones that involve established companies like Coca-Cola. It will be interesting to see what other aspects develop before the final closing next year.
Factum is a boutique consulting company with global expertise in the M&A space. We recognize that many companies are so focused on the legal and financial aspects of the deal that they neglect developing a strategy for the acquired company. That’s where we come in.
From human resource planning to implementing change programs, we help ensure your post-merger integration is seamless. Schedule a discovery call today to get strategic guidance on your impending M&A deal.
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