Wednesday 18 July 2018

Whitbread pays €39m to seize control of its Costa venture in China

Credit: Joe Giddens/PA Wire
Credit: Joe Giddens/PA Wire

Ravender Sembhy

Whitbread has paid £35m (€39m) to seize full control of its Costa Coffee joint venture in China.

Costa currently owns 51pc of the joint venture, which operates 252 stores in the Asian powerhouse, and the new deal will see it acquire the remaining 49pc from its partner Yueda.

Whitbread boss Alison Brittain said the move was part of the firm's plan to grow internationally, singling out China in particular as coffee culture becomes more popular in the country.

"The coffee shop market in China is highly attractive, with a compelling opportunity for Costa to grow its presence over the longer term.

"This acquisition gives us full strategic and funding flexibility to unlock Costa's potential in China, providing a strong platform to facilitate future growth, enhance the customer experience and make Costa the coffee shop of choice in this fast-growing market," she said.

Whitbread added that its other joint venture in China, with BHG in the north of the country, remains unaffected.

Whitbread, which also owns Premier Inn and Beefeater, revealed a slowdown in sales growth at its coffee shops in a June trading update.

The group said like-for-like Costa sales grew by 1.1pc in the first quarter to 1 June, down from 2pc growth in the previous year.

Analysts at Morgan Stanley said of the China deal: "Costa China has been honing its customer proposition since we saw management a year ago.

"It is trying to focus on a somewhat different offer to Starbucks: handmade coffee rather than push-button, a British heritage (although this seems to have been tamed down somewhat), and well-invested stores (trendy, modern, stylish, with trials of its 'Hothouse project')."

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