Alison Brittain admitted that Coca-Cola had not been the only interested party to make an approach after the demerger announcement. “We’ve had lots of suitors, none of whom have been handsome enough for us to be interested. We weren’t interested in selling to a financial-type player that would just take our plan and run with it and provide no more value. We were only interested in strategic buyers who would create additional value and allow us to share in that value — and that’s precisely what we’ve got.”
She said that as well as being an excellent deal for both Whitbread and Coca-Cola, it was a great deal for Costa. “A UK company that started with 39 stores in the southeast when we bought it for £19 million is going to become a global giant,” she said.
The coffee chain was founded in 1971 by the brothers Bruno and Sergio Costa when they set up a roastery in Lambeth, south London. They opened their first coffee shop in Vauxhall seven years later and sold it to Whitbread in 1995.
Today Costa is the world’s second biggest coffee shop operator behind Starbucks, with more than 2,400 stores in the UK and about 1,400 in 30 international markets, notably China and Poland. It also operates more than 8,000 Costa Express self-service machines.
Its rise to the clear No 1 in the British coffee market, ahead of Starbucks and Caffè Nero, is partly a result of its strategy of franchising in a wide range of locations as well as owning its own stores, such that 43 per cent of its UK stores are run by franchisees. It also has avoided the travails that afflicted Starbucks a few years ago, causing it to close some outlets, while generally it has come out ahead of its American rival in consumer taste tests.
Costa’s trading performance has come off the boil slightly in recent times amid fragile consumer confidence in the wider retail sector and rising costs, and there have been fears that the domestic market is becoming saturated. Yet it has continued to expand, reporting revenues last year of £1.29 billion, underlying earnings of £238 million and operating profits of £123 million.
Analysts have suggested that once the Costa sale goes through in the first half of next year, the slimmed-down Whitbread, consisting of Premier Inn and about 400 pub-restaurants next to hotels, also could elicit bid interest, from both trade players and property investors eyeing its £5.4 billion of assets.
Ms Brittain dismissed the suggestion that Whitbread was bound to receive bid interest as “entirely speculation”, and added that its investors were happy with the asset-rich strategy. “We’ve got enormous support from our shareholder base for the way we operate the company. It’s a very unique model, which is why it’s successful.”
Richard Baker, a former Whitbread chairman, said that the sale of Costa to Coca-Cola was a “wonderful deal” for both parties. He said that there had been a risk that a demerger might not have created much upside in the value of the two separate entities, possibly leaving both vulnerable. However, the cash from the Costa sale would provide Whitbread with the opportunity to “do more things with Premier Inn”, possibly enabling it to look at acquisitions in sectors such as serviced apartments and student accommodation.
Ms Brittain also raised the tantalising prospect that Whitbread could repeat the Costa success story with Pure, a London-based chain of 15 healthy eating fast-food stores. It acquired a 49 per cent stake two years ago for £6.8 million and has an option to buy it out within the next three years. She said Pure’s position was “not dissimilar” to Costa when Whitbread bought it and represented “another great growth opportunity”.
Profile: Alison Brittain
From the moment Alison Brittain took the reins at Whitbread, she did not duck the issue of a demerger (Dominic Walsh writes). Unlike Andy Harrison, her predecessor, she acknowledged that it was one of the key strategic issues that the company faced and made clear that she and the board were “open-minded”.
From the moment Alison Brittain took the reins at Whitbread, she did not duck the issue of a demerger (Dominic Walsh writes). Unlike Andy Harrison, her predecessor, she acknowledged that it was one of the key strategic issues that the company faced and made clear that she and the board were “open-minded”.
Such pragmatism has been a feature of her rise to the top of a FTSE 100 company, one of only a handful of women to do so. She started out on the Barclays graduate training programme in 1987 after her time at the University of Stirling. After 20 years there, Ms Brittain, 53, joined Santander UK, becoming the executive director for retail distribution.
In 2011, she joined Lloyds Banking Group as head of its retail division before being plucked from the banking world to become the boss of Whitbread in 2015.
Her tenure has coincided with a more challenging trading backdrop, amid rising costs and fragile consumer confidence. But the mother of two, and the 2017 Veuve Clicquot business woman of year, has, in the words of one analyst, “rolled up her sleeves and got on with it”.
Profile: James Quincey
Like Henry Cavill playing Superman, or Steve Easterbrook running McDonald’s, James Quincey is a Briton in charge of an American institution (Tabby Kinder writes).
Like Henry Cavill playing Superman, or Steve Easterbrook running McDonald’s, James Quincey is a Briton in charge of an American institution (Tabby Kinder writes).
Mr Quincey was born in London in 1965 and studied at Liverpool University, before joining Coca-Cola in 1996. He worked his way up the ranks of the fizzy drinks company, including jobs in Buenos Aires and Mexico City, and was appointed president of northwest Europe and Nordics in 2008. Five years later Mr Quincey became head of Europe before being promoted to chief operating officer. He became president and chief executive in 2017.
Mr Quincey took over with a plan to drive forward a cultural revolution that would shake up Coca-Cola. Described as a “denim-wearing, call me James type”, he has a ruthless side. Mr Quincey, 53, has axed 1,200 corporate jobs since becoming boss, or 20 per cent its head office staff.
However, he also has introduced a casual dress code at its Atlanta headquarters as part of his shake-up.
