Whitbread obtained shareholder approval for its proposed sale of its coffee chain Costa to Coca-Cola for an enterprise value of £3.9 billion ($5.1 billion) at a general meeting held in London.
“There are aspects of the coffee market where there is growth including high-end brands, ready to drink brands, and the vending market,” Richard Clarke, equity analyst at Bernstein, tod CNBC.
Big, traditional food and beverage companies are under pressure to adapt to changing consumer preferences, for example, health and wellness, natural ingredients and high-end niche brands.
In 2018, PepsiCo announced plans to buy Sodastream for $3.2 billion, Nestle struck a $7 billion licensing deal with Starbucks, Italian coffee maker Lavazza agreed to acquire Mars Drinks business for around $650 million, according to Reuters sources, and most recently, Italian coffee maker Illy signed a licensing agreement with JAB Holdings.
Analysts highlight that the presence of activists in the sector is a contributing factor as well. Even if companies do not have activists on their shareholder register, the threat of attracting one is leading companies to proactively search for growth.
Investors argue that the attractiveness of coffee is driven by the scarcity of growing categories in the beverage space, of which coffee is one. While parts of the coffee market are arguably close to saturation, there are several areas that offer significant growth potential.
Whitbread shares are up 16 percent since the announcement of the sale on August 31.
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