From an India perspective, Coca-Cola is likely to rejuvenate the brand, according to industry sources, as it looks to consolidate its presence in the Rs20 billion domestic coffee retail market, which is growing at 11-12 per cent per annum.
“The acquisition will help scale up Costa, as Coca-Cola is a large player here and has a good understanding of the Indian market and consumer. Coca-Cola, of course, will diversify into healthier drinks with the acquisition, something it is already doing. The company will also get access to distribution channels (via retail stores of Costa) through the transaction.
This way it can push its own portfolio of products,” said Abneesh Roy, senior vice-president, research (institutional equities), Edelweiss.
Global majors such as Starbucks and McCafe (from McDonald’s) have a headstart in the domestic market with over 124 and 150 stores, respectively, in the country, competing with homegrown players such as Café Coffee Day, which has over 1,700 stores.
Costa Coffee, which has been in India for nearly a decade and a half, has around 100 stores, run by Ravi Jaipuria’s Devyani International under a franchisee agreement with the previous owner of Costa (Whitbread).
Coca-Cola, industry sources say, could renegotiate new terms with Costa’s existing franchisee partners (including Jaipuria in India) or may even buy out the franchisee’s interest altogether in the venture, depending on how the original deal (between Whitbread and the franchisee) has been structured. Jaipuria was not immediately available for comment.
In 2014, Costa and Jaipuria were close to terminating their “exclusive” franchisee agreement after the latter declined committing more investment into the business.