Whitbread (LON:WTB) , the hotel and restaurant group, said today that its fast growing Costa Coffee chain was acquiring Coffee Nation for £59.5m in cash. The group is now planning to launch a new brand, Costa Express which will target the self-serve coffee bar sector. The news came as Whitbread reported that like-for-like sales at Costa had grown by 7.9% in the 50 weeks to February 17. An aggressive expansion campaign, which will see and additional 300 new stores in 2010/11, helped drive up total sales by 28.5%.

Costa is the UK’s largest and fastest-growing coffee shop brand with over 1,850 stores, 1,200 in the UK and a further 650 internationally. The acquisition of Coffee Nation gives it access to new types of location and creates a growth opportunity in the UK’s emerging self-serve coffee bar sector, which currently comprises approximately 2,000 units. Coffee Nation operates 900 of those units and counts Tesco and motorway services operators Moto and Welcome Break among its customers. Costa will use the purchase of Coffee Nation to develop Costa Express and is targeting 3,000 bars across the UK over the next five years, capable of quadrupling its profit contribution. This is in addition to Costa's continuing rapid growth of its store network.

Andy Harrison, the chief executive of Whitbread, said: “Customers increasingly want great tasting coffee on the go, which makes the self-serve coffee market very attractive. This acquisition provides an exciting launch pad to develop 3,000 Costa Express bars across the UK, providing an additional growth lever for the Costa brand and making Costa available to more customers in more locations.”

Elsewhere in its sales update today, Whitbread reported an 8.8% rise in like-for-like revenues from its Premier Inn hotel chain and a 3.3% rise in sales from its restaurants business. Overall like-for-like sales across the group grew by 6.7%, with total sales up 13.7%. The Whitebread share price fell by 4.5% to 1,656p.

Mr Harrison said: “Whitbread continues to perform well with total sales in the last 11 weeks up 12.4%. Our like for like sales are good especially in a challenging economic environment and against tougher comparatives. We anticipate that the outturn for the year will be in line with market expectations, demonstrating strong profit growth. Whilst it is premature to judge the trajectory of the UK consumer economy…

Unlock the rest of this article with a 14 day trial

Already have an account?
Login here