Coffee chain brews plan to percolate into China
Whitebread, the leisure group, has signed a joint venture deal to develop its Costa coffee chain in China in the next stage of its strategy to turn the brand into a global competitor to Starbucks. Costa, which is already in 14 territories, including India and countries in the Middle East, plans to open more than 300 stores across China over the next five years in partnership with Yueda Group – a conglomerate with links to Carrefour, the French retailer, and Hyundai, the carmaker. The initial focus will be on Shanghai, where Costa will be based, and eastern China, with the first outlet due to open next year
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. Whitbread will invest £2 million in the first year, enough to support up to ten openings. Chinese regulations mean that it has had to take the joint venture route rather than sign a franchise deal. Costa, which has more than 450 stores in the UK and 100 overseas, is following the lead of Starbucks, the American coffee behemoth, which opened the first of its 150 Chinese stores, most of them in Shanghai and Beijing, a decade ago . The Costa chain has been one of Whitbread”s best-performing brands in recent years, a trend maintained in the first 13 weeks of the financial year to June 1. In a trading update, Whitbread said that Costa had delivered like-for-like growth of 6.5 per cent. The group as a whole reported like-for-like sales up 1.6 per cent – an improvement on last year”s small decline – helped by a return to growth from David Lloyd Leisure, which reported like-for-like sales up 2.1 per cent. Premier Travel Inn (PTI) was up 6.7 per cent, while high street restaurants were 1.9 per cent ahead. The laggard was its pub-restaurants division, comprising the Beefeater and Brewers Fayre brands, which declined by 2 per cent. The group recently announced plans to sell 235 of its standalone sites in order to focus on those next door to PTI lodges or with the capacity to have a PTI built next door. First-round bids for the pubs are due in this week, with Mitchells & Butlers, Wolverhampton & Dudley Breweries and GI Partners, the private equity firm, expected to lead the bidding. Robert Tchenguiz”s R20 is believed to have decided against making an offer. The healthy prices paid recently by GI Partners for 290 former Spirit Group pubs and by Greene King for Hardys & Hansons, the Nottingham brewer and pub operator, have prompted predictions that the Whitbread package could fetch as much as £500 million, a multiple of more than ten times earnings. Whitbread is also reviewing the future of its poorly performing Pizza Hut and TGI Friday”s brands, with a sale the most likely outcome. Analysts suggested that the sale of the pubs and restaurants would enable the group to return significant sums to shareholders on top of the £400 million already promised. Alan Parker, Whitbread”s chief executive, said that he was pleased with the improvement in performance seen in the first 13 weeks, although he admitted that the second quarter had started more slowly. He said that he remained “positive about the outcome for the year as a whole”.
Source: www.cofei.com
