Costa is to be demerged from the Premier Inns business and become listed as a separate company within the next two years.

Owner Whitbread today (25 April) confirmed a demerger would be pursued “as fast as practical and appropriate to optimise value for shareholders”.

The company said it had developed Costa into the UK’s clear leader in the out-of-home coffee market, and had made improvements in product innovation and digital capability.

According to British Baker research, Costa grew by 358 sites in 2017, making it the largest bakery/coffee shop operator in the UK, ahead of Subway and Greggs.

The Whitbread board said it was confident that both Premier Inn and Costa would soon be businesses of sufficient strength, scale and capability to enable them to thrive as independent companies. It added that the 24-month time frame would enable it to:

  • complete complex and critical IT and business system upgrades and improvement programmes
  • deliver a recently upgraded efficiency programme that would offset a “significant proportion” of industry inflation and minimise disruption to trading and product innovation, particularly in the UK
  • further develop the international strategies in both Premier Inn and Costa
  • manage the Whitbread pension fund deficit and funding facilities, and ensuring Whitbread and Costa had appropriate governance structures in place as separate entities.

“A separation will provide enhanced focus for each business and give shareholders an investment in two high-quality businesses,” said Whitbread chairman Adam Crozier.

“We will ensure that prior to separation each business is sufficiently developed and well-positioned to take advantage of the structural growth opportunities available to them in the UK and internationally.

“The team will now also be focused on ensuring the demerger of Costa is conducted as fast as practical and appropriate to optimise value for Whitbread’s shareholders.”

Whitbread chief executive officer Alison Brittain said the company had made “tremendous progress in innovation and growth in our core UK businesses”.

“Costa will become a listed entity in its own right and the clear market leader in the out-of-home coffee market in the UK. Costa will also be well positioned to build further on its strong international foundations, with growth expected in China and Costa Express.”