Business Growth - Costa Looks East

Here is a really interesting example of external growth through horizontal integration with a highly successful UK drink and leisure business seeing expansion opportunities in Central and Eastern Europe. Costa is paying £36million for Coffee Heaven a business that has 90 coffee shops in Central and Eastern Europe, comprising 62 shops in Poland, 14 in the Czech Republic and 14 across Bulgaria, Hungary and Latvia.

Costa has more than 1,000 stores in the UK and more than 400 internationally and its stores account for around 25 per cent of Whitbread’s total revenues. All its international stores are operated under franchise. Costa is a wholly-owned unit of Whitbread, the U.K.‘s largest hotel and restaurant company operating brands in the budget hotel, restaurant and coffee shop sectors, whose brands include Premier Inn, Beefeater and Brewers Fayre. Premier Inn is the key part of this business - its fortunes essentially drive the company’s share price.

2010-11 should see a number of CEEC countries emerge from a turbulent and difficult macroeconomic period. And as per capita incomes rise, the potential for growth of market demand in high street coffee stores in many of the EU’s new member states ought to be high. That said Coffeeheaven has made net losses in each of the last seven years - Costa will be hoping that its greater financial resources and economies of scale will help to bring the business back into profitability. Whitbread has an annual capital spending in excess of £300million, so the £36million paid for Coffee Heaven looks small in comparison.

Unit 2 Macro: Positive and Negative Multiplier Effects [20 May 2012]
Unit 2 Macro: The Importance of Productivity [20 May 2012]
Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
Unit 2 Macro: Model answer for revision data question [9 May 2012]
Tullow Oil and African Development [25 Apr 2012]
Unit 4 Macro: The Euro Zone Crisis (Revision) [22 Apr 2012]
Unit 3 Micro: Quiz on Business Costs and Profits [11 Apr 2012]
Unit 3 Micro: Evaluation Question on Supermarkets [11 Apr 2012]
Unit 3 Micro: Revision on Monopoly Price and Output [6 Apr 2012]
Unit 3 Micro: Monopoly and Economic Welfare [6 Apr 2012]
Unit 1 Micro: Revision on Price Elasticity of Supply [5 Apr 2012]
Unit 3 Micro: Revision on Takeovers and Mergers [3 Apr 2012]
Unit 1 Micro: Revision on Producer Subsidies [2 Apr 2012]
Unit 1 Micro: Nottingham introduces workplace parking tax [1 Apr 2012]
Unit 2 Macro: Revision on Capital Investment [30 Mar 2012]
Unit 3 Micro: EU Imposes Further Price Cap on Mobile Phone Companies [29 Mar 2012]
Unit 4 Macro: Evaluating 3 Years of Quantitative Easing [27 Mar 2012]
Unit 1 Micro: Breaking Down the Cost of Gas [4 Mar 2012]
Unit 1 Micro: Public Goods [11 Feb 2012]
Unit 1 Micro: Can the UK Computer Games Industry Grow [24 Jan 2012]
Unit 2 Macro: Factors Driving Business Investment [10 Jan 2012]
2012 - Carnage on the High Street [28 Dec 2011]
Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry [21 Dec 2011]
Unit 3 Micro: Patent Wars- A Touchy Subject for Apple [16 Dec 2011]
Unit 3 Micro: Brand Loyalty in Mobile Phones [27 Nov 2011]
Unit 2 Macro: Should the EU introduce a Tobin Tax? [14 Nov 2011]
AS Macro: The State of British Business [13 Nov 2011]
Unit 3 Micro: UK Executive Pay - All in it Together? [29 Oct 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Another Economics prop - for remembering MC=MR! [15 Sep 2011]
Unit 1 Micro: Cotton Prices and the Retail Price of Clothing [13 Jul 2011]
Unit 1 Micro: Economics of Volatile Corn Prices [12 Jul 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
Unit 3 Micro: Oligopsony - Dairy Losses Drive Farmers from the Fields [10 Jul 2011]
Where there’s muck there’s brass [6 Jul 2011]
AS Macro Key Term: Demand Pull Inflation [24 May 2011]
AS Macro Key Term: Cost Push Inflation [24 May 2011]
AS Macro Key Term: Recession [23 May 2011]
AS Macro Key Term: Spare Capacity [23 May 2011]
A2 Micro: Competition Policy [20 May 2011]
A2 Micro: Oligopoly and Collusion [20 May 2011]
A2 Micro: Oligopoly [20 May 2011]
A2 Micro: Price Discrimination [19 May 2011]
A2 Micro: Entry Barriers in Markets [19 May 2011]
Unit 3 Micro: Monopsony Power in Markets [19 May 2011]
A2 Micro: The Importance of Profit [19 May 2011]
A2 Micro: High and Low Marginal Cost Products [19 May 2011]
A2 Micro: Consequences of Price Discrimination [19 May 2011]
A2 Micro: Examples of Price Discrimination [19 May 2011]
Unit 3 Micro: Perfect Competition [19 May 2011]
A2 Micro: Competition and Efficiency [19 May 2011]
A2 Micro: Outsourcing [18 May 2011]
A2 Micro: Business Growth [18 May 2011]
A2 Micro: Innovation and Economic Policies [18 May 2011]
A2 Micro: Innovation Efficiency and Welfare [18 May 2011]
A2 Micro: Moving Away from Profit Max [18 May 2011]
A2 Micro: Minimum Efficient Scale [18 May 2011]
A2 Micro: Economies of Scope [18 May 2011]
AS and A2 Macro Revision: Keynesian Economics [28 Apr 2011]
A2 Micro: EU Aviation - State Aid and State Ownership [28 Apr 2011]
Wiki Revision: A to Z on Monopoly [23 Apr 2011]
A2 Micro: Changes in Costs and Profits [23 Apr 2011]
Rise in investment could kick start recovery [18 Apr 2011]
Key AS Micro Terms: Competition and Monopoly [17 Apr 2011]
Key AS Micro Terms: Costs and Profits [16 Apr 2011]
Smartphones and Creative Destruction [16 Apr 2011]
AS Micro Revision: Banana Prices [1 Apr 2011]
AS Macro Revision: Investment Spending [12 Mar 2011]
Tenner Tycoon - enterprise competition [7 Mar 2011]
Economics Q&A: What factors help to explain rising food prices? [14 Feb 2011]
Shared Value and the Limitations of CSR [12 Feb 2011]
Shorting the market - the vultures target HMV [23 Jan 2011]
Economics Q&A: Can economics provide answers to the crisis of collapsing stocks in global fishing? [19 Jan 2011]
Tesco - Time to start a price war! [19 Jan 2011]
Economics Q&A: How might rising food prices affect food retailers and manufacturers in the UK? [16 Jan 2011]
Economics Q&A: What are some of the benefits and drawbacks of a period of rising world food prices [4 Jan 2011]
Heinz Means Strikes [29 Dec 2010]
HMV on the brink? [9 Dec 2010]
Growth and Strategy at Domino’s Pizza [27 Nov 2010]
Energy Oligopoly - Price Investigation is Launched [26 Nov 2010]
Using Google Docs - A2 Applied Micro on Collusion [21 Nov 2010]
Experimenting with Google Docs - the Rise of a Digital Conglomerate [8 Nov 2010]
The Market for Potash [30 Oct 2010]
A2 Micro: Monopoly Price and Output [28 Oct 2010]
Asia Rising - Thai Car Exports Speeds Up Growth [27 Oct 2010]
The Business Objectives of Mark Zuckerberg [25 Oct 2010]
Departing from pure profit maximisation [14 Oct 2010]
CEO admits biggest mistake in corporate history! [29 Sep 2010]
Student View: Takeovers and Mergers and Shareholder Value [27 Sep 2010]
External Growth - Google’s Acquisition Boom [21 Sep 2010]
Market implications of creating the world’s biggest airline [19 Sep 2010]
Some videos on business integration [13 Sep 2010]
Potash - a battle for grey dust that has become gold dust [26 Aug 2010]
Cocoa Economics [30 Jul 2010]
Unit 2 Macro: How can supply-side policies help in a recession? [6 Jun 2010]
Australia divided on a mining super-tax [4 Jun 2010]
AS Macro Revision: Cyclical unemployment [2 Jun 2010]
AS Macro Revision: Cost Push Inflation [31 May 2010]
Sterling and Exports - The Importance of Time Lags [29 May 2010]
AS Macro: Sterling and the UK Economy [29 May 2010]

ECONOMICS TEACHER RESOURCE NEWSLETTER

Join over 6,000 other Economics Teachers in the UK and around the world who receive the tutor2u regular Economics Resource Email Newsletter. Get special offers, first news of latest resources, teaching ideas, conferences and workshops + loads of great ideas for teaching economics from our blog authors.