Froth on the beer versus froth on the coffee?
A short BBC video on Whitbread’s huge strategic shift from brewing to retailing coffee and budget hotels.
Whitbread abandoned beer brewing and pub retailing and off licence sales, an industry in which had been a significant presence since 1742. By 2001, the sector had low profits growth and declining sales. Capital has been diverted into areas with higher growth coffee shops and budget hotels. Whitbread’s main brands include Costa Coffee, Premier Inns.
The firm’s history goes back to 1742 when Samuel Whitbread established a brewery, 8 years later a largest breweries was established in Chiswell Street, in London.
Since the firm’s exit from brewing in 2001, it has been involved in a series of asset sales and acquisitions. In 2007 Whitbread sold David Lloyd Fitness Centres for £925m. Mitchells and Butlers paid c.£500m to purchase 239 pub restaurants from Whitbread in 2006. The disposal of its 50% stake in PizzaHut’s UK operations realised £112m. The sale of the TGI Friday’s franchise brought in £70.4m., Whitbread also raised £117m from its 23.75% stake in the Britvic soft drinks company.
Whitbread used the capital to lower its debts,and to fund investment in Costa Coffee and Premier Inns. The firm’s mission statement harks back to
links with Samuel Whitbread. “Although our core businesses have changed, we remain true to Samuel’s founding spirit by genuinely focusing on our customers, striving for the best and recognising that progress comes from innovative thinking.”
In 2011 Whitbread bought up Coffee Nation which ran self service coffee machines at motorway service stations and airports, to complement its Costa Coffee operations. Given the low economic growth and falling real incomes in the UK, the Whitbread group has invested heavily in operations in China, opening 71 new stores in China. The Chinese market may offer great opportunties for sales and profit growth as incomes rise.
Whitbread is a good example of a firm which has reinvented itself, but it is pertinent to ask if a period of organic growth and consolidation might be preferable to growth through acquisitions and disposals.
Join Graham Prior and Jim Riley for a resource-packed CPD day which will help you accelerate your planning and lesson preparation for the new AQA A Level Business. We've packed this day with resources to help teach the new spec content. We also consider how best to approach the challenges of a linear Business course.
Teaching & learning products
Worked A Grade answers to recent AQA GCSE Business Studies Unit 1 exam papers together with detailed examiner commentary