Whitbread PLC (LON:WTB) has been slimming down its operations gradually since 2000 when it ended its 258-year history of brewing in the UK with the sale of its beer operations.
In the latest move to trim down the business, the company is the process of selling its Costa Coffee business to The Coca-Cola Co (NYSE:KO) for £3.9bn.
The deal will leave Whitbread with the Premier Inn hotel business and a handful of restaurant chains including Beefeater, Thyme, Table Table and Brewers Fayre.
READ: Whitbread shares froth higher as it agrees to sell Costa coffee to Coca-Cola for £3.9bn
Looking back at Whitbread’s history, the company has evolved considerably since its inception.
The beginnings of Whitbread
Whitbread was founded by Samuel Whitbread who created the first purpose-built mass production brewery in the UK in the mid-1700s. In 1868, the company introduced bottling of beer, to become a national brand.
A century later, the company opened its first Beefeater and Travel Inn in 1974 and 1987 respectively.
A period of acquisitions
In the 1990s, it expanded the business with a raft of acquisitions, including David Lloyd Leisure, Marriott Hotels, TGI Fridays, Pizza Hut and Premier Lodge hotels.
Five years later, it bought Costa from Sergio and Bruno Costa in 1995 for £19mln.
A period of disposals
By 2000, Whitbread had decided to reduce its operations with the sale of its beer operations for £400mln to Interbrew, the Belgian owner of Stella Artois.
Since then, it has also sold Marriott Hotels, Pizza Hut, David Lloyd Leisure, TGI Fridays and Premier Lodge hotels.
Costa's growth story
Costa had just 39 shops in the UK when Whitbread took over the business. It now has more than 2,400 shops in the UK and more than 1,400 shops in 31 global markets, thanks to a booming global café market that is now worth about US$165bn.
While Whitbread is selling Costa at an undeniably rich valuation, the brand has long been the star performer of the group, so some investors may miss the caffeine hit it provides.
Nevertheless, the company's share price has responded positively to the deal with Coca-Cola, having risen 15% since announcing the deal.
Once it completes the deal to offload Costa, what remains of Whitbread is essentially just Premier Inn, bar a few restaurant brands.
Whitbread under pressure to boost Premier Inn performance
The pressure is now on Whitbread to deliver improved returns from Premier Inn. The group’s plan is to use the proceeds of the Costa sale to expand Premier Inn in the UK and Germany with a target of adding 4,000 to 4,500 rooms this year.
The most recent trading statement from Whitbread showed Premier Inn sales grew by 4.3% in the first quarter but this was driven by the 4,198 rooms that opened over the last 12 months.
On a like-for-like basis, sales were flat, but an unusually hot summer could have helped improve sales as more Britons decided to stay at home, rather than go abroad.