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Britain's Costa Coffee eyes Paris high street

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(Globalpost/GlobalPost)

By Neil Maidment

LONDON (Reuters) - British hotel and coffee shop operator Whitbread <WTB.L> is on the hunt for high street stores in Paris as it looks to expand its ever-growing Costa Coffee chain into France.

Costa has grown rapidly in Britain to 1,500 outlets as demand grows for coffee on the go, and is set on increasing that to 3,500 globally by 2016, with a 500-store target in China a big focus.

Some analysts warn, however, that expanding in China through joint ventures may not yield big profits for some time and that greater exposure to developed European markets could offer bigger rewards and complement growth in an increasingly competitive British market.

U.S. rival Starbucks <SBUX.O> has already opened dozens of outlets in France in an attempt to compete with the thousands of family-run cafes along boulevards in Paris and other cities.

Costa has been running stores at travel hubs in Spain, Portugal and at the Gare de Lyon rail station in Paris to help gauge further interest in the brand. In February it said early signs were "very encouraging".

It is now on the hunt for central Paris outlets, according to an advertisement seen by Reuters from property agent Harper Dennis Hobbs, which is looking for shops for Costa on busy high streets in the French capital.

Harper Dennis Hobbs and Whitbread both declined to comment. A spokeswoman for Whitbread said it would open a Costa store at Nice airport in southeast France by the end of April.

Costa, which also has vending machine and wholesale offerings, has over 900 outlets overseas, mainly via franchises, in around 25 countries such as Poland, India and Saudi Arabia. China is its second-biggest market, with 250 outlets.

"While higher risk, there could be a bigger profit pool in, say, France and Germany than in China," Morgan Stanley analysts said in a recent note.

They said Costa was already generating around 80 million pounds ($122.13 million) in earnings before interest and tax at British retail stores, which was around 10 times what it might make in China in three to five years.

Whitbread, which also runs British hotel chain Premier Inn and the Beefeater and Brewers Fayre pub restaurant chains, makes almost all of its 1.8 billion pound annual revenue in its home market, with Costa generating around 30 percent of the total.

Shares in the company, which will post its preliminary results next Tuesday, have risen 39 percent in a year.

(Editing by Tom Pfeiffer)

http://www.globalpost.com/dispatch/news/thomson-reuters/130424/britains-costa-coffee-eyes-paris-high-street