Whitbread goes for organic growth

Whitbread plc emerged as one of the clear winners during the recent recession in the UK and it appears to be putting its competitive advantages to good use by announcing an acceleration of its internal (or “organic”) growth strategy. This is a terrific case study on growth to use with students - it covers so many specification areas and is especially useful for AQA BUSS4 students who need to gather some evidence-based research data for their Section B essays.

This article in the Guardian provides a neat background to Whitbread’s announcement about a more aggressive growth programme post recession. The announcement is covered here too, albeit briefly, on the BBC website.

Students wanting to get into more detail ought to visit the investor relations section of the Whitbread website. I picked up a particularly useful series of research bullet points which outline Whitbread’s short and medium/long-term objectives for its two main brands - Premier Inn and Costa Coffee. These are as follows:

Short-term objectives: 2011/12 Growth Plans
o Premier Inn to grow number of UK rooms by approximately 9% (around 4,000 additional rooms and 14 new restaurants)
o Costa to grow number of stores by approximately 15% (around 300 new stores)
o Around 2,500 new jobs to be created in the UK

Medium-term objectives: New five year growth milestones
o Premier Inn to accelerate growth and increase its UK capacity by 50% to at least 65,000 rooms, with a committed pipeline of 10,500 rooms
o Costa to double to 3,500 stores worldwide and £1.3 billion system sales
o Costa Express (the rebranded Coffee Nation) to be expanded to 3,000 units

Students who who have followed Whitbread recently will recall the acquisition of Coffee Nation for £59.5 million - a good example of how internal and external growth strategies can work hand-in-hand.

Lots of potential for students to analyse and evaluate whether Whitbread are likely to achieve their short and medium-term growth targets. What factors will their success depend on? Certainly the economic environment will be one significant factor, although Whitbread managed to weather the global economic downturn better than most.

I suspect that the competitor response will be the most significant factor. Costa Coffee, for example, is locked in battle with Starbucks as they both attempt to grow their share of the the coffee shop market in emerging economies.