Coca-Cola has chosen to halt its plans to divest the Costa Coffee chain, a decision that comes after offers from private equity firms fell short of the company's expectations. This move marks the conclusion of a lengthy auction process that commenced several months ago.
According to a report from the Financial Times, Coca-Cola put discussions with the remaining bidders on hold in December. This decision follows initial reports from August that indicated Coca-Cola was collaborating with financial advisors to evaluate the potential sale of Costa Coffee, possibly at a price significantly lower than what they originally paid for the brand, which was about half of the £3.9 billion spent when they acquired it from Whitbread in 2018.
When Coca-Cola purchased Costa, it had high aspirations for the UK’s leading coffee retailer. However, since then, the chain has faced numerous challenges, including escalating costs—most notably a surge in coffee bean prices—and stiff competition within the UK market.
In light of these difficulties, Coca-Cola was reportedly seeking around £2 billion for Costa Coffee, which would have translated into a substantial loss for the company. Among the private equity firms that were in the later stages of negotiations to acquire Costa were TDR Capital, the parent company of Asda, and Bain Capital’s special situations fund, which manages brands like Gail’s Bakery and PizzaExpress. Earlier in the process, other firms such as Apollo, KKR, and Centurium Capital were also involved, with the entire auction being overseen by Lazard, an investment bank.
James Quincey, Coca-Cola’s outgoing CEO, who will transition to the role of executive chair at the end of March, previously expressed to investors that Costa Coffee had "not quite delivered" as anticipated and was "not aligning with our investment expectations."
Following Quincey’s departure, Henrique Braun, currently the chief operating officer, will take over leadership. Importantly, Coca-Cola has not entirely ruled out the possibility of selling Costa Coffee in the future.
Costa Coffee operates approximately 2,700 locations across the UK and Ireland. The chain has been under pressure from rising operational costs and competition from both upscale alternatives like Gail’s and independent cafes, alongside more budget-friendly options from chains such as Greggs and McDonald’s.
Founded in 1971 by Italian siblings Sergio and Bruno Costa, the coffee chain was sold to Whitbread in 1995 for £19 million. When Coca-Cola acquired Costa, Quincey noted that there were significant opportunities for creating value.
In its latest financial report, Costa generated revenues of £1.2 billion for the year 2024, reflecting a modest increase of only 1% compared to 2023. However, the company also reported a widening operating loss of £13.5 million, attributing this setback to "challenging conditions with low foot traffic and the emergence of value-driven competitors."
Both Coca-Cola and Costa Coffee have been approached for comments regarding this ongoing situation.
