Coca-Cola does not plan to sell Costa Coffee anymore
What's the story
Coca-Cola has reportedly called off its plans to sell the Costa Coffee chain. The decision comes after bids from private equity firms fell short of the company's £2 billion sale expectations, Financial Times reported. The US soft drinks giant had earlier engaged in discussions with potential buyers as part of an auction process that started in August last year.
Acquisition details
Coca-Cola's journey with Costa Coffee since 2018
Coca-Cola had high hopes for Costa Coffee when it acquired the chain from Whitbread, owner of Premier Inn hotels, for £3.9 billion in 2018. However, the coffee chain has struggled in recent years due to rising costs and stiff competition on UK high streets. The company was reportedly looking at a sale price of around £2 billion for Costa, which would have meant a multibillion-pound loss.
Market competition
Potential buyers and future prospects
The final bidders for Costa included TDR Capital, owner of Asda, and Bain Capital's special situations fund. Other private equity firms such as Apollo, KKR, and Centurium Capital were also in the running. Despite the sale talks, Coca-Cola's outgoing CEO James Quincey had previously said that Costa had "not quite delivered" for the company. Coca-Cola has reportedly not definitively ruled out a future sale of Costa Coffee, even as Henrique Braun takes over as CEO from March-end.
Revenue report
Costa Coffee's financial performance and market challenges
Costa Coffee, which operates around 2,700 outlets in the UK and Ireland, has been struggling with rising costs and competition from premium brands like Gail's and value-led competitors such as Greggs and McDonald's. The chain generated revenues of £1.2 billion in its last fiscal year (2024), a mere 1% increase from 2023. However, it also reported widened operating losses of £13.5 million due to "challenging conditions with soft footfall and growth of value-led competitors."