Coca-Cola may sell Costa Coffee, 6 years after £3.9B acquisition
What's the story
Coca-Cola is considering selling Costa Coffee, the UK's largest high street coffee chain. The move comes more than six years after the Atlanta-based soft drinks giant acquired the business in a £3.9 billion deal in 2018. The company has hired Lazard, an investment bank, to explore options for the business and assess interest from potential buyers.
Sale talks
Sale not guaranteed as Coca-Cola weighs options
Initial discussions have already been held with a select few potential buyers, including private equity firms. Indicative offers are expected in early autumn. However, it's worth noting that Coca-Cola may still choose not to go ahead with the sale of Costa Coffee. The chain operates over 2,000 stores in the UK and more than 3,000 globally.
Financial implications
Potential multibillion-pound loss on original acquisition cost
Analysts have suggested that a sale of Costa Coffee could lead to a multibillion-pound loss on the original £3.9 billion acquisition cost. One analyst even speculated that Costa Coffee could now be worth just £2 billion in a sale process. However, the proceeds from such a disposal would not significantly impact Coca-Cola, which had a market capitalization of $304.2 billion (£224.9 billion) at Friday's closing share price.
Business performance
Costa's revenues since Coca-Cola acquisition
Since Coca-Cola acquired Costa Coffee in 2018, the chain has struggled to match its pre-acquisition revenue. In 2023, it recorded revenues of £1.22 billion, a 9% increase from the previous year but still below the £1.3 billion recorded in 2018. Despite these challenges, Costa has paid over £250 million in dividends to its owner since the acquisition.
Strategic move
Global expansion of Costa Coffee under Coca-Cola
When Coca-Cola acquired Costa Coffee, CEO James Quincey said it would give the company new capabilities in coffee and open up opportunities to grow the brand worldwide. He noted that hot beverages were one of the few segments where Coca-Cola didn't have a global brand. Costa Coffee now operates in dozens of countries, including India, Japan, Mexico, and Poland.