Coca-Cola has reportedly abandoned plans to sell its Costa Coffee chain after bids from private equity firms failed to meet its expectations.
The US soft drinks company halted discussions with remaining bidders in December, according to the Financial Times, ending a months-long auction process.
It first emerged in August that Coca-Cola was working with bankers on a review of Costa that could lead to the chain being sold off in a cut-price deal, of roughly half what it paid for the business.
Coca-Cola had high hopes for Britain’s largest coffee chain when it bought it for £3.9bn in 2018 from Whitbread, the owner of Premier Inn hotels.
However, since then the chain has struggled in the face of rising costs, particularly the rise in coffee bean prices, and competition on UK high streets.
As a result, Coca-Cola was reportedly seeking about £2bn for Costa, which would have resulted in it realising a multibillion-pound loss.
The companies in the latter stages of talks to buy Costa included Asda’s owner, TDR Capital, and Bain Capital’s special situations fund, which owns Gail’s Bakery and PizzaExpress, according to the FT. The newspaper added that the private equity firms Apollo, KKR and Centurium Capital were involved earlier in the auction process, which was handled by the investment bank Lazard.
Coca-Cola’s outgoing chief executive, James Quincey, who will move to become the company’s executive chair at the end of March, previously told investors that Costa had “not quite delivered” for the soft drinks company and was “not where we wanted it to be from an investment hypothesis point of view”.
Quincey will be succeeded by Coca-Cola’s chief operating officer, Henrique Braun, and the company has reportedly not definitively ruled out selling Costa in the future.
Costa, which has about 2,700 outlets across the UK and Ireland, has been squeezed by rising costs and faced competition from upmarket rivals such as Gail’s and independent coffee shops, as well as cheaper offerings from the likes of Greggs and McDonald’s.
The coffee chain was founded in 1971 by Italian brothers, Sergio and Bruno Costa, and sold to Whitbread in 1995 for £19m. When Coca-Cola bought the business, Quincey said there were “great opportunities for value creation”.
Costa made revenues of £1.2bn in its 2024 financial year, according to its most recent annual accounts filed at Companies House, only 1% higher than in 2023. However, its operating losses widened from a year earlier to £13.5m, which the company blamed on “challenging conditions with soft footfall and growth of value-led competitors”.
Coca-Cola and Costa Coffee were approached for comment.
