Coca-Cola abandons Costa Coffee sale plans as Asda owner bids low
US beverage giant Coca-Cola has reportedly scrapped plans to sell the world’s second-largest coffee chain after offers from private equity firms came in below expectations.
The company brought talks with remaining bidders for Costa Coffee to a halt in December, ending an auction process which had lasted several months, according to the Financial Times.
Sources familiar with the matter said private equity firms in the latter round of negotiations included Asda owner TDR Capital and Bain Capital Special Situations, owner of bakery chain Gails and Pizza Express.
Private equity firms Apollo, KKR and Centurium Capital, owner of China’s Luckin Coffee Chain were also reportedly involved in the early stages of discussions, which was handled by Lazard.
Coca-Cola had been seeking roughly £2bn for Costa, nearly half of the £3.9bn it paid to acquire the UK’s largest coffee chain for Premier Inn owner Whitbread in 2018.
Talks over a deal with TDR would have seen the beverage company retain a minority stake in Costa.
One person familiar with Coke’s thinking told the Financial Times that the company would revive plans to sell Costa in the medium term.
Costa struggles with costs
The decision to end efforts to find a buyer for Costa, which boasts 2,700 branches across the UK and Ireland, comes as Coke’s chief operating officer, Henrique Braun, prepares to replace James Quincey as chief executive in March.
Quincey, who admitted to analysts last summer that Costa had “not delivered” for the company will move to become the company’s executive chair.
Under Coke’s six year ownership Costa has found itself competing with upmarket independent coffee shops and cheaper chains such as Greggs, as consumers pivot to subdued spending.
Costa’s operating loss more than doubled to £13.5m on revenues of £1.2bn in 2024, according to accounts filed at UK companies house, with the company blaming the cheaper competitors and low footfall.
Higher prices and sale fails
UK coffee shops have also been dealing with higher coffee bean prices and staffing costs, which many have credited to the increase to employers’ national insurance which came into effect last April.
The failure to make a sale may force Coke to write down Costa’s value on its books.
Costa’s express business, which owns and operates several of the brand’s self-serve machines, wrote down the value of its assets by £51m last year after choosing to discontinue the use of “certain prototypes”.