Coca-Cola has abandoned its attempt to sell the Costa Coffee chain after bids from potential buyers fell significantly short of its £2 billion valuation, according to a new report.
Auction Halted After Disappointing Bids
The US beverage giant halted discussions with remaining bidders in December, bringing a months-long auction process to an end. The Financial Times reported that bids from private equity firms failed to meet Coca-Cola's sale expectations for Britain's largest coffee chain.
It first emerged in August that Coca-Cola was conducting a strategic review of Costa, which could have led to a sale at roughly half the £3.9 billion it paid to acquire the business from Whitbread in 2018. At that time, the company had expressed high hopes for the chain's potential.
Struggles in a Competitive Market
Since its acquisition, Costa has faced considerable headwinds. The chain has grappled with rising operational costs, particularly soaring coffee bean prices, and intense competition on UK high streets.
This challenging environment has squeezed profitability. According to its most recent annual accounts filed at Companies House, Costa's revenue for the 2024 financial year was £1.2 billion, a mere 1% increase from 2023. More tellingly, its operating losses widened to £13.5 million, which the company attributed to soft footfall and the growth of value-led competitors.
The final stages of the sale process involved serious interest from Asda's owner, TDR Capital, and Bain Capital's special situations fund, which also owns Gail's Bakery and PizzaExpress. Earlier in the auction, run by investment bank Lazard, other major private equity players like Apollo, KKR and Centurium Capital were also involved.
Leadership Acknowledges Shortfalls
Coca-Cola's outgoing chief executive, James Quincey, who is set to become executive chair at the end of March, had previously been candid with investors. He stated that Costa had "not quite delivered" for the soft drinks conglomerate and was "not where we wanted it to be from an investment hypothesis point of view."
Quincey will be succeeded by the company's current chief operating officer, Henrique Braun. Reports indicate that while the immediate sale is off the table, Coca-Cola has not definitively ruled out a future disposal of the business.
Founded in 1971 by Italian brothers Sergio and Bruno Costa, the chain was sold to Whitbread in 1995 for £19 million before its blockbuster sale to Coca-Cola. Today, with approximately 2,700 outlets across the UK and Ireland, Costa finds itself competing on two fronts: against upmarket rivals like Gail's and independent cafes, and against cheaper offerings from Greggs and McDonald's.
Coca-Cola and Costa Coffee declined to comment when approached for this story.
