Coca-Cola has abandoned plans to sell Costa Coffee, after bids for the chain failed to meet its £2bn price mark, the Financial Times has reported.
At £2bn, a sale would have netted Coca-Cola approximately half of the £3.9bn it paid to buy Costa from hospitality giant Whitbread.
Yet private equity firms involved in the bidding were unwilling to spend so much on the ailing high street chain, leading Coca-Cola to end a months-long auction process in December, according to “two people familiar with the matter”.
Asda owner TDR Capital and Bain Capital’s special situations fund were among bidders in the later stages of negotiations, the FT reported, with Apollo, KKR and Centurium Capital all involved in earlier talks.
Costa Coffee’s losses more than doubled in its latest accounts, filed to 31 December 2024, as slow footfall and cheaper competition choked income. Operating losses widened from £5.8m to £13.5m, depsite revenue rising 1% to £1.2bn.
“How the mighty have fallen,” said AJ Bell head of markets Dan Coatsworth.
“Once a dominant name on the high street, Costa Coffee has gone off the boil, and its sale process has gone down the drain. Coca-Cola has been trying to sell the business, but it looks like offers have only been lukewarm.
“Reports suggest the sale has been scrapped after failing to get the right price. This is not a good look given the speculated sale price was already half what Coca-Cola paid in 2018. The coffee chain hasn’t worked for Coca-Cola, yet the parent company will be reluctant to sell it for beans.”
Coca-Cola’s divestiture would be the latest in a trend of large conglomerates selling or spinning off awkward subsidiaries to focus on their core offerings – shoring up profitability and keeping investors happy – including Unilever’s spin-off of Magnum, Reckitt’s sale of its Essential Home business, and Nestlé’s mooted sale of its bottled water business.
“We’re in an era where companies are focusing on what they do best, and for Coca-Cola that means fizzy drinks rather than lattes.
“Higher staffing costs and a spike in raw material prices have put pressure on Costa. At the same time, competition has heated up, and consumers have become wary about spending money on casual items like a coffee.
“It always felt like Costa was low down the priority list for Coca-Cola, left to go cold like an undrunk cappuccino. It will now have to give the brand more love if it is to stand any chance of getting a more reasonable takeover offer.”
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