Coca-Cola CEO James Quincey has admitted the soft drinks giant expected “much more growth” from the non-retail side of Costa Coffee.
Speaking to investors after Coca-Cola reported third quarter results on Tuesday (21 October), Quincey said coffee remained “a super attractive category” but admitted Costa was “not where we want it to be” following its £3.9bn capture of the business from Whitbread in 2019.
Quincey said: “The Costa business is doing well – it’s returned to volume growth. We’ve been reinvesting in the stores, principally in the UK, continuing to increase the footprint of Costa Express and doing kind of beans to machines in a number of other countries. The business is doing well and is getting some good growth from the top to the bottom line.
“The investment hypothesis hasn’t worked out as we expected in the sense that we were looking for much more growth in the non-retail store side of the business, which much more suits the Coca-Cola system.
“We have not found a path to that in the last number of years. We are kind of standing back and reflecting on what that means for us and where we should go next in coffee.
“Costa is a great business, and we continue to run it to be successful. It just hasn’t created the multiplier so far that we’re looking for into our broader business.”
Read more: As a sale of Costa Coffee brews, why is it an attractive target for a private equity buyer?
Last year, Coca-Cola reported a 3% decline in coffee sales, primarily due to the performance of Costa in the UK.
Sales of its ready-to-drink coffee products lost £4.7m on volumes down 23.2% in the off-trade, following distribution losses last year [NIQ 52 w/e 28 December 2024].
Costa’s RTDs were relaunched in retail earlier this summer with updated packaging, a “silkier” recipe and two new flavours.
Among those rumoured to be interested in acquiring the Costa Coffee business are Asda owner TDR Capital, Gail’s and Pizza Express backer Bain Capital and US-based private equity investor KKR.
It is expected that any deal would be for Costa’s out-of-home business of nearly 2,800 Costa shops in the UK and Ireland, with Coca-Cola retaining the rights to the brand’s struggling ready-to-drink coffee range.
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