Coca-Cola is reportedly considering selling Costa Coffee, a move that could value the chain at around £2 billion. This consideration comes after Coca-Cola acquired Costa Coffee for £3.9 billion in 2019, indicating a substantial loss in brand valuation.
Coca-Cola is exploring a £2 billion sale of Costa Coffee, highlighting a significant drop in brand value since its £3.9 billion acquisition in 2019.
The beverage giant aimed to enter the hot drinks market through this purchase, expanding its offerings beyond sugary soft drinks. However, challenges soon emerged.
The initial excitement over Costa’s potential quickly faded. There has been a strategic misalignment between Coca-Cola’s core business model and the operational demands of managing a coffee chain.
Costa Coffee boasts more than 2,000 stores across the UK and over 3,000 worldwide. Despite this extensive footprint, revenues have declined, with UK earnings reaching £1.22 billion in 2023, falling below 2018 levels. In fact, the chain recorded a pre-tax loss of £9.6 million in the same year.
Competition has also intensified in the coffee market, with consumers increasingly favoring boutique shops and other major brands. Changing habits, such as the rise of at-home coffee consumption, have hit Costa’s foot traffic hard. The COVID-19 pandemic added to the strain by causing store closures and increasing rents.
Meanwhile, Costa’s efforts to innovate have lagged behind, evidenced by delays in digital ordering features and premium offerings. Coca-Cola’s internal review of its business portfolio has highlighted these struggles, leading to the current contemplation of a sale.
Investment bank Lazard is overseeing the process and engaging with potential buyers, primarily private equity firms. As indicative offers are expected in early autumn 2025, Coca-Cola remains cautious and has not yet committed to selling.
This potential sale signals a significant corporate shift. It reflects Coca-Cola’s need to reassess its strategy in the face of unexpected challenges in the coffee sector. The decision to divest Costa Coffee may reshape the company’s focus on its core beverage business.
