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Coca-Cola has ditched plans to sell Costa Coffee after bids from private equity suitors fell short of its expectations, marking the latest setback in its ownership of the struggling UK coffee shop chain.
The US soft drinks giant ended talks with remaining bidders for Costa in December, calling a halt to an auction process lasting several months, according to two people familiar with the matter.
Firms in the latter rounds of negotiations included Asda owner TDR Capital and Bain Capital’s special situations fund, owner of the bakery chain Gail’s and PizzaExpress, the people said.
The FT previously reported that Coke had been seeking about £2bn for Costa, roughly half the £3.9bn it paid to acquire the UK’s largest coffee shop chain from Premier Inn owner Whitbread in 2018.
Talks over a deal with TDR would have seen Coke retain a minority stake in Costa. Private equity firms Apollo, KKR and Centurium Capital, owner of China’s Luckin Coffee chain, were involved at earlier stages of the process, which was handled by Lazard, according to people familiar with the matter.
The decision to end efforts to find a buyer for Costa, which has more than 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. One person familiar with Coke’s thinking said the company could still revive plans to sell Costa in the medium term.
Quincey, who admitted to analysts last July that Costa had “not delivered” for Coke, will become the company’s executive chair.
Under Coke’s ownership Costa has found itself competing with more upmarket independent coffee shops and cheaper operators such as Greggs, at a time of subdued consumer spending.
Costa’s operating loss more than doubled to £13.5mn on revenues of £1.2bn in 2024, according to accounts filed at UK Companies House. The company blamed weak high street footfall and competition from cheaper rivals.
UK coffee shops have since been grappling with higher coffee bean prices and staffing costs, principally through the increase to employers’ national insurance which came into effect in April last year.
The failure of the sale process may force Coke to write down the value of Costa on its books. In 2024 Costa took an impairment of £48.6mn on the value of its Chinese business, attributing the move to weaker than expected demand in its coffee shops in Shanghai.
Meanwhile Costa’s Express business, which owns and operates the brand’s self-service machines, wrote down the value of its assets by £51mn last year after choosing to discontinue the use of “certain prototypes”.
Coke, Bain and TDR all declined to comment.
Additional reporting by Gregory Meyer in New York