Coca-Cola reportedly abandons plans to sell Costa Coffee chain

Costa had revenues in Ireland of €115.2m in 2024

EMBARGOED TO 0001 THURSDAY JUNE 18 Undated handout photo issued by Costa Coffee of one of their sign, as thousands of their caf??s will be opening their doors by the end of June after three months of closure.

Coca-Cola has reportedly abandoned plans to sell its Costa Coffee chain after bids from private equity firms failed to meet its expectations.

The US soft drinks company halted discussions with remaining bidders in December, according to the Financial Times, ending a months-long auction process.

It first emerged in August that Coca-Cola was working with bankers on a review of Costa that could lead to the chain being sold off in a cut-price deal, of roughly half what it paid for the business.

Coca-Cola had high hopes for the coffee chain when it bought it for £3.9bn (€4.5bn) in 2018 from Whitbread, the owner of Premier Inn hotels.

However, since then, the chain has struggled in the face of rising costs, particularly the rise in coffee bean prices, and competition.

Costa Coffee operates in 50 countries, with more than 2,700 coffee shops across the UK and Ireland and over 1,300 more outlets globally, according to its website.

In Ireland and Northern Ireland, the Costa franchise is operated by MBCC Foods (Ireland) most recent accounts for the firm reported revenues of €115.2m in the 12 months to January 2024, a 1% increase on the previous year.

Coca-Cola was reportedly seeking about £2bn (€2.31bn) for Costa, which would have resulted in it realising a multibillion-pound loss.

The companies in the latter stages of talks to buy Costa included Asda’s owner, TDR Capital, and Bain Capital’s special situations fund, which owns Gail’s Bakery and PizzaExpress, according to the FT. The newspaper added that the private equity firms Apollo, KKR and Centurium Capital were involved earlier in the auction process, which was handled by the investment bank Lazard.

Coca-Cola’s outgoing chief executive, James Quincey, who will move to become the company’s executive chair at the end of March, previously told investors that Costa had “not quite delivered” for the soft drinks company and was “not where we wanted it to be from an investment hypothesis point of view”.

Quincey will be succeeded by Coca-Cola’s chief operating officer, Henrique Braun, and the company has reportedly not definitively ruled out selling Costa in the future.

Costa, which has about 2,700 outlets across the UK and Ireland, has been squeezed by rising costs and faced competition from upmarket rivals such as Gail’s and independent coffee shops, as well as cheaper offerings from the likes of Greggs and McDonald’s.

The Guardian