Coca-Cola considers selling Costa Coffee after rising costs and weak performance
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Coca-Cola is weighing a potential sale of Costa Coffee, according to two people familiar with the matter, as mounting costs and increasing competition from premium rivals continue to weigh on the brand’s performance.
The soft drinks giant acquired Costa, the UK’s largest coffee chain, in 2018 for £3.9 billion as part of a strategy to diversify beyond carbonated beverages. At the time, the move was hailed as a bold step into the growing global coffee market. Yet rising prices for coffee beans and other raw materials have placed significant pressure on margins, while the company has struggled to meet expectations for growth.
Coca-Cola chief executive James Quincey admitted to analysts in July that Costa had “not quite delivered” and was “not where we wanted it to be from an investment hypothesis point of view.” He said the group was now “reflecting on what we’ve learned [and] thinking about how we might want to find new avenues to grow in the coffee category.”
Costa, with thousands of outlets across the UK, remains the country’s largest coffee chain but has faced stiff competition from artisanal rivals that have reshaped consumer expectations with more premium offerings. The brand, along with peers such as Starbucks and Caffè Nero, was badly affected by the Covid-19 lockdowns, which brought customer traffic to a halt. The subsequent surge in inflation and the cost-of-living crisis further dented recovery.
In response to these pressures, Costa announced a restructuring programme in 2022, citing the “challenging economic environment and inflationary pressures.” While the chain has sought to adapt, analysts note that the gap between traditional coffee shop formats and boutique competitors has continued to widen.
Speculation over a possible sale was first reported by Sky. Coca-Cola has so far declined to comment, saying only that it does not respond to “market rumours or speculation.”
A divestment of Costa would mark a significant strategic shift for Coca-Cola, raising questions about the company’s future role in the coffee sector, which it once viewed as a major engine of growth.
