According to a report by the Financial Times (FT), the US firm halted discussions with remaining bidders in December, concluding an auction process that had spanned several months.
The news initially surfaced in August when Coca-Cola announced a review of its Costa business, which it acquired for nearly £4 billion from Whitbread in 2018. Collaborating with bankers, the multinational considered selling Costa Coffee, the UK’s largest coffee chain, potentially at a significantly reduced price, possibly recouping only half of the original investment.
Coca-Cola set an asking price of merely £2 billion, aiming to resolve ongoing challenges faced by the subsidiary. These issues have been compounded by a substantial downturn in hospitality amidst a persistently tough economic climate in their home market.
Like many high street coffee chains in the UK, Costa Coffee has experienced significant impacts from the Covid pandemic and Brexit. Additionally, the company contends with increased competition, a rising cost-of-living crisis, and the global surge in bean prices.
Companies reportedly engaged in advanced negotiations to acquire the business include TDR Capital, the owner of Asda, and Bain Capital’s special situations fund, which also owns Gail’s Bakery and PizzaExpress. Earlier in the process, private equity firms such as Apollo, KKR, and Centurium Capital were involved, with the auction managed by investment bank Lazard.
Outgoing CEO, James Quincey, previously informed investors that the chain, operating approximately 2,700 locations in the UK and Ireland, had “not quite delivered” for Coca-Cola and that it was “not where [management] wanted it to be from an investment hypothesis point of view.”
Currently, the company appears to believe that retaining Costa Coffee might yield better outcomes in the long run rather than proceeding with a sale at a substantial loss.
This situation illustrates ongoing shifts within the food and beverage industry, reflecting current food manufacturing trends, food distribution trends, and emerging innovations in food processing technology. As companies navigate food and drink sustainability, regulations, and consumer trends, strategic decisions such as Coca-Cola’s will likely shape future market dynamics.
