Coca-Cola Company chose to suspend the sale of its Costa Coffee business after recent bids from private equity firms failed to align with the company's financial expectations. Sources familiar with the matter indicate that discussions with final bidders, notably TDR Capital and Bain Capital’s special situations fund, were terminated in December following an extended auction process.
Initially acquiring Costa Coffee from Whitbread in 2018 for approximately $5 billion, Coca-Cola aimed to generate around $2.5 billion from its divestiture. However, neither the bids nor the market conditions favored the completion of this sale. This strategic reversal coincides with an impending leadership transition as Henrique Braun is set to take over the CEO role from James Quincey in March.
Financial Headwinds and Market Competition
Costa Coffee has struggled in recent years, contending with heightened competition both from independent coffee businesses and large-scale industry players. These pressures, combined with increased operational expenses, have placed the chain in a negative financial position.
For the fiscal year 2024, Costa reported operating losses exceeding £13.5 million (approximately $18.15 million) on revenues of £1.2 billion (about $1.6 billion), marking an over twofold increase in deficit. The company’s underperformance has influenced Coca-Cola’s decision-making regarding the asset's disposition.
The decision to retain Costa Coffee means Coca-Cola may have to consider recording a potential impairment charge on its books, reflecting the diminished valuation of the chain. Nevertheless, insiders suggest that Coca-Cola might revisit the sale prospect over the medium term if market conditions improve.
Sale Process and Bidding Participants
Prior to halting the sale, Coca-Cola had indicated a preferred bid from TDR Capital, owner of supermarket chain Asda. This proposed deal included Coca-Cola maintaining a minority stake in Costa Coffee. The auction process also involved interest from several private equity firms at earlier stages, including Apollo, KKR, and Centurium Capital, the latter being the proprietor of China’s Luckin Coffee chain. Investment bank Lazard managed the sale proceedings.
Requests for comments from Coca-Cola, TDR Capital, and Bain Capital remained unanswered at the time of reporting.
Stock Market Implications
On Tuesday, Coca-Cola’s stock price closed marginally lower by 0.22%, standing at $71.08. Over the course of 2025, the company's shares increased by roughly 12.5%, outperforming competitor PepsiCo, whose shares decreased by 5.1% in the same timeframe.
According to technical analyses provided by market data platforms, Coca-Cola’s stock exhibits balanced technical strength complemented by moderate momentum and quality indicators. However, its value metrics appear less favorable. The share price trend maintains a bullish outlook across short, medium, and long-term horizons.
Looking Ahead
The indefinite postponement of Costa Coffee’s sale introduces near-term uncertainty regarding Coca-Cola’s strategic portfolio management. While the current economic environment and Costa’s financial challenges have made a transaction unviable, Coca-Cola’s future approach may adapt with market developments.
Key Points:
- Coca-Cola has stopped the attempted sale process for Costa Coffee after bids failed to meet its $2.5 billion target.
- Final bids included interest from TDR Capital and Bain Capital; earlier bidders involved Apollo, KKR, and Centurium Capital.
- Costa Coffee has faced increased competition and rising costs, leading to operating losses over £13.5 million in 2024.
- Upcoming CEO Henrique Braun's leadership marks a period of change as the company navigates its strategic decisions regarding Costa.
Risks and Uncertainties:
- Continued operating losses and competitive pressures risk further deterioration of Costa Coffee’s financial health.
- Potential write-down charges for Costa could impact Coca-Cola’s financial statements.
- Market valuation and investor confidence could fluctuate amid leadership changes and halted divestiture plans.
- Future attempts to sell Costa depend on improving market conditions and financial performance, rendering timing uncertain.