The Coca-Cola Co. has reportedly ended plans to try to sell UK chain Costa Coffee.
The US giant is said to have held talks in recent months to offload Costa Coffee and is now reported to have abandoned the idea.
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According to The Financial Times, offers tabled by private-equity suitors have failed to meet Coca-Cola’s expectations. Talks ended last month, unnamed sources told the publication.
Just Drinks approached Coca-Cola for comment. Coca-Cola has yet to comment directly on the reports it has been looking to offload Costa Coffee, although there have been regular reports suggesting discussions have been held with various private-equity houses. A spokesperson said: “We do not comment on market rumours or speculation.”
Coca-Cola acquired Costa Coffee for $5.1bn in 2018 as part of the Sprite brand owner’s strategy to position itself as a “total beverage company”.
Speaking to analysts in July after Coca-Cola reported its second-quarter financial results, CEO James Quincey was asked to reflect on the coffee market and the company’s strategy in the sector. He remarked Coca-Cola’s “investment in Costa is not where we wanted it to be from an investment hypothesis point of view”, adding: “I mean, the business is still a good business but it’s not quite delivered on the different verticals of growth that we were hoping to accelerate much quicker, the ready-to-drink coffee, the Express machines at home.”
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By GlobalDataQuincey said the Costa business “remains more weighted to stores”. There are more than 2,000 in the UK and over 3,000 globally.
When Coca-Cola published its third-quarter results in October, Quincey was again asked to outline the company’s coffee strategy.
“The coffee category is a super-attractive category. It’s very large, it’s profitable and it’s growing and it’s relatively unconsolidated,” he said.
“Interesting for the Coke system if we can find a way to play in it that works for us. We’ve tried a number of things over the last decades to find a path that works for us in coffee, Costa being the most recent iteration of that.
“Actually, the Costa business is doing well. It’s returned to volume growth. We’ve been reinvesting in the stores, principally in the UK, continuing to increase the footprint of the total park of the Costa Express machines and doing kind of beans-to-machines in a number of other countries. The business is doing well and is getting some good growth from the top to the bottom line.
“The commentary we made last time is the investment hypothesis didn’t work out as we expected in the sense that we were looking for much more growth in the non-retail store side of the business, which much more suits the Coke system. We have not found a path to that in the last number of years and so we are kind of standing back and reflecting on what that means for us and where we should go next in coffee.”
Last month, Coca-Cola announced Quincey would be stepping down at the end of March after almost nine years at the helm.
COO Henrique Braun, who, like Quincey, joined Coca-Cola in 1996, will become the group’s chief executive in April.
