What does Costa Coffee company information tell us about the sale?

Coca-Cola is considering selling Costa, the UK coffee chain it bought in 2018 for 3.9 billion pounds. Bloomberg reports a preliminary valuation of about 1 billion pounds, close to a quarter of that price. Centurium Capital, KKR, and Bain Capital have shown interest, and Centurium may bid jointly with its portfolio company Luckin Coffee. Coca-Cola still hopes to keep the ready-to-drink coffee arm.

Costa and Starbucks were both founded in 1978, and Costa became the largest coffee chain in the UK, operating in more than 30 countries with over 4,000 stores. It entered China in 2006 and once expanded at 2.5 times Starbucks' pace there. As Luckin and Manner grew, Costa lost ground on digital operations and marketing; by the end of 2024 only 389 stores remained in China.

Coca-Cola's acquisition of the UK coffee chain Costa for £3.9 billion in 2018 may now be put up for sale. According to Bloomberg, the preliminary valuation is only about £1 billion, equivalent to a quarter of the original acquisition price. Institutions such as Centurium Capital, KKR, and Bain Capital have all shown interest, and Centurium Capital may team up with its portfolio company Luckin Coffee to bid jointly. At the same time, Coca-Cola does not intend to let go completely and still hopes to retain control of Costa's ready-to-drink coffee business. In the Chinese market, Costa went from once going head-to-head with Starbucks to now continuously shrinking its stores — a turn that reflects the dramatic changes in the domestic coffee competitive landscape.

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According to recent Bloomberg news, global beverage giant Coca-Cola is considering selling its UK coffee chain brand Costa. The brand was acquired by Coca-Cola in 2018.

Costa and Starbucks were both founded in 1978. Costa is the largest coffee chain brand in the UK, with operations covering more than 30 countries and regions worldwide and a total of more than 4,000 stores. In its home market of the UK, Costa's market share once exceeded Starbucks'.

In the Chinese market, Costa entered in 2006 and was long regarded as Starbucks' main competitor. When it first entered China, Costa often chose to open stores near Starbucks locations, and its expansion speed once reached 2.5 times that of Starbucks. China thus became Costa's largest market outside the UK and one of only two markets worldwide directly operated by its headquarters.

However, with the rapid rise of local coffee chain brands such as Luckin and Manner, competition in China's coffee market has become increasingly fierce. Costa, which originally planned to catch up with or even surpass Starbucks in China, has shown obvious shortcomings in digital operations and marketing models, and its brand competitiveness is no longer what it used to be.

Starting in 2020, Costa began closing stores in the Chinese market one after another. By the end of 2024, only 389 Costa stores remained in China, mainly concentrated in first-tier cities such as Beijing and Shanghai, and it gradually withdrew from places such as Nanchang and Qingdao. The latest data from Narrow Door Restaurant Eye shows that Costa's store scale is still continuing to shrink, with the number of stores now down to 334.

This business situation led parent company Coca-Cola to consider selling the Costa business. In 2018, Coca-Cola acquired Costa for £3.9 billion, using it to enter the coffee market. But the deal did not bring the expected profit growth. On the earnings call in July this year, Coca-Cola's CEO admitted: "From the original investment assumptions, Coca-Cola's investment in Costa Coffee has not met expectations."

According to media reports, the sale has attracted attention from a number of well-known investment institutions, including Luckin's major shareholder Centurium Capital, KKR, and Bain Capital. A source revealed that Costa Coffee's preliminary valuation is about £1 billion, only a quarter of Coca-Cola's acquisition price of £3.9 billion that year.

In addition to the valuation information, the report also cited people familiar with the matter as saying that Centurium Capital is indeed following the Costa acquisition case and may directly contribute funds through its own fund, or may jointly participate in the bid with its portfolio company Luckin Coffee. Another media report pointed out that Coca-Cola does not want to completely give up the Costa coffee business. The American beverage giant has told potential buyers that it will retain control of Costa's ready-to-drink products.

In the ready-to-drink coffee sector, Nestlé holds an absolutely leading position, but brands such as Costa and Starbucks also have market shares that cannot be ignored. Therefore, Coca-Cola, which excels in the ready-to-drink business, will still retain this segment with growth potential, which also means that what it is considering selling is mainly Costa's coffee store business.

As of press time, Coca-Cola, Costa, Centurium Capital, and Luckin all declined to comment on market rumors.

Image source: Internet

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