US soft drinks company Coca-Cola is working with investment bank Lazard to review options, including a potential sale, of British coffee chain Costa, which it acquired in 2018 for more than $5 billion, Sky News reported yesterday.
Atlanta-headquartered Coca-Cola has held initial talks with a small number of potential bidders for Costa, including private equity firms, Sky News reported, citing unidentified sources.
The report said indicative offers are expected in early autumn, while noting that Coca-Cola may ultimately choose not to proceed with a sale.
Costa Coffee operates in 50 countries, with more than 2,700 coffee shops across the UK and Ireland and more than 1,300 more outlets globally, according to its website.
Coca-Cola acquired the chain more than six years ago to strengthen its push into healthier beverages and compete with Starbucks and Nestle in the global coffee market.
In the US, food companies are seeking healthier substitutes as they respond to Health Secretary Robert F Kennedy Jr’s Make America Healthy Again campaign. In July, President Donald Trump said Coca-Cola had agreed to use real cane sugar in the US.
Analysts said that a sale could crystallise a multibillion dollar loss on the $5.8 billion sum Coca-Cola agreed to pay to buy Costa from Whitbread, the London-listed owner of the Premier Inn hotel chain, in 2018.
One suggested that Costa might now command a price tag of just $2.7bn in a sale process.
Filings show that despite its lacklustre performance, Costa has paid more than $338 million in dividends to its owner since the acquisition.
The deal was intended to provide Coca-Cola with a global platform in a growing area of the beverages market.
Costa trades in dozens of countries, including India, Japan, Mexico and Poland, and operates a network of thousands of coffee vending machines internationally under the Costa Express brand.
The chain was founded in 1971 by Italian brothers Sergio and Bruno Costa.
It was sold to Whitbread for $25.7m in 1995, when it traded from fewer than 40 stores.
The business is now one of Britain’s biggest private sector employers, and has become a ubiquitous presence on high streets across the country.
Its main rivals include Starbucks, Caffe Nero and Pret a Manger – the last of which is being prepared for a stake sale and possible public market flotation.
It has also faced growing competition from more upmarket chains such as Gail’s, the bakeries group, which has also been exploring a sale.
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