Coca-Cola reportedly halting sale of Costa Coffee

Coca-Cola appears to be scrapping its search for a buyer for its British brand Costa Coffee, according to a major financial publication.

The Atlanta beverage company ended talks with potential buyers after bids for Costa Coffee fell short of expectations, the Financial Times reported, citing unnamed individuals.

The move comes as Coca-Cola is about to welcome a new CEO, Henrique Braun, and as the coffee industry faces headwinds and more consumers feel strapped.

Costa Coffee has thousands of coffee shops in the United Kingdom and Ireland, along with several in Atlanta. Coke sells Costa products to restaurant customers, including AMC Theatres. The brand also has vending machines, along with at-home and read-to-drink products.

Potential suitors for Costa Coffee included London private equity firm TDR Capital and Boston private investment firm Bain Capital’s special situations fund, according to the Financial Times. Both were involved in later stages of negotiations, the publication said.

The Atlanta Journal-Constitution could not immediately verify the report. A Coca-Cola spokesperson said Wednesday the company does not comment on “market rumors or speculation.” TDR Capital and Bain Capital declined to comment.

Coca-Cola closed on its purchase of Costa Coffee in 2019 for about $5 billion — one of the largest acquisitions in the history of the beverage company, best known for its carbonated sodas.

But the pandemic disrupted Coca-Cola’s ambitions for Costa Coffee.

“Our investment in Costa is not where we wanted it to be from an investment hypothesis point of view,” James Quincey, outgoing Coca-Cola CEO, said during an earnings call last July. “ … It’s not quite delivered on the different verticals of growth.”

Not long after, news reports circulated that Coca-Cola was exploring options for Costa Coffee, including a potential sale.

“I think the timing was bad” to try to sell the brand, said Duane Stanford, publisher and editor of trade publication Beverage Digest.

Consumers are more cautious with their spending, he said, and the price of coffee has soared almost 20% over the past year, according to the U.S. Bureau of Labor Statistics.

“Buyers know that Coca-Cola was not able to find the value for the business that they had hoped when they bought it pre-COVID,” Stanford said. “That puts Coca-Cola at a bit of a disadvantage when it comes to negotiating.”

Private equity players were also probably looking for a steep discount, he added.

It’s not clear what Coca-Cola may envision now for Costa Coffee or whether it might revive efforts to sell the brand again in the future.

Walking away from the table could also be a negotiating tactic, Stanford said.