Coca Cola trying to promote Costa Coffee eight years after £4bn takeover

Coca Cola is once again looking to sell the Costa Coffee chain and has already had conversations with at least one potential buyer, reports suggest. 

The beverage giant is thought to have revived the sales process for Costa, with the chain expected to fall into the clutches of private equity according to a report by US news website Semafor.

The company being bought by a private equity group may spark fears of more closures on the High Street, retail experts have warned.  

In its previous attempt to flog the brand, owner Coca-Cola was said to be looking to sell for £2billion – far less than the £3.9billion it paid to purchase it in 2018 from previous owner Whitbread.

It called off sales talks earlier this year after struggling to convince private equity companies to fork out its desired price, the Financial Times reported.

But the US behemoth may be hoping the British chain appears more appealing after last week sharing that its UK business had returned to an operating profit after a menu shake-up.

Marketing strategy: Costa Coffee has been attempting to win over customers in the face of competition from challenger brands such as Blank Street – including by using celebrities like Olivia Attwood (pictured) 

Costa, which was founded by Italian brothers Bruno and Sergio Costa in London in 1971 and now operates 2,700 cafes in the UK and Ireland, has also been opening new shops.

It opened a net 50 new outlets in the UK last year and is planning 50 additional new shops this year.

The business has struggled with hot competition from cheaper firm Greggs in recent years, while rival Pret also launched a meal deal to appeal to cost-conscious consumers.

It has also been challenged by newer and trendier brands, such as Blank Street and Black Sheep Coffee, which sell products such as flavoured matcha and ube lattes that are popular with Gen Z consumers.

Costa also sells its coffee through deals with supermarkets including ‘ready to drink’ coffees in cans, as advertised by ITV presenter Olivia Attwood, and thousands of Express vending machines.

But its main Costa Ltd arm raked in profits of £20million in the year to December 31, 2025, reviving its fortunes after sinking into the red by £13.5million in 2024, according to the latest accounts. Sales jumped 5 per cent to just under £1.3billion.

The business said it is now the biggest coffee shop seller of matcha in the UK and is seeing increased demand for decaffeinated drinks. 

Coffee chains are also grappling with higher costs of doing business, including higher National Insurance contributions and wages, plus stubborn inflation on the price of ingredients.

But talks with the preferred bidder, TDR Capital – the private equity owner of grocer supermarket – hit a wall over the price, according to the Financial Times.

In July last year, Coca-Cola chief executive James Quincey admitted that its Costa acquisition had ‘not quite delivered’ and was ‘not where we wanted it to be from an investment hypothesis point of view’.

A private equity firm would be the most likely purchaser, according to Lale Akoner, global market strategist at investment platform Etoro.

She added: ‘Food and drink multinationals could also be interested, although supermarkets seem less likely given the complexities of operating a large coffee shop network.

‘Coca-Cola looks unlikely to recover anything close to the £3.9 billion it originally paid for Costa, reflecting the challenges the business has faced and the increasingly competitive coffee market.

‘For Coca-Cola, the rationale is strategic. Running labour-intensive coffee shops is far removed from its higher-margin concentrate business. Selling Costa would simplify operations, free up capital and allow Coca-Cola to focus on its core strengths.’

Consumer giants like Coca-Cola – which also owns brands Sprite and Fanta – are adapting to shifts in consumer behaviour towards healthier lifestyles. The business is betting big on sports drinks including energy and electrolyte products.

But retail expert Jonathan De Mello agreed that ‘any potential sale will likely command a steep discount compared to the original purchase price – especially after private equity bids fell flat earlier this year.’

He added: ‘If Costa is ultimately snapped up by a private equity turnaround specialist, there will naturally be high-street anxieties regarding store closures. 

‘We have seen private equity buyers aggressively rationalise estates at other major brands to cut costs, and a new owner would almost certainly target underperforming Costa sites for closure to build a leaner operation. 

‘However, a sophisticated turnaround operator will look to balance these necessary closures with aggressive modernization, updating the remaining estate to better align with evolving demographic tastes while driving back-end efficiencies to restore long-term profitability.’