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Costa is the UK's largest coffee chain(Image: Matt Gilley/PlymouthLive)
American drinks titan Coca-Cola has reportedly abandoned plans to sell the world's second-largest coffee chain after bids from private equity firms fell short of expectations.
The Financial Times reports that the company ceased discussions with remaining contenders for Costa Coffee in December, concluding an auction process that had spanned several months.
Insiders revealed that private equity firms involved in the final round of negotiations included TDR Capital, owner of Asda, and Bain Capital Special Situations, proprietor of bakery chain Gails and Pizza Express.
Private equity companies Apollo, KKR and Centurium Capital, which owns China's Luckin Coffee Chain, were also reportedly engaged in the initial stages of talks, overseen by Lazard.
Coca-Cola had been hoping to fetch approximately £2bn for Costa, nearly half of the £3.9bn it shelled out to purchase the UK's largest coffee chain from Premier Inn owner Whitbread in 2018, as reported by City AM.
Negotiations with TDR could have resulted in the beverage firm retaining a minority stake in Costa.
A source close to Coca-Cola's strategy informed the Financial Times that the company would revisit plans to offload Costa in the medium term.
The decision to halt efforts to find a buyer for Costa, which operates 2,700 branches across the UK and Ireland, coincides with Coke's chief operating officer, Henrique Braun, preparing to succeed James Quincey as chief executive in March.
Quincey, who acknowledged to analysts last summer that Costa had "not delivered" for the company, will transition to the role of executive chair.
During Coke's six-year ownership, Costa has faced stiff competition from upmarket independent coffee shops and more affordable chains such as Greggs, as consumers have shifted towards more restrained spending habits.
Costa's operating loss more than doubled to £13.5m on revenues of £1.2bn in 2024, according to accounts filed at Companies House, with the company attributing this to cheaper competitors and reduced footfall.
UK coffee shops have also been grappling with higher coffee bean prices and staffing costs, which many have attributed to the increase in employers' national insurance that took effect last April.
The unsuccessful sale attempt may compel Coke to write down Costa's value on its balance sheet.
Costa's express business, which owns and operates several of the brand's self-serve machines, wrote down the value of its assets by £51m last year after deciding to discontinue the use of "certain prototypes".
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