The Coca-Cola Co. is reportedly weighing up the future of its UK coffee chain Costa Coffee.
Over the weekend, Sky News and Reuters reported Coca-Cola has appointed Lazard to review its options for a business the soft drinks giant acquired seven years ago.
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Sky News first reported early talks have been held with possible suitors, including private-equity companies.
Indicative offers for Costa Coffee, which operates in 50 countries worldwide, could be made during the autumn, the UK broadcaster said.
Just Drinks has approached Coca-Cola for comment.
Coca-Cola acquired Costa Coffee for $5.1bn in 2018 as part of the Sprite brand owner’s strategy to position itself as a “total beverage company”.
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By GlobalDataThe same year, the company invested in sports-nutrition business Bodyarmor. A year earlier, it had acquired Mexican sparkling water brand Topo Chico.
Speaking to analysts last month after Coca-Cola reported its second-quarter financial results, CEO James Quincey was asked to reflect on the coffee market and the company’s strategy in the sector.
“Coffee is a large, fragmented, growing category in the total beverage industry, so, it’s clearly attractive if we and the bottling system can find ways to participate more deeply in that category,” Quincey said.
“Now, having said that, our investment in Costa is not where we wanted it to be from an investment hypothesis point of view. I mean, the business is still a good business but it’s not quite delivered on the different verticals of growth that we were hoping to accelerate much quicker, the ready-to-drink coffee, the Express machines at home.”
Quincey said the Costa business “remains more weighted to stores”. There are more than 2,000 in the UK and over 3,000 globally.
He added: “In the stores, we’ve been driving the affordability and actually doing a good job on refreshing the stores and driving the speed of service.
“But, still, the investment hypothesis as originally intended has not played out despite the improvement in the store business.
“I think I would say we’re in the mode of reflecting on what we’ve learnt, thinking about how we might want to find new avenues to grow in the coffee category, while continuing to run the Costa business successfully because it’s still a lot of money we put down and we want that money to work as hard as possible.”
