Coca-Cola reportedly mulling Costa Coffee sale amid market challenges

Coca-Cola is reportedly exploring options to sell its Costa Coffee business, as the US beverage giant evaluates strategies to focus on its core soft drink and ready-to-drink portfolio and high-growth beverage categories.

Coca-Cola acquired Costa Coffee in 2018 from British multinational hotel and restaurant company Whitbread for around US$5.1 billion, marking its entry into the hot beverages sector. However, the retail chain has been grappling with challenges such as high coffee bean costs and competition from Starbucks, Pret a Manger, McCafé, and local chains.

Analysts suggest Coca-Cola could consider selling Costa to refocus on its core beverage business, such as soft drinks, sparkling water, and ready-to-drink coffee/tea, where margins are higher and the global scale is easier to leverage.

Others speculate a sale could free cash for acquisitions or expansion into high-growth categories such as sparkling water, energy drinks, or plant-based beverages, where Coca-Cola sees more substantial margins.

They also note that scaling cafes internationally can be costly and slow, making a divestiture strategically logical.

Coca-Cola CEO James Quincey stated that the company’s investment in Costa is “not where we wanted it to be from an investment hypothesis point of view” in an earnings call last month.

“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.”

The potential sale has drawn investor interest, with market watchers noting it could be positively received as part of a broader effort to sharpen Coca-Cola’s strategic focus. No official confirmation has been made, and details regarding timing, valuation, or potential buyers remain speculative.

Food Ingredients First has contacted Coca-Cola to comment on the speculations.

Meanwhile, US President Donald Trump said last month that Coca-Cola will use real cane sugar instead of corn syrup in the production of its signature soda in the US in a move to appeal to consumers seeking more natural ingredients.