Coca-Cola's $5.1 Billion Costa Coffee Bet Stalls as Sale Talks Resurface

Coca-Cola’s strategic push into the global coffee market via its acquisition of British chain Costa Coffee has fallen short of initial expansion goals. The company invested $5.1 billion in the deal, targeting a sector valued at approximately $570 billion. However, successive obstacles to growth plans have brought potential divestiture back into focus.

Original Acquisition Strategy

When announcing the transaction in August 2018, Coca-Cola intended to leverage its worldwide bottling, distribution, and marketing networks to expand Costa beyond its traditional markets. The strategy involved multi-channel growth, ranging from self-service coffee machines to ready-to-drink and packaged coffee products.

Then-Chief Executive James Quincy described the move as more than just buying a brand, stating that "Costa gives the company a platform for expansion." This reflected hopes of utilizing Coca-Cola’s global reach to enter the coffee and tea market, where the beverage giant previously competed only in limited segments.

Operational Challenges and Pandemic Impact

Entering the coffee sector proved difficult as an extension of the soft drink business model. Operational and marketing challenges arose from managing coffee machines and developing cafe networks. These issues were exacerbated by the COVID-19 pandemic, which disrupted original growth ambitions. According to Bloomberg, reports indicate renewed efforts to sell the chain.

The core concept relied on Costa benefiting from Coca-Cola’s extensive network to reach consumers in stores, fuel stations, hotels, and cinemas. Yet, transferring a successful UK market model to other regions was not as straightforward as anticipated. Tens of thousands of Costa Express machines globally faced operating and maintenance costs distinct from carbonated beverages.

Market Penetration Hurdles

Bloomberg notes that while the number of Costa machines grew from 8,237 at acquisition to over 15,000 currently, geographic spread alone did not ensure success, particularly in markets unfamiliar with the brand. In the United States, Costa lacked the recognition it enjoys in Britain. American consumers typically buy large quantities of low-priced drip coffee from gas stations, whereas vending machines relied on powdered milk. Customers did not expect espresso-quality drinks or high prices from these units.

Distribution network capabilities also struggled with equipment management. Costa requires monitoring machine needs for milk and coffee beans, a level of operational follow-up unusual for the soft drink industry. Consequently, Costa reduced headquarters staff by 18% between 2021 and 2025.

Competitive Landscape and Financials

Costa failed to achieve desired penetration in the ready-to-drink coffee market, valued at around $23 billion. Its main US competitor, the Frappuccino joint venture between PepsiCo and Starbucks, became the best-selling brand in this category domestically, leaving Costa with relatively limited presence. The company also hesitated to aggressively open US cafes due to concerns about conflicts with McDonald’s, a key client offering coffee.

Timing further complicated matters. In 2020, pandemic closures wiped out a major revenue source for Costa’s British cafes overnight. Simultaneously, many consumers upgraded home brewing equipment. Delays in renovating branches weakened Costa’s ability to adapt to market changes, and post-pandemic recovery remained suboptimal.

Chris Close, former Costa Coffee operations director now working as a supply chain consultant, characterized the deal as a relatively limited loss for a company of Coca-Cola’s size but noted it is a failure hard to ignore. He suggested the error might be marginal in corporate accounts yet occurred publicly, potentially prompting greater caution in future acquisitions.

Divestiture Attempts and Recent Performance

Under Coca-Cola’s ownership, Costa attempted new ventures, including the BaristaBot automated coffee machine project. In 2020, it acquired Prego, a Texas-based coffee robotics firm. However, the new machine proved expensive, leading to the project’s cancellation in May 2025 amid cost-cutting measures.

Late in 2025, Coca-Cola tried to sell Costa to British firm TDR Capital for £1 billion (approximately $1.3 billion), but price disagreements prevented completion. For 2025, the company reported revenues of £1.29 billion ($1.74 billion), a 5% year-on-year increase, following an operating loss of £13.5 million in 2024.

Founded in London in 1971 by brothers Sergio and Bruno Costa, the chain tested 112 coffee types before settling on the "Moka Italia" blend that became its signature.