Coca-Cola's £3.9bn acquisition of Costa Coffee in January 2019 has hit a major roadblock, with the beverage giant hiring restructuring experts Alvarez & Marsal and Alix Partners to review the struggling coffee chain's finances. The decision follows failed sale talks between Coca-Cola and private equity firms, which offered lower prices than expected.
The company's failure to secure a £2bn sale price is a significant setback for Coca-Cola, which had been seeking to offload Costa Coffee amid rising losses. According to Companies House filings, Costa's operating losses more than doubled from £5.8m to £13.5m on revenues of £1.2bn in 2024 – a stark reminder of the challenges facing the UK's largest coffee chain.
With over 2,700 branches across the UK and Ireland, Costa Coffee is one of the country's leading high street brands, employing 16,000 people in Britain. However, the company has been grappling with stiff competition from other coffee retailers and independent sellers, exacerbated by higher prices for coffee beans and rising staffing costs.
As consumer spending habits continue to shift, UK coffee drinkers are increasingly seeking out cheaper alternatives. According to market research, sales of coffee have slowed in recent months, with many consumers opting for home-brewed coffee or switching to lower-cost brands. This trend is set to impact Costa Coffee's bottom line, with the company facing a significant uphill battle to recover its fortunes.
Under UK law, businesses are required to provide clear and accurate information about their financial situation and any potential changes to their operations. Consumer rights experts warn that Costa Coffee must ensure transparency in any restructuring efforts, keeping customers informed of any changes to services or pricing.