Coca-Cola Puts COSTA Up for Sale Again: Why Cheaper but Still No Buyer?

At a Glance (China Coffee Network): Friends familiar with the coffee market will not be strangers to the well-known brand COSTA. This former coffee old-guard has recently fallen into an awkward position: its owner C…

Friends familiar with the coffee market will not be strangers to the well-known brand COSTA. This former coffee old-guard has recently fallen into an awkward position: its owner Coca-Cola has again launched a process to sell COSTA. The brand gets cheaper and cheaper, but why is no one buying?

According to Jiemian News, people familiar with the matter said Coca-Cola is again seeking to sell COSTA Coffee. The earlier sale process stalled earlier this year and has now been stalled for months. The report said at least one strategic acquirer had considered a transaction but dropped it over valuation and strategic issues. It is currently unclear what price Coca-Cola might seek if it pitches the asset more aggressively.

Last May there were reports that Coca-Cola had met with potential buyers to discuss a low-price sale of COSTA, meaning the UK’s largest coffee-chain brand COSTA may change hands again. In 2018 Coca-Cola acquired COSTA in full from UK’s Whitbread for $5.1 billion (about 36 billion yuan). The deal was one of then-CEO Quincey’s most important acquisitions. At the time Coca-Cola had high hopes—hot drinks were one of the few categories without a global brand layout, and COSTA’s strong coffee platform could let Coca-Cola enter the market.

At the time, COSTA was the world’s second-largest coffee chain, with nearly 4,000 stores worldwide, a complete coffee supply chain and a trained barista workforce. Coca-Cola valued not only COSTA’s physical network but its full coffee platform spanning stores, ready-to-drink (RTD) coffee and vending machines.

COSTA’s growth was sluggish, far below Coca-Cola’s initial expectations. According to financial data, COSTA’s revenue was about £1.3 billion in FY2018, falling to £1.22 billion in FY2023 (latest data).

II. Why cheaper but still no buyer?

Recently Coca-Cola wants to sell COSTA again. This is not surprising—from the high-price acquisition to today’s discounted handover, COSTA’s performance under Coca-Cola in recent years can only be described as “passable at best.” Now being sold again, how should we read it?

First, COSTA’s expected story has fundamentally changed. At that time, COSTA was the world’s second-largest coffee chain, holding a mature store network and many peripheral businesses, able to tell a highly imaginative capital-market story. Carbonated-drink growth hitting a ceiling is Coca-Cola’s long-standing worry, and the coffee track was then a recognized consumption-upgrade direction.

Coca-Cola’s calculus was clear: take COSTA, on one hand directly enter the freshly made coffee track, on the other rely on COSTA’s coffee IP to develop bottled RTD coffee, connecting offline stores and fast-moving retail channels into a complete coffee product matrix. By the logic of the time, this acquisition looked like a beautiful strategic patch.

But after so many years of operation, the market has gradually seen the truth: COSTA’s heavy-asset store model, compounded by its inherently weak growth attributes, had its imagination overrated from the start. Store rent and labor are rigid costs; every store needs continuous investment, and marginal expansion cost is hard to lower. Unlike traditional bottled drinks, where once the product is set, factory production and channel distribution mean lower unit cost at higher volume.

A coffee chain is nothing like that logic—the more stores, the heavier the fixed-cost burden. When market growth slows and consumer demand shifts fast, this business model’s fragility is exposed. The business synergies Coca-Cola expected did not materialize; COSTA even kept consuming the group’s management resources, and the beautiful M&A story slowly became an asset burden.

Second, COSTA’s biggest pain point is being stuck in the middle. The coffee market’s tiers are already very clear: high-end specialty coffee has its stable clientele, pursuing bean quality and store character, willing to pay for unique experience. Starbucks firmly holds the upper-middle position—it sells not just a cup of coffee but the “third place,” a social scene; many go to Starbucks for the environment to work or meet, a scene mindset deeply etched in consumers. The low-end coffee market sees Luckin, Cotti and others continually battling, using low prices, high-frequency coupons and online delivery to grab mass consumers, turning coffee into an everyday affordable drink.

COSTA’s awkwardness is that it has neither advantage. It lacks Starbucks’ long-accumulated space attribute and social brand mindset—consumers do not prioritize going to COSTA to work or meet; meanwhile its pricing cannot come down, unable to match internet coffee brands on price, and its online operation and delivery-traffic playbook also lags. Unable to beat Starbucks upward on scene barriers, unable to beat new coffee brands downward on value, squeezed from both sides, its target clientele keeps draining.

Many consumers feel COSTA coffee is not cheap, yet has no sufficiently unique reason to patronize specifically. This sandwich positioning could barely survive in an incremental era; once the industry enters stock competition and the pie stops growing, brands grab each other’s customers, and the brand in the middle is hit first. Many failed consumer brands fell into exactly this middle-positioning trap.

Third, COSTA’s operating model is too heavy and too slow. Starbucks sells space; Luckin and Cotti sell internet efficiency; but COSTA still follows the old traditional heavy-asset store logic. This heavy-asset play, in an era emphasizing light-asset and fast-turnover, is undoubtedly a drag. For example, mainstream players now iterate products almost weekly, updating every three to four weeks, stimulating palates with co-branded hits and fruit/tea coffees to lift repurchase. But COSTA’s product update speed lags far behind market needs; its menu recycles the same classic espresso.

Worse, the overly heavy store model inevitably brings high fixed costs. Large mall stores have extremely high rent; under this heavy asset, without very high table turnover, cash flow is directly dragged. Facing high rent and low turnover, COSTA can barely maintain, let alone expand. Without large capital to catalyze, heavy asset means high risk—one step slow, every step slow.

Fourth, the gene difference with Coca-Cola makes it harder to get support. Many fail to see this underlying logic, thinking Coca-Cola as a global FMCG giant can easily channel and tech-enable a coffee chain. This commits a typical industrial-economics error. Coca-Cola’s real core competence lies in globally laid-out channel distribution, highly standardized industrial production, and marketing that sells a bottle of sugary water into global consensus. This logic is extremely standardized, volume-driven, strongly FMCG.

But chain coffee is an exceptionally complex industrial ecosystem; it is not just selling drinks, but tests continuous, meticulous supply-chain operation—from green-bean procurement, roasting and blending to in-store quality control, each link must be managed like embroidery; it needs front-end interaction with consumers and a sustained ecosystem to maintain heat and stickiness. This is completely severed from the consume-a-sip-of-Coke ecosystem. Coca-Cola lacks the gene to do heavy supply chains and physical-service ecosystems; the root is that their underlying business logics do not connect. Forcing FMCG genes onto a chain-coffee ecosystem is like using tank blueprints to build a sports car—looks sturdy, but drives wrong everywhere. This gene difference doomed this merger to eventual disintegration.

It can be said that this COSTA sale, whatever the outcome, these problems are what any potential new owner must face and solve. If a new owner cannot fundamentally solve them and find a suitable differentiation strategy, COSTA’s fate will likely not change much. Coffee-market competition has entered a white-hot stage; the time and opportunity left for COSTA are truly few.

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