Costa Coffee sale draws interest from Wagamama owner as Coca Cola reviews options

Costa Coffee, Britain’s leading high street coffee chain, has attracted interest from potential buyers as Coca Cola considers divesting the brand. Apollo Global Management, the owner of Wagamama’s parent group, is understood to have entered preliminary discussions with Lazard, advisers to Coca Cola, as part of the process. While KKR, another prominent private equity firm, has also held talks, indications suggest it will not submit a formal bid.

Coca Cola acquired Costa Coffee from Whitbread in 2019 for £3.9 billion, seeking to enhance its presence in the global coffee sector and lessen dependence on carbonated beverages. Despite Costa’s established dominance on the UK high street and trade across 50 countries, revenues have struggled to gain momentum. For 2023, Costa reported £1.2 billion in revenues compared to £1.3 billion in 2018, the year prior to Coca Cola’s takeover.

Recent comments from James Quincey, chief executive of Coca Cola, reveal that the performance of Costa has not matched initial expectations. The company is reassessing its approach to extracting value and seeking fresh growth avenues within the coffee category. Efforts to revitalise Costa continue, including a significant store refresh programme. A new concept store in London has introduced an updated layout, streamlining service for customers on the go and enhancing the in-store atmosphere for those wishing to linger.

The emergence of Apollo among the interested parties signals ongoing deal activity within the hospitality sector as international investment firms look to expand their UK holdings. Costa Coffee holds over 2000 outlets in Britain, contending with rivals such as Starbucks, Pret a Manger, and Caffè Nero. Discussions around its future ownership come at a pivotal time for both the chain and its parent company as market dynamics evolve across the coffee and casual dining industries.