Costa. Not the brand it looks.
Coca-Cola bought it for £4 billion and is now struggling to sell it for half of that. Costa looks like a global brand. It behaves like a labour-heavy retail business.
THE GIST ON COSTA: "The £4bn Coffee Reality"
What is happening with the sale?
Coca-Cola bought Costa Coffee for £4 billion and is now struggling to sell it for half that. It is making last-ditch attempts to salvage the sale after buyers pushed back on the price.
Costa generates about £1.2 billion in gross revenue a year, yet still made a loss of £13.8 million last year. Several private equity bidders have already dropped out.
What is Costa really?
On the surface a global consumer brand. In reality a labour-heavy retail business selling an everyday product in an extremely crowded market. Every cup depends on hourly wages, long opening hours, high rent locations and volatile commodity costs, and that structure caps how profitable it can become even at scale.
What changed?
Its value was predicated on routine: commuters buying the same coffee every day, demand you could forecast. But people work from home, new independent cafes have appeared and low-cost chains have improved. Commuters are far more deliberate about where they spend.
Once volume shrinks, it stops masking the cost base and the economics become visible. Buyers aren't doubting demand for coffee. They're asking what the margin is, and what growth is left after wages, rent and saturation.
Costa or an independent cafe?
Your take. One tap, then see how everyone else voted.
Quick answers
What did Coca-Cola pay for Costa?
£4 billion, according to Huw, and it is now struggling to sell for around half that.
Is Costa profitable?
It generates about £1.2 billion in gross revenue but made a £13.8 million loss last year.
Why are buyers wary?
Costs of wages, rent and commodities cap the margin, and commuter routine has weakened.
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