The Coca-Cola Firm is brewing up a sale of Costa, Britain’s greatest excessive road espresso chain, greater than six years after buying the enterprise in a transfer geared toward serving to it cut back its reliance on sugary smooth drinks.
Preliminary talks have already been held with a small variety of potential bidders, together with personal fairness corporations, Metropolis sources stated on Saturday.
Lazard, the funding financial institution, is known to have been engaged by Coca-Cola to evaluate choices for the enterprise and gauge curiosity from potential consumers.
Indicative presents are stated to be due within the early a part of the autumn, though one supply cautioned that Coca-Cola might but resolve to not proceed with a sale.
Costa trades from greater than 2,000 shops within the UK, and properly over 3,000 globally, in keeping with the newest accessible figures.
It has been reported to have a world workforce numbering 35,000, though Coca-Cola didn’t reply to a number of makes an attempt to determine the exact variety of retailers presently in operation, or its worker numbers.
This weekend, analysts stated {that a} sale might crystallise a multibillion pound loss on the £3.9bn sum Coca-Cola agreed to pay to purchase Costa from Whitbread, the London-listed proprietor of the Premier Inn lodge chain, in 2018.
One urged that Costa would possibly now command a price ticket of simply £2bn in a sale course of.
The disposal proceeds would, in any case, not be materials to the Atlanta-based firm, which had a market capitalisation at Friday’s closing share value of $304.2bn (£224.9bn).
On the time of the acquisition, Coca-Cola’s chief government, James Quincey, stated: “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide.
“Scorching drinks is likely one of the few segments of the whole beverage panorama the place Coca-Cola doesn’t have a world model.
“Costa gives us access to this market with a strong coffee platform.”
Nevertheless, accounts filed at Corporations Home for Costa present that in 2023 – the final yr for which standalone outcomes can be found – the espresso chain recorded revenues of £1.22bn.
Whereas this represented a 9% improve on the earlier yr, it was under the £1.3bn recorded in 2018, the ultimate yr earlier than Coca-Cola took management of the enterprise.
Coca-Cola has been grappling with the weak efficiency of Costa for a while, with Mr Quincey saying on an earnings name final month: “We’re in the mode of reflecting on what we’ve learned, thinking about how we might want to find new avenues to grow in the coffee category while continuing to run the Costa business successfully.”
“It’s still a lot of money we put down, and we wanted that money to work as hard as possible.”
Costa’s 2022 accounts referred to the monetary pressures it confronted from “the economic environment and inflationary pressures”, leading to it launching “a restructuring programme to address the scale of overheads and invest for growth”.
Filings present that regardless of its lacklustre efficiency, Costa has paid greater than £250m in dividends to its proprietor because the acquisition.
The deal was meant to offer Coca-Cola with a world platform in a rising space of the drinks market.
Costa trades in dozens of nations, together with India, Japan, Mexico and Poland, and operates a community of hundreds of espresso merchandising machines internationally underneath the Costa Specific model.
The chain was based in 1971 by Italian brothers Sergio and Bruno Costa.
It was bought to Whitbread for £19m in 1995, when it traded from fewer than 40 shops.
The enterprise is now one in every of Britain’s greatest personal sector employers, and has turn out to be a ubiquitous presence on excessive streets throughout the nation.
Its principal rivals embody Starbucks, Caffe Nero and Pret a Manger – the final of which is being ready for a stake sale and potential public market flotation.
It has additionally confronted rising competitors from extra upmarket chains akin to Gail’s, the bakeries group, which has additionally been exploring a sale.
A Lazard spokesperson declined to remark.
