Coca‑Cola’s planned divestiture of its Costa Coffee chain is now in jeopardy as the company and private‑equity firm TDR Capital enter last‑ditch talks to salvage the deal, according to reports that surfaced on December 13 2025.
The sale was first announced in the week of December 8, when Coca‑Cola named TDR Capital its preferred bidder. The transaction, which would transfer the Costa brand and all of its 1,400 UK stores to the buyer, is valued at roughly £2 billion—about 50 % less than the £3.9 billion enterprise value paid in 2018, implying a multibillion‑pound loss for Coca‑Cola if the deal falls through.
Costa Coffee’s financial performance has been a key driver of the sale’s uncertainty. In 2023 the chain generated £1.22 billion in revenue but posted a pre‑tax loss of £9.6 million, a sharp reversal from the £245.9 million profit reported in 2022. Rising input costs, wage pressures, and the lingering effects of the pandemic have eroded margins, while the capital‑intensive retail model clashes with Coca‑Cola’s asset‑light concentrate strategy.
Coca‑Cola’s decision to divest Costa stems from a strategic mismatch: the company’s core competency lies in producing and distributing beverage concentrates, not in operating a large network of physical coffee shops. The sale is intended to refocus capital on higher‑margin, lower‑capex segments such as zero‑sugar and functional drinks, and to reduce the burden of a business that has struggled to meet the investment hypothesis set by the Coca‑Cola board.
Negotiations have stalled over the price that TDR Capital is willing to pay. The parties have agreed that Coca‑Cola will retain a minority stake in Costa, but the valuation gap remains a sticking point. Coca‑Cola CEO James Quincey has publicly stated that Costa has “not quite delivered” and is “not where we wanted it to be from an investment hypothesis point of view,” underscoring the urgency of reaching a settlement.
If the deal collapses, Coca‑Cola will face a significant write‑down on a major asset and will need to continue managing a business that has underperformed for several years. The outcome will also signal how the company prioritizes its portfolio and whether it will pursue further divestitures of non‑core assets in the future.
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