Costa Coffee’s Future in Question as Coca-Cola Prepares Sale

Private equity giant Bain Capital, the owner of PizzaExpress and upmarket bakery chain Gail’s, has entered the race to acquire Costa Coffee from Coca-Cola in a deal that could reshape the UK’s café sector.

The Boston-based firm’s Special Situations unit, established in 2018 to invest in complex assets, has submitted a first-round bid for Costa, which is currently valued at around £2bn. The move places Bain alongside other suitors such as TDR Capital, the private equity owner of Asda and UK operator of Popeyes. Meanwhile, Apollo Global Management, initially considered a strong contender, has opted not to proceed with a bid.

A Coffee Chain in Transition

Founded by Italian brothers Sergio and Bruno Costa in London in 1971, Costa has grown into the UK’s largest coffee chain, with more than 2,600 cafés across the UK and Northern Ireland, and around 3,900 sites globally. Despite its scale, Costa has struggled in recent years. Rising labour costs, inflation in raw ingredients such as coffee beans, and subdued consumer spending since the Covid-19 pandemic have all weighed heavily on performance .

Coca-Cola acquired Costa for £3.9bn in 2018, positioning the brand as part of its broader ambition to diversify beyond soft drinks. At the time, executives heralded the deal as a pathway to creating a “global coffee platform.” However, the results have fallen short of expectations. In 2023, Costa reported a pre-tax loss of £9.6m, a sharp reversal from the modest £245,950 profit recorded the year before. Coca-Cola itself acknowledged that the investment had “not quite delivered” on its original hypothesis .

Private Equity’s Appetite

Bain Capital’s track record in hospitality suggests Costa could be a natural fit within its portfolio. The firm became the controlling shareholder of Bread Holdings, the parent company of Gail’s, in 2021, and it was part of the group that took control of PizzaExpress during the pandemic. More recently, Bain injected an additional £20m into PizzaExpress to support its turnaround .

Through its Special Situations unit, which manages $21.6bn in assets, Bain has focused on businesses that require both liquidity and operational restructuring. This makes Costa—an established but struggling high street icon—an attractive target. Analysts note, however, that a potential sale may crystallise significant losses for Coca-Cola, with Costa now valued at nearly half of its 2018 purchase price  .

The Wider Market Impact

The bidding war for Costa reflects a broader shift in the UK’s dining and beverage market, where casual dining groups and coffee chains are under pressure to adapt to new consumer behaviours, tighter margins, and increasing competition. Investors see opportunity in established brands with loyal customer bases but recognise the operational challenges in turning them around.

Should Bain succeed, the deal could echo its past strategy with PizzaExpress and Gail’s: stabilising iconic but pressured brands, leveraging economies of scale, and seeking growth through innovation and international expansion. Yet the scale of Costa’s global operations may prove a greater test, especially at a time when international coffee competition is intensifying, with Starbucks and independent operators vying for market share.

What Comes Next

Initial bids for Costa were due in late September, and the process is now advancing under the guidance of investment bankers at Lazard. With Coca-Cola under pressure to offload an underperforming asset, and private equity circling, the coming months may determine not only Costa’s future ownership but also the direction of the UK’s wider coffee culture.

As one industry insider noted, “This isn’t just about who buys Costa—it’s about whether Britain’s most famous coffee brand can rediscover its spark.”