Coca-Cola explores sale of Costa Coffee, source says

FILE - Cans of Coca-Cola are on display at a grocery market in Uniontown, Pa., April 24, 2022. The soft drink giant's sponsorship of the flagship U.N. climate conference, known as COP27, sparked an online backlash and highlighted broader concerns about corporate lobbying and influence. (AP Photo/Gene J. Puskar, File) (Gene J. Puskar/AP)

U.S. soft drinks company Coca-Cola is working with investment bank Lazard to review options, including a potential sale, of British coffee chain Costa, a source familiar with the matter told Reuters on Sunday.

Coca-Cola did not immediately respond to a request for a comment outside regular business hours. Costa, and Lazard did not immediately respond to requests for comment.

The company has held initial talks with a small number of potential bidders for Costa, including private equity firms, Sky News first reported, citing unidentified sources.

Indicative offers are expected in early autumn, but a sale is not definitive, Sky reported.

Coca Cola acquired Costa Coffee in 2018 for over US$5 billion, to strengthen its position in the global coffee market, competing with Starbucks and Nestle .

A potential sale of Costa Coffee which operates in 50 countries, would add onto the wave of dealmaking in the packaged food space which has witnessed robust growth as companies seek scale to weather the impact of price inflation and consumers shopping for healthier options.

In an earnings call last month, the Coca-Cola CEO James Quincey hinted at changes to Costa’s operations, saying “Our investment in Costa is not where we wanted it to be from an investment hypothesis point of view.”

“We’re in the mode of reflecting on what we’ve learnt, thinking about how we might want to find new avenues to grow in the coffee category, while continuing to run the Costa business successfully.”

In the United States, food companies are seeking healthier substitutes as they respond to Health Secretary Robert F. Kennedy Jr.’s Make America Healthy Again campaign. In July Coca-Cola had agreed to use real cane sugar in the United States.

Reporting by Anousha Sakoui, additional reporting by Gursimran Kaur, Abu Sultan, Mrinmay Dey and Pretish M J in Bengaluru. Editing by Mark Potter and Alistair Bell.