Coca‑Cola Reportedly Weighs Sale of Costa as Experts Cite Brand Drift and Rise of Specialty Cafés

Coca‑Cola is reportedly exploring a sale of Costa Coffee amid indications the once‑dominant British café chain is losing ground to smaller, trendier competitors and changing consumer habits.

Industry and branding experts who spoke to media outlets pointed to a combination of factors — including a perception that Costa’s stores and menu have become "predictable" and "anonymous" — and wider structural pressures such as rising input costs, falling out‑of‑home demand and a shift in where and how people consume coffee.

Coca‑Cola’s global chief executive, James Quincey, told investors last month that Costa had "not quite delivered" against expectations and was not where the company wanted it "from an investment hypothesis point of view," according to published reports. The Grocer cited Coca‑Cola as attributing a three‑percent decline in coffee sales to Costa’s weaker performance in the UK and noting that the chain’s food‑to‑go offer has also struggled.

Financial data published by industry outlets show Costa generated about £1.22 billion in revenue in 2023, up roughly nine percent on the prior year but still short of the roughly £1.3 billion reported in 2018, the year Coca‑Cola acquired the business. Over the past seven years, Costa is reported to have returned more than £250 million in dividends to its parent. Media accounts also cite a pre‑tax loss of £9.6 million for Costa in 2023.

Branding specialists described a market in which independent and specialist chains have gained cultural cachet by offering perceived authenticity and a tailored customer experience. "There's no character left," said Calvin Innes, creative strategist at JvM NERD, characterising Costa’s uniform décor and standardised menu as failures to keep pace with consumer demand for personality and discovery. "That uniformity was once a strength, but now makes Costa feel more like the 'McDonald's of coffee' than a place people genuinely want to belong to," he said.

Dominic Goldman, founder and chief creative officer of agency You're The Goods, echoed that view, saying Costa had not renewed its offer while other brands "elevated and upskilled." He cited consumers’ heightened expectations around bean quality, milk texture and store ambience, and argued a turnaround would require both product and brand investment.

Other experts warned that convenience alone no longer guarantees loyalty. Julia Payne, founder of Fractional CMO, noted that ubiquity can undermine emotional connection: "Being everywhere makes Costa convenient, but convenience alone doesn't create an emotional connection or a reason to prefer the brand over alternatives," she said.

The competitive landscape has shifted. Independent specialty operators and upmarket chains such as Gail's and Grind, as well as newer entrants and international roll‑outs from companies like Watchhouse, Blank Sheep Coffee and KNOOPS, have attracted investment and consumer interest by emphasising sourcing, craft and distinctive store formats. Several specialists highlighted by analysts have used investor funding and crowdfunding to expand in affluent or high‑foot‑traffic business districts, where higher ticket sizes are more sustainable.

Economic and structural pressures have compounded the challenge. Consumer champion Martin Newsman pointed to a 50‑year high in coffee bean prices and a broader cost‑of‑living squeeze that has reduced out‑of‑home treats for some customers. He also noted the growth of ready‑to‑drink and at‑home formats as alternatives to café purchases. Meanwhile, changes in work patterns have reduced city‑centre footfall, increasing the risk attached to large portfolios of high‑street leases.

Some competitors have reported stronger recent results. Pret A Manger said sales rose by 10 percent in the first half of 2024 and posted higher underlying profits for 2023. Café Nero reported an increase in sales for the six months to November 2024. Conversely, Starbucks' UK business reported a pre‑tax loss for its 2024 financial year amid a boycott campaign linked to geopolitical events, illustrating how external factors can cut both ways for multinational chains.

Not all commentators draw a simple moral for smaller brands: Paul MacKenzie‑Cummins, owner of reputation firm Clearly PR, warned that the broader market could see similar pressures as consumer tastes evolve faster than some established chains can adapt. Jon Townsend, director at The Institute of Coffee, observed that specialty operators have benefitted from new capital and investor interest, enabling scale in some markets but also concentrating growth in wealthier areas or business districts.

For any potential buyer, analysts said the task would likely involve refreshing store design, restoring product quality and rebuilding an emotional connection with customers. "Whoever buys Costa must fix the recipe and then invest properly in the brand," Dominic Goldman said, arguing that a Costa cup should convey pride rather than apology.

Coca‑Cola has not confirmed plans for Costa. Media outlets that reported on the potential sale said the company was "reflecting on what we've learned, thinking about how we might want to find new avenues to grow in the coffee category." The Daily Mail and other publications reported the details of industry commentary; Costa and Coca‑Cola did not provide immediate public responses to those reports when contacted.

The possible sale comes as coffee culture in the UK continues to fragment between convenience‑oriented mass channels and a growing specialty market in which provenance, craft and experience drive consumer choice and, in some cases, higher price points. How a new owner might reposition Costa — or whether Coca‑Cola opts to retain and reinvest in the brand — could reshape the high‑street coffee market in the year ahead.