Coca-Cola’s $5.1 billion acquisition of Costa Coffee in August 2018 was pitched as a strategic entry into the global coffee market, a sector estimated at $570 billion. The British chain, known for its UK presence and espresso-based offerings, was expected to leverage Coca-Cola’s vast distribution network for international expansion. More than eight years later, the strategy has largely unraveled, leaving Costa confined primarily to the UK and Ireland. The deal’s failure stems from a series of operational and market missteps that derailed its ambitious rollout plans.
The initial vision centered on scaling Costa through Coca-Cola’s existing infrastructure. The company planned to deploy “Costa Express” vending machines—dubbed “barista-in-a-box” units—in locations where Coca-Cola already distributed beverages. However, these machines proved costlier and more labor-intensive to maintain than traditional soda dispensers. Jason Cotta, a former Costa managing director who left six months post-acquisition, explained to Bloomberg that bottlers struggled to integrate the new system.
Unlike low-maintenance soda machines, Costa Express required daily attention, a burden many distributors were unprepared to handle. Bloomberg reported that they proved costlier and more complicated for bottlers to install than the cold beverage dispensers they were used to. Soda machines need very little upkeep, while Costa Express units needed daily care, which many bottlers found hard to manage.
Read Also: HDFC Bank Faces Probe and Merger Woes Ahead of New
Expanding into the U.S. market presented another hurdle. Coca-Cola avoided opening numerous Costa cafes in America to avoid straining its relationship with McDonald’s, a key partner. Without physical locations, the brand lacked visibility among American consumers, who were unfamiliar with Costa’s offerings. The U.S. ready-to-drink (RTD) coffee market, valued at nearly $23 billion, was already dominated by Frappuccino, a PepsiCo-Starbucks joint venture that led sales.
Costa’s absence from supermarket shelves and its inability to compete with established brands further eroded its prospects. Coca-Cola was wary of opening many Costa cafes there, fearing it would cause trouble with McDonald’s, one of its most valued customers. Without cafes, the brand had almost no recognition in the country. American consumers were also not used to high-quality espresso from vending machines, and they were unwilling to pay coffee-shop prices for it.
The pandemic exacerbated challenges. Costa’s UK stores closed in 2020, causing significant revenue losses. Though vending machines resumed performance post-restrictions, the broader recovery under Coca-Cola’s ownership lagged. The company also delayed shop refurbishments during the crisis. By 2024, Costa generated £1.2 billion in revenue but reported an operating loss of £13 million, pressured by rising labor costs and coffee prices amid stiff competition from budget and premium rivals.
Read Also: Newsprint Industry Urges PM to Resolve Coal Crisis
Costa also ran into events that no deal plan could have covered. Its UK shops were shut in 2020 during the COVID-19 pandemic, which led to a major loss of revenue. Express vending machines performed well once restrictions eased, but the wider recovery under Coca-Cola’s ownership was not strong. The company also lagged on refurbishing its shops during this period.
Late last year, Coca-Cola attempted to sell Costa but received bids below expectations, valuing the chain at roughly £2 billion, half its 2018 purchase price. Since then, the company has denied any active sale, instead focusing on optimizing its existing UK and Ireland estate.
