Coca-Cola's plan for Costa Coffee was to put it everywhere a Coke already sits. It paid $5.1 billion for the British chain in 2018, and the idea was to use Coke's muscle in cold drinks to spread Costa through "barista-in-a-box" espresso vending machines and bottled coffee nearly everywhere Coke products are sold.
It was former chief executive James Quincey's big bet on breaking into the global coffee and tea market, which Bloomberg sizes at half a trillion dollars. Eight years on, Bloomberg's Saturday feature opens with its verdict: Coke "took a $5 billion swing at the coffee market and whiffed".
The machines that didn't travel
The machines were the first problem. Costa's vending units turned out to be more expensive and more complicated for Coke's bottlers, the companies that actually get Coke into shops, to place than the cold-drink dispensers they knew. Jason Cotta, a former Costa managing director who left six months after the deal, told Bloomberg the thinking had been that "you could marry the two things together and get this huge placement of Costa Express machines". "That turned out to not be true," he said.
Bottled coffee went no better. Coke hoped to take a real slice of a ready-to-drink coffee market worth nearly $23 billion, and was beaten to it by its biggest rival: Frappuccino, a joint venture between PepsiCo and Starbucks, is the top-selling brand in the US, where Costa is still relatively unknown.
What Coke was left with is a coffee-shop chain, more than 2,700 Costa shops concentrated in the UK and Ireland. "It's almost a rounding error for Coca-Cola, but it's a very public rounding error," said Chris Clowes, a former Costa operations manager who now consults on supply chains.
Selling, or not selling
Coke has already tried to get out once. It ran a sale late last year, and the Financial Times reported in January that the plan had been dropped after offers from private equity firms came in below expectations. At least one company from inside the industry also looked at Costa and passed, over price and strategy, Semafor reported.
This month Semafor, as relayed by Reuters, said Coca-Cola is trying again. Coke says it is not. In a statement to Bloomberg it said it is not in the market to sell Costa, that it believes in the business and that "the actions Costa has taken are delivering positive results".
Bloomberg says Costa's revenue is trending up and costs are being trimmed, which some former employees read as a sign that new chief executive Henrique Braun may try to sell it again in the coming months. For now, the company that wanted Costa wherever Coke is sold owns a few thousand coffee shops in Britain and Ireland, and says it is keeping them.
