Coca-Cola acquired Costa Coffee from British hotel and leisure company Whitbread for $5.1 billion in August 2018. At the time, the deal was seen as a major step towards expanding beyond its traditional cold drinks business, report mentioned.In 2020, restrictions forced Costa's UK coffee shops to close, cutting off a key source of revenue.
Coca-Cola spent billions of dollars buying Costa Coffee in 2018, hoping to make a strong entry into the global coffee market. Nearly eight years later, the company has struggled to turn that investment into the success it had expected, reported Bloomberg.The plan was ambitious.
Coca-Cola wanted to use its vast distribution network to expand Costa's coffee vending machines and bottled coffee business across the world. However, expensive machines, operational challenges and a lack of brand recognition in the US have held back those ambitions.Costa continues to operate thousands of coffee shops and vending machines, mainly in the UK and Ireland.
While its financial performance has recently improved, the business has not become the global coffee powerhouse Coca-Cola had hoped for.WHY COCA-COLA BOUGHT COSTA COFFEECoca-Cola acquired Costa Coffee from British hotel and leisure company Whitbread for $5.1 billion in August 2018. At the time, the deal was seen as a major step towards expanding beyond its traditional cold drinks business.
Costa, founded in London in 1971, established itself as one of Britain's best-known coffee chains. Whitbread had bought the business in 1995 for 19 million pounds and expanded it from 39 outlets into a widely recognised brand.Coca-Cola saw an opportunity to take Costa beyond its coffee shops.
The company wanted to use its global network of bottlers and distributors to sell ready-to-drink coffee and expand Costa Express, its automated machines that prepare espresso-based drinks. The opportunity appeared attractive.
Coca-Cola estimated that the global coffee and tea market was worth around $570 billion, but the company had a limited presence in the category.The acquisition was intended to give Coca-Cola a platform to compete in this large market without relying entirely on its traditional beverages.EXPENSIVE MACHINES AND DISTRIBUTION CHALLENGESOne of the main pillars of Coca-Cola's strategy was to expand Costa Express machines across different markets.These touchscreen machines allow customers to order coffee-based drinks, including espresso and cappuccino. Costa already had a strong presence in the UK, including at Shell petrol stations, where customers were familiar with the brand and its coffee.However, expanding the model internationally proved more difficult than expected.Unlike traditional soft drink vending machines, Costa Express machines require regular maintenance and careful handling of ingredients such as fresh milk and coffee beans.
Coca-Cola's bottling partners, which were accustomed to distributing cold beverages, were not necessarily equipped to manage these requirements.The machines were also expensive and complicated to install and operate.Coca-Cola had hoped to use its existing vending and distribution network to place large numbers of Costa machines in new markets. But the two businesses did not fit together as smoothly as expected.By the time Coca-Cola bought Costa, the company had 8,237 Express machines.
That number has since risen to more than 15,000, but the expansion has not delivered the global reach that the company had initially envisaged, the report mentioned.WHY COSTA STRUGGLED TO WIN OVER US CONSUMERSThe US was an important potential market for Costa, but the brand had little recognition among American consumers.In Britain, Costa could rely on customers who already knew its coffee shops and were willing to pay for espresso-based drinks made with fresh ingredients. In the US, many consumers were more familiar with conventional drip coffee sold at petrol stations and other everyday locations, the report mentioned.Introducing an unfamiliar brand through vending machines also made it harder to attract customers who had no prior experience with Costa.Coca-Cola did not pursue an extensive expansion of Costa coffee shops in the US.
One concern was the potential impact on its relationship with McDonald's, an important Coca-Cola customer that also sells coffee.Instead, the company focused on vending machines and ready-to-drink products. However, it struggled to gain a meaningful share of the ready-to-drink coffee market.Its rival PepsiCo, through its partnership with Starbucks, had a stronger position in the US market with Starbucks Frappuccino products, according to the report.Costa's limited brand recognition in the country made it harder to compete with established players.PANDEMIC ADDED TO COSTA'S PROBLEMSThe Covid-19 pandemic created another major setback for business.In 2020, restrictions forced Costa's UK coffee shops to close, cutting off a key source of revenue.
During lockdowns, many consumers also invested in home coffee machines, changing their coffee-buying habits, the report mentioned.Although Costa's vending machines benefited as travel and public activity resumed, customers did not return to coffee shops in quite the same way. The company also faced criticism from former employees over delays in renovating its outlets.Costa was therefore dealing with both the immediate effects of the pandemic and the longer-term challenge of modernising its business.The company also missed some emerging consumer trends.
For instance, Costa introduced a full matcha latte offering in early 2026, several years after the drink had begun gaining popularity among competitors.Costa has said that its matcha latte has become the best-selling version of the drink among UK speciality coffee shops, although the company acknowledged that it was not the first to introduce the product.FAILED SALE ATTEMPT AND COST-CUTTING MEASURESBy 2025, Coca-Cola was publicly acknowledging that its investment in Costa had not performed as expected, the report mentioned.The company attempted to sell Costa towards the end of last year, with private equity firms among the potential buyers. Reports said that some interested parties considered offers of around 1 billion pounds, significantly below the amount Coca-Cola had paid for the business.However, the talks collapsed over disagreements about the price and the scope of the proposed sale, including whether Costa's bottled coffee business would be included.Coca-Cola ultimately decided to retain the chain.
The company has also stated that it is not currently looking to sell Costa, adding that coffee remains an important part of its overall beverage strategy.Meanwhile, Costa has been cutting costs and reducing its corporate workforce. Its corporate headcount fell 18% between 2021 and 2025.The company has also been investing in store renovations and reviewing how it operates.
Some former employees believe these changes could prepare the business for another sale attempt, although Coca-Cola has not confirmed such a plan.COSTA'S FINANCIAL PERFORMANCE SHOWS SIGNS OF RECOVERYDespite the challenges, Costa's latest financial figures suggest that the business is beginning to improve.According to company filings published in the UK in September, Costa generated revenue of 1.29 billion pounds in 2025, an increase of 5% from the previous year.It also reported an operating profit of 20.4 million pounds, compared with an operating loss of 13.5 million pounds in 2024. Costa's management has said that growth accelerated in the first half of 2026.The company has renovated 1,063 stores in the UK and Ireland since 2023.
Its presence has also expanded to around 50 countries, compared with 32 when Coca-Cola acquired it, according to the report.These improvements suggest that Costa may be making progress in its core business, even though its wider international ambitions have not worked out as planned.WHAT THE COSTA DEAL MEANS FOR COCA-COLAFor Coca-Cola, Costa remains a relatively small part of a business valued at more than $400 billion in the stock market, according to the source report.However, the acquisition highlights the difficulties that even large companies can face when they enter a new industry.Coca-Cola has built its business around marketing, distributing and selling beverages through an extensive network of bottling partners. Running coffee shops and maintaining machines that prepare fresh drinks requires a different set of operational skills.The company still has reasons to diversify as consumer preferences change and demand for traditional soft drinks faces long-term pressure.
Its purchase of Fairlife, a premium milk brand, has been a more successful example of expansion into a new beverage category.Costa, by contrast, shows that a recognised brand and a large distribution network are not enough to guarantee success.Coca-Cola's challenge now is to improve Costa's performance and decide how best to use the business as part of its wider strategy. Whether the coffee chain can eventually deliver the returns originally expected remains an open question.- Ends