The coffee industry is huge! Coca-Cola wants to sell Costa at a low price of 25%?!
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Recently, Bloomberg reported that global beverage giant Coca-Cola may sell Costa, a well-known British coffee chain it bought in 2018.
It is reported that Costa, the UK's largest coffee chain brand founded in 1978 with Starbucks, operates in more than 30 countries and regions around the world, with more than 4000 stores. Its market share in the UK, its home base, once surpassed Starbucks.
In the China market, Costa, which entered in 2006, has always been regarded as a strong rival to Starbucks. When I first entered China, Costa was often seen around Starbucks stores, and its opening speed was 2.5 times faster than Starbucks. As a result, the China market has become Costa's largest market in the world except the UK, and the only market in the world directly operated by the headquarters.
However, with the rise of domestic coffee chain brands such as Luckin and Manner, competition in the China coffee market has become increasingly fierce. Costa, which was originally full of ambition and planned to catch up with or even surpass Starbucks in the China market, revealed its shortcomings such as lagging digital operations and traditional marketing models, and its brand competitiveness is not as good as before.
In 2020, Costa has successively reported that stores are closing in the China market. As of the end of 2024, Costa Coffee has only 389 stores in China, mainly distributed in first-tier cities such as Beijing and Shanghai, and is gradually withdrawing from cities such as Nanchang and Qingdao. Today's data from Narrow-door Dining Center shows that the size of Costa stores is still shrinking, with the number of stores dropping to 334.
This situation has led its parent company Coca-Cola to plan to sell its Costa business. In 2018, Coca-Cola bought Costa for £ 3.9 billion and began to enter the coffee market. However, the deal did not bring Coca-Cola the expected profit growth. At its earnings conference in July this year, Coca-Cola CEO said,"Based on the original investment assumptions, Coca-Cola's investment in Costa Coffee did not meet expectations."
Media reported that the proposed sale has attracted the interest of many well-known investment institutions such as Ruixing's major shareholders, Dazheng Capital, KKR, and Bain Capital. Sources revealed that the preliminary valuation of Costa Coffee is about 1 billion pounds, which is one-quarter of the £ 3.9 billion purchase price Coca-Cola paid.
In addition to business valuation, the report quoted sources familiar with the matter as saying that Dazheng Capital is indeed following up on the Costa Coffee acquisition, but it may directly contribute funds through its own funds, or it may participate in the bidding together with Ruixing Coffee, which it invests in. In addition, media reports said that Coca-Cola does not want to completely lose its Costa coffee business. The American beverage giant has told potential acquirers that it will retain control of Costa coffee ready-to-drink products.
In the field of ready-to-drink coffee, although Nestlé has an absolute leading position, brands such as Costa and Starbucks also occupy market positions that cannot be ignored. Therefore, Coca-Cola, which specializes in this field, will still retain its ready-to-drink coffee business with potential space, which means that its main consideration for selling should be the Costa coffee store business.
So far, Coca-Cola, Costa, Dazheng Capital and Lucky have declined to comment on market rumors.
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