Back in 2018, Coca-Cola made a bold move: it paid around $5.1 billion to acquire Costa Coffee, the UK-based chain, in a bid to diversify beyond fizzy drinks and stake its claim in the fast-growing global coffee market. The logic seemed bulletproof add coffee, add growth. But fast-forward to 2025, and the company’s own CEO, James Quincey, is openly admitting the investment hasn’t generated the multiplier effect they hoped for.
Quincey told investors during an earnings call that the “investment hypothesis didn’t work out as we expected,” noting that while coffee remains an attractive category, Costa has not delivered the growth outside its retail café footprint that Coca-Cola hoped for.
On the face of it, the numbers show mixed results. Costa continues to operate thousands of locations worldwide, but its financial contribution hasn’t scaled in line with expectations. Around mid-2025, reports emerged that Coca-Cola is actively exploring a potential sale of Costa, as the chain faces rising operational costs, bean-price inflation, and intense competition from premium coffee brands.
So what went wrong? There are several key reasons behind the gap between ambition and deliverables.
Firstly, operational complexity. Coca-Cola is world-class at manufacturing and distribution of beverages, but running a global retail café chain is a different game. Quincey and other executives acknowledged that scaling retail coffee operations with attendant real-estate leases, staffing, location management and café customer experience proved more challenging than expected.
Secondly, the growth model missed its target. Coca-Cola had hoped Costa’s branded channels including its automated coffee machines, vending units and international expansion would accelerate growth beyond the core café stores. But those efforts didn’t “create a multiplier” in Quincey’s words meaning the returns didn’t scale as planned.
Third, external pressures tightened the screws: inflation on coffee beans, labor cost increases, and a crowded coffee market where premium players and speciality cafes are proliferating. In the UK and Europe especially, Costa faced headwinds from rising costs and changing consumer behaviours after the pandemic.
From a strategic perspective, Coca-Cola’s attempt to move deeper into the “out-of-home” coffee business may have collided with its core strength: manufacturing beverages for retail and restaurants. Costa’s model involves foot traffic, café ambience, real-estate investment – all types of risk that a soft-drinks giant doesn’t necessarily excel at.
That said, Coca-Cola isn’t abandoning coffee entirely. The company still sees coffee as “super attractive” and profitable but what’s under review is how Costa fits into its broader ecosystem and how to capture its value effectively. Quincey said they are “reflecting on what we’ve learned” and exploring “new avenues to grow in the coffee category.”
For investors and observers, the Costa saga serves as a cautionary tale: even world-class brands can stumble when moving into unfamiliar business models. It highlights how strategic fit, operational expertise and margin expectations matter just as much as growth ambition.
Going forward, Coca-Cola may either restructure Costa, boost its synergies with the broader beverage platform (for example, through ready-to-drink coffee beverages), or pursue a sale for a handshake-loss. Regardless of the path, the company now appears less confident in the original thesis and more pragmatic about its next move.
In sum: Coca-Cola’s $5 billion coffee bet remains unsweetened, not for lack of ambition, but for the challenge of converting a drinks powerhouse into a global café operator.
