KKR Reawakens Bid for Costa Coffee in Surprise Turn as Coca-Cola Seeks £1.5bn Sale
November 2 - 2025
Coffee Geography Magazine
In an unexpected twist that has reignited the auction for one of Britain's most prominent coffee chains, private equity firm KKR has re-entered negotiations to acquire Costa Coffee from The Coca-Cola Company. This dramatic reversal comes after KKR had initially appeared to walk away from the process in late August, soon after news of the potential sale first emerged. The New York-based investment giant has now rejoined competing bidders Bain Capital and TDR Capital in active talks, creating a three-way contest for the coffee chain.
The renewed interest from such a prominent private equity player marks one of the most significant developments in the auction process and could intensify competition for the asset. Management presentations with potential bidders were scheduled to begin recently, giving suitors deeper access to Costa's operations and financial details. The return of KKR to the negotiating table suggests strong underlying investor appetite for established consumer brands with global scale, even amid a challenging retail environment.
Coca-Cola's decision to explore a sale of Costa's store operations represents a significant strategic shift for the beverage behemoth. A key aspect of the proposed transaction structure involves Coca-Cola retaining ownership of Costa's ready-to-drink portfolio, which includes bottled and canned coffee products distributed through supermarkets and other retail channels. This carve-out arrangement would allow Coca-Cola to maintain a presence in the coffee category through higher-margin packaged goods while exiting the more capital-intensive physical retail operations.
The most striking aspect of the current auction is the substantial valuation compression compared to Coca-Cola's original acquisition price. Industry insiders suggest that Costa could be sold for approximately £1.5 billion, less than half of the £3.9 billion that Coca-Cola paid in 2019. This potential write-down is set against a backdrop of mixed performance. In 2023, the coffee chain recorded revenues of £1.22 billion, representing a 9% increase from the previous year. Despite this improvement, the figure remains notably below pre-acquisition levels, underscoring the challenges that have prompted Coca-Cola's reconsideration.
The challenges facing Costa Coffee reflect broader sector-wide headwinds affecting established coffee chains globally. The industry is grappling with input cost pressures from persistently high green coffee prices, changing consumer patterns, and an increasingly competitive beverage landscape. Even industry giants have felt these pressures, with companies reporting softened earnings and pursuing consolidation to diversify revenue streams.
Costa Coffee has undergone several ownership transitions throughout its history. The chain was founded in 1971 by Italian brothers Sergio and Bruno Costa and was sold to Whitbread in 1995 for just £19 million. Under Whitbread's ownership, Costa experienced rapid expansion throughout the UK and internationally, growing to become Britain's largest coffee chain before Coca-Cola's blockbuster acquisition.
If completed, a sale of Costa Coffee to a private equity buyer would rank among the largest UK consumer-sector transactions of the year. For the successful bidder, potential value-creation levers could include store format optimization, selective international expansion in promising overseas markets, and improvements to operational efficiency. The competitive landscape for the acquisition features distinct profiles among the leading bidders, with KKR as the surprise returnee, Bain Capital bringing experience from its partial ownership of other bakery chains, and TDR Capital potentially offering strategic partnerships through its ownership of UK supermarket chain Asda.
As the auction process advances, the outcome will serve as a barometer for both the valuation of consumer-facing retail assets in the current economic climate and the perceived growth trajectory of established coffee chains. The ultimate resolution will not only determine the future of one of Britain's most recognizable high street brands but also provide valuable insights into how institutional investors view the long-term prospects of physical retail concepts.