Costa Coffee Bounces Back After Coca-Cola’s Failed Sale Attempt

Costa Coffee says it has delivered a year of “strong progress,” rebounding to profitability just months after its parent company, Coca-Cola, quietly abandoned efforts to sell the chain to a private equity buyer.

The UK’s second-largest coffee chain grew revenue by five per cent to £1.3bn last year and swung back into operating profit, according to accounts filed by the company. The turnaround marks a notable reversal of fortune for a brand that just a year ago was being shopped around to buyout firms as Coca-Cola looked to cut its losses on a business it bought for £3.9bn in 2018.

Costa Coffee Returns to Profit After Rocky 2024

Costa posted an operating profit of £20m in 2025, a sharp turnaround from the £13.5m loss recorded the previous year. The company attributed that earlier slump to “soft footfall and growth of value-led competitors” — a polite way of describing the squeeze cheaper rivals have put on traditional coffee shop chains across British high streets.

Still, not every metric moved in the right direction. Costa’s statutory profit actually fell by seven per cent to £62m, a reminder that headline recovery narratives rarely tell the whole story. The gap between operating performance and bottom-line profit suggests one-off costs or accounting adjustments took some shine off an otherwise upbeat set of results.

Chief executive Philippe Schaillee credited the company’s investment programme — a mix of store refurbishments and product innovation — for driving the improvement. “These results demonstrate the strength of the Costa brand and the dedication of our hard-working teams, who serve great coffee with heart every day, and reinforce our focus on building sustainable long-term growth,” he said.

A Sale That Never Happened

The backdrop to this recovery is Coca-Cola’s abandoned attempt to offload Costa. The beverage giant had been seeking roughly £2bn for the chain, with names including Asda owner TDR Capital, Gail’s backer Bain Capital, and private equity firm Apollo reportedly circling as potential buyers. But in January, Coca-Cola scrapped the sale process after bids came in below its expectations.

That decision leaves Costa Coffee back under the Coca-Cola umbrella for now, with the drinks giant presumably watching closely to see whether this year’s improved numbers represent a genuine turnaround or a temporary bounce. Either way, the failed sale has given Costa breathing room to pursue its own recovery plan rather than operating under the uncertainty of a looming ownership change.

Losing Ground to Greggs and Cheaper Rivals

Despite the improved financials, Costa’s position atop the UK coffee market has slipped. Earlier this month, bakery chain Greggs overtook Costa to become the country’s largest branded coffee destination by outlet count, with 2,737 sites compared with Costa’s 2,707. For a brand that has long positioned itself as Britain’s coffee shop of choice, ceding that crown to a bakery chain best known for sausage rolls is a symbolic blow.

The competitive pressure runs in both directions. Budget-focused operators have chipped away at Costa’s customer base from below, while upmarket entrants like Blank Street have begun appearing on UK high streets, targeting younger, trend-conscious coffee drinkers from above. Costa also has the dubious distinction of having the highest proportion of sites within a five-minute drive of another coffee brand — 73 per cent as of December 2025 — underscoring just how saturated and fiercely contested the UK coffee market has become.

In response, Costa appears to be prioritising quality over sheer scale. The chain opened just 79 new UK stores in 2025 and plans to open only 40 to 50 new sites over the coming year — a notably cautious expansion pace for a brand that once blanketed town centres with new openings.

Betting on Refurbishments and New Flavours

Instead of chasing growth through new store openings, Costa has poured resources into revamping existing locations. The company has refurbished 1,063 stores across the UK and Ireland since 2023, including 305 last year alone, and plans to refresh roughly 210 more sites in 2026.

Product innovation has also played a role in the recovery. Costa pointed to its Matcha and Ube drinks as key drivers of customer growth, with iced beverages proving especially popular during last year’s summer heatwaves. “Costa is deliberate with innovations, ensuring that innovations have staying power that Costa can scale really well,” the company said. “That’s the advantage of Costa’s scale: when we see something customers genuinely want, we can make it accessible to millions of people.”

The chain still serves more than four million cups of coffee daily and counts six million active members in its loyalty scheme — scale that gives Costa Coffee a cushion even as its market lead narrows. Whether that scale is enough to fend off cut-price challengers and premium newcomers alike will determine if this year’s progress marks a lasting recovery or merely a pause before the next downturn.