Coca-Cola(US:KO) 3 6 Ke·2025-08-05 03:43Core Viewpoint - Coca-Cola is reassessing its investment in Costa Coffee, reflecting on past experiences and exploring new growth avenues in the coffee category after the acquisition did not meet expectations [1][3]. Group 1: Acquisition and Initial Expectations - Coca-Cola acquired Costa Coffee for $5.1 billion in 2018, aiming to enter the hot beverage market, which lacked a global brand presence [1][3]. - At the time of acquisition, Costa was the second-largest coffee chain globally, with nearly 4,000 stores and a robust supply chain [3]. - The acquisition was seen as a strategic move to compete with Starbucks and Nestlé in the rapidly growing beverage category [3]. Group 2: Performance Issues - Costa's revenue declined from approximately £1.3 billion in the 2018 fiscal year to £1.22 billion in the 2023 fiscal year, indicating underperformance post-acquisition [3]. - Analysts noted that while new products launched in the UK received positive feedback, Costa struggled in the competitive U.S. market, primarily focusing on B2B channels due to challenges in retail [6]. - Coca-Cola's lack of experience in operating coffee shops contributed to the difficulties in integrating Costa into its business model [6][7]. Group 3: Market Challenges in China - Costa entered the Chinese market in 2006 but has seen stagnation, with only about 400 stores compared to Starbucks' 7,596 stores as of 2024 [8][10]. - The brand has been overshadowed by local competitors like Luckin Coffee, which has rapidly expanded to over 21,000 stores [8][10]. - Despite plans to open 1,000 stores by 2025, Costa's store count has remained stagnant since 2020, with reports of closures in various cities [10][11]. Group 4: Strategic Adjustments - Coca-Cola has restructured Costa's operations in China, transferring management of coffee shop operations to its European division, which may slow decision-making [11]. - The focus for Costa in China is shifting towards ready-to-drink coffee products, an area where Coca-Cola has more expertise [13]. - Despite speculation about selling Costa, Coca-Cola has integrated the brand into its regular operations, indicating a commitment to the coffee segment for the time being [13].