Coca-Cola (KO) has decided to keep its Costa Coffee chain after all, but not for happy reasons. The beverage giant pulled the plug on a months-long auction process in December after private equity bids came in lower than expected, according to a Financial Times report citing sources familiar with the situation.

The company had been in talks with several bidders, including TDR Capital and Bain Capital's special situations fund, hoping to unload the coffee business for around $2.5 billion. That's a painful haircut from the roughly $5 billion Coca-Cola paid to acquire Costa from Whitbread back in 2018. Sometimes deals don't age well.

The timing is particularly interesting given that Henrique Braun is set to take over as CEO from James Quincey in March. Nothing says "welcome to the job" quite like inheriting a struggling coffee business that nobody wants to buy.

A Business Running on Empty

Costa's troubles aren't exactly a mystery. The coffee chain has been getting squeezed from all sides, facing fierce competition from independent coffee shops and mass-market rivals while dealing with rising operational costs. It's a brutal combination that's pushed the business deep into the red.

The numbers tell the story: Costa's operating losses more than doubled to £13.5 million ($18.15 million) in 2024, even as it generated £1.2 billion ($1.6 billion) in revenue. When you're moving that much product and still losing money at an accelerating rate, you've got problems.

Keeping Costa on the books could force Coca-Cola to take a write-down on the business's value, which won't be fun. However, one person familiar with the company's thinking told the Financial Times that Coca-Cola might try selling Costa again down the road. Maybe the market will be more receptive later, or maybe the business will improve. Hope springs eternal.

The auction process had attracted some heavy hitters. TDR Capital, which owns UK supermarket chain Asda, had been named the preferred bidder in a deal structure that would have let Coca-Cola keep a minority stake. Other private equity players including Apollo, KKR, and Centurium Capital (which owns China's Luckin Coffee chain) participated in earlier rounds. Investment bank Lazard handled the process.

Coca-Cola, TDR Capital, and Bain Capital all declined to comment on the matter.

Stock Performance Holds Steady

Coca-Cola (KO) shares dipped 0.22% to $71.08 in after-hours trading Tuesday, according to market data. The stock has actually performed well this year, climbing about 12.5% in 2025 so far. That compares favorably to rival PepsiCo (PEP), which has dropped 5.1% over the same period.

From a technical perspective, the stock shows balanced strength with moderate momentum and quality scores, though value metrics look weak. Price trends remain bullish across short, medium, and long-term timeframes.