Coca-Cola is exploring the sale of Costa Coffee, Britain’s largest high street coffee chain, more than six years after acquiring the business in a bid to diversify beyond soft drinks.

According to Sky News, the Atlanta-based drinks giant has hired investment bank Lazard to sound out potential buyers, with initial talks reportedly already held with private equity firms. Indicative offers are expected in the early autumn, although Coca-Cola could still decide against proceeding.

Costa, which operates over 2,000 outlets in the UK and more than 3,000 worldwide, was purchased from Whitbread in 2018 for £3.9bn. Analysts now suggest the chain could fetch closer to £2bn, crystallising a potential multibillion-pound loss for Coca-Cola.

The move comes after years of underwhelming performance. Costa reported revenues of £1.22bn in 2023, an improvement on the previous year but still below its 2018 level. Despite restructuring and international expansion, Coca-Cola’s CEO James Quincey recently admitted the company was reassessing its coffee strategy, acknowledging challenges in making the acquisition deliver its full value.

Costa has faced mounting competition from Starbucks, Caffè Nero and Pret a Manger, as well as newer upmarket entrants like Gail’s. Economic pressures, inflation, and a shift in consumer habits have also weighed on results, even as the chain expanded internationally and rolled out its Costa Express vending machines.

Despite these hurdles, Costa has paid Coca-Cola more than £250m in dividends since the takeover. The chain remains a significant employer, with a global workforce estimated at 35,000, and continues to hold a strong brand presence across high streets and international markets.

For Coca-Cola, the potential disposal would be relatively small in scale given its $304bn market capitalisation, but it underscores the difficulty of turning coffee into the growth engine executives had envisioned. The outcome of the review process will likely shape Coca-Cola’s next steps in the hot beverage market — one of the few global drinks categories where the company still lacks a dominant brand.