Recent reports indicate that Centurium Capital, the largest shareholder of Luckin Coffee Inc., is considering a bid for UK coffee chain Costa Coffee, whose current owner Coca-Cola is exploring a potential sale.
This development has drawn widespread attention in the global coffee industry, particularly following Starbucks' recent partnership with Boyu Capital in China and increasing Chinese capital investments in international coffee brands. The potential acquisition carries significant implications.
Strategic Ambitions and Industry Shifts Centurium Capital is quietly expanding its coffee portfolio. As Luckin Coffee Inc.'s earliest and largest external institutional investor, Centurium currently holds 31.3% of its shares and 53.6% of voting rights.
This potential acquisition isn't Centurium's first move into the premium coffee market. In July, reports surfaced about its interest in acquiring a stake in Starbucks' China operations. Its consecutive interest in two major premium coffee brands clearly signals Centurium's ambition to move beyond the value segment and establish a comprehensive coffee industry chain.
The global coffee market is undergoing unprecedented transformation. Recently, Starbucks announced a joint venture with Boyu Capital to operate its China retail business, with Boyu securing up to 60% ownership. Meanwhile, Peet's Coffee parent JDE Peet’s was acquired by Keurig Dr Pepper for approximately $130 billion, with plans to create a global coffee company post-spinoff.
These capital maneuvers demonstrate growing collaboration between Chinese investors and international coffee brands, as China's coffee operation model begins making global inroads.
Costa's current challenges likely make it an attractive target for Centurium. Founded in London in 1971 by brothers Sergio and Bruno Costa, the brand became famous for its Italian-style blended coffee. Coca-Cola acquired Costa in 2018 for £3.9 billion ($5.1 billion).
However, post-acquisition performance has disappointed. Financial reports show Costa's 2023 revenue exceeded £1.2 billion, up 9% year-over-year but below 2018 levels, with profits of £2.459 million turning into a £96,000 pre-tax loss. A rumored £1 billion sale valuation would represent a significant loss for Coca-Cola compared to its purchase price seven years ago.
Complementary Synergies and Integration Potential Despite differing market positions, Costa and Luckin Coffee Inc. present strong strategic complementarity - likely Centurium's core motivation for the acquisition.
Brand-wise, Costa emphasizes "space" and premium pricing, while Luckin Coffee Inc. focuses on "efficiency" and mid-to-low price points. This differentiation enables potential synergy rather than direct competition.
Geographically, Costa's strength lies in its extensive international network spanning 50 countries, with over 2,700 UK/Ireland locations and 1,300 elsewhere. In contrast, while Luckin Coffee Inc. operates over 27,000 Chinese stores, its global footprint remains limited.
Shen Meng of Chanson Capital notes: "Costa and Luckin's complementarity outweighs overlap, potentially posing greater competition to Starbucks."
China market expertise could be key to revitalizing Costa. By Q2 2025, Luckin Coffee Inc. reported total net revenue of RMB 12.359 billion (up 47.1% YoY) and GAAP operating profit of RMB 1.7 billion (up 61.8% YoY).
This growth stems from Luckin's efficient digital operations and compact store model. Its R&D system quantifies flavor profiles numerically rather than descriptively, tracking beverage trends digitally. New products move from development to launch within weeks through responsive supply chains.
Comparatively, Costa maintains limited China presence with just 341 operating stores (over 40% in Jiangsu-Zhejiang-Shanghai), average checks exceeding RMB 30, limited product options, and slower innovation than local grab-and-go brands.
Post-acquisition integration may focus on: 1) Replicating Luckin's proven compact store model to reduce Costa's operating costs and accelerate expansion 2) Implementing Luckin's digital R&D, operations, and membership systems to enhance Costa's product innovation and targeted marketing 3) Supply chain consolidation using Luckin's efficient network to reduce costs and speed innovation 4) Market complementarity, with Luckin leveraging Costa's global network for European expansion without location challenges
The global coffee market is witnessing a quiet revolution. As Starbucks China transitions to Boyu Capital and Costa potentially to Centurium, China's model is making subtle global advances. Ultimately, victory will belong to those who best navigate market changes while effectively integrating resources.
The globalization story of Chinese coffee has just begun.
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