Costa living crisis: Coffee firm's losses double as rivals are said to offer 'better experience, ambience, food' and 'less corporate'
Struggling cafe chain Costa Coffee saw its losses double in 2024 as it faces tough competition from rivals who are said to offer a 'better' experience and nicer food with a less corporate touch.
The high street brand, owned by Coca-Cola, saw its operating loss widen from £5.8m in 2023 to £13.5m in the year to December 2024.
The results mark the worst year for Costa since the pandemic, before which it was regularly reporting profits of up to £100 million per year.
The firm said losses were 'primarily driven by challenging conditions with soft footfall and growth of value-led competitors.'
But experts have pointed the finger at a triple threat in the UK's coffee market - from cheaper alternatives such as Greggs, premium offerings such as Gail's and booming independent offerings across the country.
Clive Black, analyst at Shore Capital, told the Telegraph that the coffee chain has 'peaked': 'It has perhaps reached the peak of its extent in the UK, 'peak Costa' if you like, which makes it more exposed than most to competitive challenges.'
He added that there was a 'whole plethora of independent, often artisanal players offering a better experience, a better ambience, a better story, so less corporate and much better food'.
Sales did rise by one percent in 2024, taking total revenue to more than £1.2 billion, but this is seemingly not enough to quiet its concerned owners.
The high street coffee chain faces hot competition from Greggs, Pret and a number of newer brands
The cost of living crisis is thought to be behind a surge in customers opting for cheaper options including Greggs, McDonald's and smaller, artisan independent stores.
Costa has also suffered with breakout chains in the last few years, including hipster-friendly Black Sheep Coffee and Blank Street.
And among younger customers, trends such as flavoured matchas are often pushing them to abandon traditional coffee altogether.
This paints a gloomy picture for Costa, whose middle-of-the-road offering is somewhat mismatched by its high prices - although it is significantly cheaper than rival Starbucks.
Research has shown the average coffee price has soared by 80p since 2022, now hovering at just over £4 per cup.
Partly to blame is the steep increase in the price of the beans themselves, which has almost doubled in just two years.
Coffee bean prices have soared globally as bad weather and droughts in major growing regions such as Brazil and Vietnam ruined harvests, with supply chain disruption expected to only worsen due to the impacts of climate change.
This is all without taking into account significant financial pressures which have emerged since the pandemic including rising inflation and the recent rise in National Insurance brought in by Rachel Reeves in her first Budget in 2024.
The high street brand, owned by Coca-Cola, saw its operating loss widen from £5.8m in 2023 to £13.5m in the year to December 2024
It all means that Coca-Cola is now understood to be looking to sell Costa Coffee for around £2 billion.
In July, Coca-Cola chief executive James Quincey admitted that its Costa acquisition had 'not quite delivered' and was 'not where we wanted it to be from an investment hypothesis point of view'.
Costa Coffee has more than 2,500 branches across the UK some 55 years after being founded by two Italian brothers Bruno and Sergio Costa in London in 1971.
A spokesperson for Costa said: 'Costa Coffee delivered like-for-like revenue growth in 2024 and demonstrated strong operational resilience despite inflationary headwinds. We continue to invest in our UK estate and the expansion of the Costa Coffee brand globally. These aggregated results are reported as part of The Coca-Cola Company.
'Since being acquired by The Coca-Cola Company in 2019, Costa Coffee has delivered continued revenue growth and is part of Coca-Cola's strategy to offer a broad range of beverages for every occasion.'
