A major UK coffee chain is struggling to keep pace with other shops as competitors offer more affordable coffee. Costa Coffee, which has 2,500 sites across the UK, has seen its worst performance since 2021.
The chain saw losses of £13.5 million in 2024, up from £5.8 million in 2023, according to Companies House filings. Before 2021, Costa was making profits of between £60 million and £100 million a year. The company blamed this poor performance on decreasing footfall in the high street and and competitors cutting costs.
McDonald's, Greggs, and Pret A Manger are all cheaper than Costa and have been expanding their offerings. There had also been a boom in premium coffee chains like Gail's and Blank Street. A medium cappuccino at Costa is £4.10, while at Caffe Nero and Pret A Manger it is £4, at Greggs it is £2.40, and at McDonald's it is £1.89.
Costa also pointed to "inflationary pressures on the cost of goods and operating expenses", following a surge in coffee bean prices, doubling from September 2023 to 2025.
Clive Black, analyst at Shore Capital, told the Telegraph: "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.
"There is 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".
This comes after news that Coca-Cola, which owns Costa, has been looking into a sale of the brand. The chain is expected to be sold for £2 billion, a £1.9 million decrease on what Coca-Cola paid for it in 2018.
James Quincey, Coca-Cola's chief executive, said in July that Costa was "not where we wanted it to be from an investment hypothesis point of view". Coca-Cola said a 3% decrease in coffee sales was "primarily due to the performance of Costa Coffee in the United Kingdom".
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."
