Britain hits ‘peak Costa’ as coffee chain’s losses double

Costa Coffee’s financial losses have doubled as the chain struggles to compete with cheaper high street rivals.The chain, which has more than 2,500 UK sites, saw operating losses widen to £13.5m for 2024 from £5.8m the previous year, new Companies House filings show.The loss marks its worst performance since 2021, when Costa was still wrangling with Covid restrictions. Before that, it was regularly making profits of between £60m and £100m a year.Costa blamed the latest slump on competition from cut-price rivals and fewer shoppers hitting the high street.Cheaper competitors including McDonald’s, Greggs and Pret A Manger have been expanding their coffee ranges, while there has been a boom in more premium stores such as Gail’s.Telegraph analysis last month revealed that Costa was more expensive for lattes and cappuccinos than comparable Caffe Nero and Pret a Manger stores, although it was cheaper than Starbucks.Clive Black, analyst at Shore Capital, said: “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”.Costa’s financial results, published earlier this week, are the most up to date insight into the company’s performance and highlight why owner Coca-Cola has been exploring a sale of the brand.Coca-Cola hired bankers to explore plans for the chain in August. Costa is expected to be sold at a significantly lower price than the £3.9bn Coca Cola paid for it in 2018. It is expected to sell the business for as little as £2bn.James Quincey, Coca-Cola’s chief executive, warned in July that the brand was “not where we wanted it to be from an investment hypothesis point of view”.In its most recent financial results, Coca-Cola said a 3pc decrease in coffee sales was “primarily due to the performance of Costa Coffee in the United Kingdom”.Costa, in its latest accounts, pointed to “inflationary pressures on the cost of goods and operating expenses”. It follows a major surge in coffee bean prices.The price of Arabica beans is currently hovering at around $4 (£3) a pound – more than double the level in September 2023.It means that on average, prices for customers have jumped by 80p since 2022 to £4.02.Costa did not immediately respond to requests for comment.