Costa Coffee Losses Double as Market Competition Intensifies

Costa Coffee’s financial deterioration has accelerated sharply, with operating losses doubling to £13.5 million in 2024 compared to £5.8 million the previous year, according to newly filed Companies House documents. This represents the coffee chain’s worst financial performance since 2021, when Covid-19 restrictions hampered operations across the hospitality sector.

The 2,500-strong UK estate has struggled against an increasingly fragmented competitive landscape. Cut-price operators including McDonald’s, Greggs and Pret A Manger have expanded their coffee offerings, whilst premium competitors such as Gail’s have captured market share from traditional coffee chains. Telegraph analysis revealed that Costa’s pricing for lattes and cappuccinos exceeds that of Caffe Nero and Pret A Manger, though remains lower than Starbucks locations.

Clive Black, analyst at Shore Capital, characterised the situation as “peak Costa,” suggesting the chain has reached saturation point in the United Kingdom market. He noted that independent and artisanal operators now offer superior customer experiences, ambience and food offerings compared to Costa’s corporate model.

The losses coincide with significant input cost pressures. Arabica coffee bean prices currently hover around $4 per pound, more than double the September 2023 level. Customer prices have risen approximately 80 pence since 2022, reaching an average of £4.02. Coca-Cola, which acquired Costa for £3.9 billion in 2018, has attributed a three percent decline in coffee sales primarily to Costa’s United Kingdom performance.

Coca-Cola initiated a strategic review of the brand in August, engaging investment bankers to explore a potential sale. Industry estimates suggest the business could fetch approximately £2 billion, representing a substantial discount to the acquisition price. Coca-Cola Chief Executive James Quincey stated in July that Costa was “not where we wanted it to be from an investment hypothesis point of view.”

A Costa spokesman maintained that the chain achieved like-for-like revenue growth during 2024 and demonstrated “strong operational resilience” despite inflationary pressures. The company indicated continued investment in its UK operations and international expansion remains part of Coca-Cola’s broader beverage strategy.