Lucy Williams recently indulged in an iced strawberry matcha after accompanying her sister to her niece’s first haircut.
“I feel like a strawberry matcha is a coming out with your sister thing, rather than an everyday thing,” she remarked, highlighting its special-occasion status.
However, in the UK, an iced strawberry matcha – or any matcha variety – is notably absent from Costa Coffee’s menu.
Williams was at Blank Street Coffee, a chain whose vibrant array of matcha beverages has garnered a cult following, counting celebrities like Molly-Mae Hague and Sabrina Carpenter among its fans.
While Williams enjoys coffee at home daily, she seeks out barista-made options for a treat.
“There are only certain places I’d go for a coffee,” she stated, excluding Costa from her preferred list.
Reports indicate that Costa’s owner, Coca-Cola, is considering selling the chain. One analyst suggests the sale could fetch £2bn – a considerable drop from the $4.9bn (£3.9bn) paid in 2019. This raises questions about potential challenges facing the brand.
Analysts note that coffee and tea consumption trends are evolving, particularly among younger demographics. Coupled with rising coffee prices and overall cost-of-living pressures, established chains like Costa are facing increased competition.
In contrast, Blank Street, which started in 2020 as a small coffee cart in Brooklyn, has expanded rapidly across New York, Washington, and Boston. It entered the London market in 2022 and now operates approximately 35 locations in the capital, with additional stores in Manchester, Birmingham, and Edinburgh.
The chain’s popularity has been fueled, in part, by its strong presence on TikTok, where users share videos of themselves enjoying its aesthetically pleasing cafes and participating in promotional events.
Australian travelers Bree Taylor and Rebecca Trow, both 27, included Blank Street on their London itinerary after discovering its pastel-colored drinks on TikTok.
“We saw it and were like ‘we have to go there’,” said Rebecca, emphasizing the influence of social media on their decision.
Lauren Nicholson, 24, and Jordan Brookes, 27, were similarly attracted to the cafe’s vibrant matcha offerings, priced just under £5 each.
Jordan stated that he began drinking matcha about two months ago and is now “hooked,” illustrating the growing appeal of this beverage.
Indeed, the global matcha craze has led to supply shortages of the vibrant green Japanese tea, driving up prices.
Costa’s competitors have responded to the trend, with Starbucks and Pret offering iced matcha lattes, and Nero featuring a strawberry and vanilla iced matcha latte.
This trend extends beyond London, with popular national chains like Gail’s and Black Sheep Coffee also offering matcha-based beverages. Black Sheep Coffee even offers green matcha waffles.
The pursuit of new, affordable luxury drinks has emerged as a prominent trend since the Covid-19 pandemic and has continued to gain momentum amid the ongoing cost-of-living crisis.
“If you think about a lot of gen Z, they’re looking at matcha, they’re looking at brews, they’re more healthy. My late teenagers, they don’t drink caffeinated beverages at all,” observed Danni Hewson, head of financial analysis at AJ Bell.
Traditionally, matcha is believed to possess antioxidants and offer a more sustained caffeine effect compared to the “high” and “crash” associated with regular coffee, although the extent of its health benefits remains a topic of debate.
In addition to standard coffees, Costa offers a variety of frappés and fruit coolers, but these often contain syrups and whipped cream, which may not appeal to consumers seeking healthier options.
With the growing popularity of home coffee machines, chains must offer compelling reasons to attract customers.
Clive Black, vice chairman of independent investment group Shore Capital, argues that Costa is not the only brand grappling with the evolving UK coffee market.
The rise of smaller chains and independent artisanal stores has also “eaten into the share” of major chains, he added.
Younger consumers are increasingly mindful of their spending choices. Lauren and Jordan, for example, stated that they generally avoid large coffee chains in favor of supporting smaller businesses, and they also prioritize taste considerations.
When a coffee can cost the best part of £5, consumers expect a product they cannot easily replicate at home.
“A straight up latte isn’t a treat, that’s a necessity,” stated Clare Bailey, independent retail analyst and founder of The Retail Champion.
“I feel like businesses that don’t reimagine themselves and don’t respond to consumer behavior, and perhaps get a little complacent, are the ones who end up in trouble,” she added.
Coca-Cola’s chief executive James Quincey admitted to an investor call last month that Costa was “not where we wanted it to be” and that the company was “thinking about how we might want to find new avenues to grow in the coffee category.”
Costa began as a London roastery in 1971 and has since expanded to more than 4,000 stores across 50 countries. It is a prominent fixture on high streets in smaller towns across the UK, often appealing to families.
In the 2023 financial year, Costa reported revenues of £1.2bn, but cited inflationary pressures, including increased costs for goods, energy, and labor, resulting in an operating loss of £14m.
Coca-Cola is now working with investment bank Lazard to explore its options for the coffee chain, including a potential sale, according to reports from Reuters and Sky News. Clive, from Shore Capital, questioned the initial rationale behind Coca-Cola’s acquisition of Costa.
Requests for comment were directed to Costa, Coca-Cola, and Lazard.
There are now 11,450 branded coffee chain outlets across the UK, up from 9,800 five years ago, according to World Coffee Portal.
The number of independent coffee shops has also increased over the past five years, from 11,700 to around 12,400.
With such extensive choice, competition for customers is intensifying. Mimoza Emsa, 47, stated that while she previously frequented Costa, she now consistently chooses Pret due to its proximity to her workplace and her subscription, which offers discounts.
“It’s really convenient. It’s one of the things that persuades me to have coffee here,” she explained.
Costa and similar chains are positioned between the affordability and speed of options like Greggs or McDonald’s coffee and the premium experience offered by higher-end establishments.
“We’ve seen all these middle of the road retailers struggle because they’re neither one thing nor the other,” noted retail analyst Clare.
Despite these challenges, Costa retains a loyal customer base.
Rafik Khezmadji, 37, stated that he visits Costa because of its convenient location near his workplace and his enjoyment of sitting outside while savoring his coffee.
“I enjoy having this moment to myself,” he shared.
For Megan Penfold, a 20-year-old fashion business student, the coffee at Costa is “not the worst and not the best.” She stopped at the cafe on Wigmore Street in London for a quick black coffee.
“Trends don’t affect me as much. I like what I like,” she concluded.
Correction: An earlier version of this story said Coca-Cola bought Costa for £4.9bn in 2019. The figure was actually $4.9bn, which was worth about £3.9bn.
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