Costa sales slow as Whitbread signals new era of coffee drinking

Costa Coffee owner Whitbread has provided an update for the City.
Costa Coffee owner Whitbread has provided an update for the City.
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Costa Coffee owner Whitbread has revealed a further slowdown in sales growth at its coffee shops, but hopes that the so called “third wave” of coffee consumption will help it bounce back.

The group said like-for-like Costa sales grew by 0.6% in the six months to August 31, down from 2.3% growth in the same period last year.

Whitbread said that an improved breakfast food range and a broader selection of cold drinks helped keep it in positive comparable sales territory, adding that it believes the UK is entering the “third wave” of coffee.

The company described this as a period in which “consumers’ preferences for coffee become more sophisticated and are willing to spend more per cup for higher quality and innovative drinks”, with Costa poised to capitalise on the new epoch.

Pre-tax profit at Costa fell 9.8% in the period to £59 million, on revenue of £622 million.

But Whitbread as a whole saw revenue rise 7.4% to £1.67 billion, while total statutory pre-tax profit rose 19.9% to £316 million.

The company saw a stronger performance in its Premier Inn hotel chain, where comparable sales rose 3.6%.

The hotel arm booked a 26.5% rise in pre-tax profits to £295 million as revenue topped £1 billion.

Chief executive Alison Brittain said: “Our plan is based on growing in our core UK markets; focusing on structural growth opportunities for Premier Inn in Germany, Costa in China and Costa Express; and strengthening our capabilities and efficiency to deliver these attractive opportunities.”

Earlier this year Whitbread paid £35 million to seize full control of its Costa Coffee joint venture in China, part of the firm’s plan to grow internationally.

On Tuesday it again singled out China in particular as coffee culture becomes more popular in the country.

“The coffee shop market in China is expected to more than double in size by 2020 and an opportunity exists to position Costa as the strongest challenger to the market leader,” Whitbread said.

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