COSTA COFFEE’S Andy Marshall has one task – to increase the UK chain’s international presence “without there being Costas on every corner and it feeling a bit oppressive”.
The market share-grabbing British coffee brand is looking to a combination of flat whites, glass boxes and Tesco to achieve its bid to keep consumers well-caffeinated despite cash-strapped times.
“There is a long way to go in Ireland in terms of the coffee story before you get anywhere near saturation point,” says Marshall. But Costa has also “learned the lessons of other coffee businesses”, he adds, preferring not to name Starbucks directly.
“Our strategy is about putting our coffee at arm’s reach, wherever people want coffee,” he says. But, crucially, this has to be done without cannibalising the custom that would otherwise fall to its existing outlets: Costa doesn’t want to have to endure the retrenchment forced upon Starbucks.
As chief operating officer for Costa’s international arm, Marshall is responsible for its expansion outside Britain and in Ireland. This task is performed in conjunction with MBCC Foods under a 10-year master franchise that began in 2005.
Costa has adopted some of the tactics deployed by MBCC in Ireland back in Britain, Marshall says, referring to its preference for serving coffee in glass boxes.
The glass boxes are not drinking receptacles, but the say- what-you-see name given to its retail park outlets. They are transparent cubes that let the sunlight shine in and the logo beam out.
“We’ve learned something from the Irish operation and we’re now putting the glass boxes into the UK retail parks,” says Marshall, who was in Dublin earlier this month to oversee a barista competition in Costa’s Dawson Street outlet.
Costa’s next move in Britain is the drive-thru, which will follow in Ireland in 2012. Then there’s a burgeoning relationship with Tesco to capitalise on – it has more than 100 outlets in its British supermarkets and has just begun pursuing this strategy in Ireland, opening beside what is now the largest Tesco Extra in Ireland at the Monread centre in Naas.
Owned by the hotel and restaurant group Whitbread, Costa Coffee has almost 2,000 stores worldwide, about 1,300 of which are in Britain. It is the largest coffee chain there, with about 500 more outlets than the global leader, Starbucks.
A Whitbread trading statement published last week shows that the brand is proving alert to consumer preferences. Sales increased 25 per cent in the six months to August 18th – a period that also saw it open its 100th store in China.
Starbucks, too, is having a good time, from a global point of view, in any case – having rebounded from a major restructuring that saw it close hundreds of under- performing stores, mainly in the US. In July, it raised its forecasts for its financial year above Wall Street estimates, as consumers returned to coffee after a period of seeking cheaper fixes.
In Ireland, Costa has 52 retail stores, 13 of which are north of the Border. The chain will reach 60 by the end of the year, according to MBCC Foods’ director Michael Conroy – a number that puts it on a par with the Insomnia Coffee Company.
“The Irish market has not disappointed us, despite recessions and everything else,” says Conroy. Average store turnover in Ireland matches or exceeds the £10,000 average in Britain, he adds, and the stores are getting bigger.
Costa has a further 65 wholesale sites in Ireland, which largely comprise contract catering agreements in offices and supplier relationships with hotels.
Almost all coffee chains in Ireland will have one thing in common at the moment – a fervent desire to make flat whites the new mocha.
This way of serving coffee, imported from Australia, is technically more difficult than something like a cappuccino, explains Marshall. “You have to heat the milk in a particular way to get this meringue-like, velvety texture.”
To date, Costa has spent £1 million training its baristas to make flat whites and it’s still not available in all markets, he says.
Adapting menus to local tastes and habits is extremely important if you want to increase revenues, adds Marshall. When MBCC started rolling out Costa outlets in Ireland, it introduced the humble scone to the franchise – now they’re served in British outlets too.
MBCC, which also operates KFC outlets in Ireland, is owned by the Edinburgh-based Tuli brothers, Raju and Sundeep, who are among Scotland’s richest businessmen. It posted a pretax profit of €1.4 million in the year to the end of January, according to its latest accounts.
Some 450 people are employed in the operation of the Irish Costa outlets, and with stores set to open in Waterford and Portlaoise shortly, Conroy is now targeting the currently Costa-deprived Galway.
As a former associate director of Hamilton Osborne King (now Savills), property is his speciality.
“We’ve been very careful with site selection,” Conroy adds. “We’re asking more questions of landlords than they are of us. And we haven’t, touch wood, engaged in too many Celtic Tiger deals.”
COFFEE: IN NUMBERS
500
“Generous” estimate of the number of branded coffee shops in Ireland, according to Costa. It claims there are far less coffee shops per head of population in Ireland than in the UK.
7.7
Percentage increase in the price of coffee in Irish grocery shops over the last 12 months, according to CSO data. This reflects a surge in the cost of coffee on global markets due to poor growing conditions.
€250,000
Kraft Food's Kenco coffee kicked off a new age in product payment on Irish television, when it paid at least this sum for a 12-month deal starting this month with TV3's The Morning Showand Midday.
32
Percentage growth in sales of Nespresso coffee machines in Britain and Ireland in 2010. Nestlé, the company behind Nespresso, has now launched a controversial baby milk equivalent of the machine, BabyNes, in Switzerland.
