Costa boost gives Whitbread the beans

Whitbread sales up 9% thanks to Costa Coffee and Premier Inn.

by Elizabeth Anderson
Last Updated: 06 Nov 2012
Whitbread, the owner of Costa Coffee and Premier Inn, showed it’s managing to ride out the tough retail climate by posting an upbeat set of results, driven by a strong performance at Costa.

Sales at the coffee chain were up 22.5% in the 13 weeks to June.  This was despite the business being ‘adversely affected by the extended Easter and Royal Wedding holiday,’ chief executive Andy Harrison said.  It opened 73 new stores during the period, meaning there are now more than 1,200 Costa Coffee shops in the UK and 650 globally.

It was a successful story for Whitbread’s hotel business too - sales at the 600 Premier Inn hotels were up 3%.  This was helped by the knock-on effects of the tough economic conditions, which saw business customers trade down from 4 and 5 star hotels.  Total sales across the Whitbread group grew 9.2% in the three months to June.

Costa Coffee, which contributes around a quarter of Whitbread’s revenues, has consistently grown sales through the downturn, being seen as an affordable luxury by many cash-strapped consumers.  But it hasn’t always been a smooth journey.  The chain has been affected by the consumer and corporate spending squeeze, like the rest of the retail sector.  In the last trading update in April, even ex-easyJet CEO Harrison admitted that he didn’t expect an improvement in the consumer environment for at least another year. Rising coffee prices and higher taxes have also presented a challenge.  Coffee prices hit a 34-year high in May and so far Costa has managed to avoid passing the rising prices on to its customers.     

On the other hand, the nation’s love affair with coffee is still going strong.  Almost three quarters (72%) of us regularly drink coffee, according to the British Coffee Association.  Around 70 million cups are drunk in the UK each day, and a significant number of those are consumed in coffee shops and outlets.  

Whitbread is certainly feeling optimistic about the future of coffee – it’s steaming ahead with a major expansion plan.  Another 300 Costa Coffee outlets will open over the next year and it’s boosting its self-service presence. Earlier this year it bought out the Coffee Nation self-service chain and will be rebranding 500 of the units, plus adding 200 of its own, to cater for those consumers in an extra hurry to get their caffeine fix.  

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