Costa Coffee Corporate
The original Costa coffee shop opened in 1978 by brothers Sergio and Bruno, now in private hands. Photograph: John Stillwell/PA
Costa Coffee, Britain's fast expanding espresso bar chain, plans to double its sales to £2bn within five years, underlining its determination to compete on a global stage with arch rival Starbucks.
The coffee chain, part of FTSE 100 leisure conglomerate Whitbread, on Tuesday announced it had broken through the £1bn sales mark, posting a 22% rise for the year to March. Sales in UK Costa stores, excluding franchised outlets, rose 24% to £592m.
Costa bosses have sought to play down suggestions that its recent success in Britain had much to do with enduring outrage at the UK tax arrangements of Starbucks, exposed by Reuters last year.
Nevertheless, the latest brand preference survey data from YouGov – released to the Guardian – show a sharp drop Starbucks' standing among coffee drinkers. The data suggest the US firm's reputation took a heavy hit, despite an unprecedented move to pledge £20m in "voluntary" tax payments.
Before the tax row
Tax campaigners including MP Margaret Hodge, chair of the parliamentary public accounts committee, had been riled after it emerged executives in the US had told shareholders Starbucks was profitable in the UK while accounts for the British subsidiary showed it had paid minimal corporation tax in 14 years.
Hodge encouraged taxpayers to boycott the US chain. "I'm not going to buy Starbucks tomorrow, I think everybody should go and buy Costa, " she told BBC2's Newsnight in October.
Whitbread finance director Nicholas Cadbury suggested recent strong Costa sales was in part due to the long winter. "When you're out there shopping you just want to get that respite from the cold, rain or snow. And we find customer 'dwell time' is longer also, " he said.
Costa sold 320m coffees and other drinks last year, growing market share from 10% to 11%. It is on track to have 1, 900 UK stores by 2016 and also has more than 2, 500 Costa Express vending machines. The Costa name sits over a further 1, 600 stores internationally – including 500 in China where the group's joint venture business is competing fiercely with Starbucks' expansion plans.
The chain is comfortably on track to double its sales from 2011 levels well before a self-imposed deadline of 2016. As a result, chief executive, Andy Harrison, has now set a new target: doubling sales from the £1bn mark by 2018.
He has also set fresh expansion targets for the firm's hotel chain, Premier Inn, and plans to take the hotel room count from 51, 700 to 75, 000 by 2013, with much of the growth coming in and around London.
Whitbread says it will create 12, 000 new jobs in the UK – many in young age groups, where unemployment is highest. The average Whitbread salary is £16, 045.
For the year to March, Whitbread created 3, 000 new jobs and increased revenues by 14% to £2.03bn. The group reported underlying pretax profits up 11.4% to £356m, on which it booked a tax charge of £91.5m.
Costa's expansion been so rapid in recent years that it has started to face opposition from some local community campaigners who believe the chain threatens the viability of small independent coffee shops. Campaigners successfully opposed a planned Costa in Totnes, Devon, last year, triggering several similar campaigns elsewhere.
Meanwhile, Bruno Costa, one of the Italian brothers from south London who founded the chain before selling it to Whitbread in 1995 for £20m, told his local paper, the Croydon Advertiser, that the coffee market was "monopolised by these three or four companies that don't give much chance to the smaller ones".