Costa Coffee Faces Mounting Losses Amid Fierce UK Competition

The British coffee giant Costa Coffee is confronting its toughest financial challenge in years, as losses more than doubled in 2024. Once a reliable profit-maker, the chain now finds itself squeezed by an evolving coffee market and shifting consumer habits. The numbers are stark: Costa’s operating losses surged from £5.8 million in 2023 to £13.5 million in the year ending December 2024, according to filings at Companies House. This is the worst performance since the Covid-hit days of 2021, a period many businesses hoped was firmly behind them.

So what’s behind the downturn? The answer lies in the fierce competition reshaping the UK’s high streets. Value-driven chains like Greggs and McDonald’s have ramped up their coffee offerings, while established names like Pret A Manger have rolled out tempting meal deals to lure cost-conscious customers. Meanwhile, newer brands such as Blank Street and Black Sheep Coffee are catching the eye of younger consumers with trendy drinks like flavoured matcha lattes. Even premium players like Gail’s are expanding, drawing away customers with artisanal vibes and boutique brews.

In the battle for Britain’s morning caffeine fix, price matters. Analysis by The Telegraph found Costa’s lattes and cappuccinos are often pricier than those at Caffe Nero or Pret, though they still undercut Starbucks. But as inflation bites and shoppers tighten their belts, every penny counts. Costa’s sales rose a modest 1 percent to £1.2 billion, but that was nowhere near enough to offset the mounting costs and dwindling footfall. Many customers are simply choosing cheaper options—or skipping the coffee shop altogether.

Behind the scenes, Costa is feeling the pinch from more than just competition. The cost of doing business in the UK has soared. Higher National Insurance contributions, wage increases, and stubbornly high coffee bean prices have all eroded margins. This double whammy of rising costs and falling customer numbers has left Costa in a precarious position.

The pressure is now on owner Coca-Cola, which bought Costa for £3.9 billion in 2018 in a bid to diversify beyond fizzy drinks. Today, the chain is valued at around £2 billion—a sharp markdown that stings for shareholders. Attempts to sell the business have hit snags: talks with preferred bidder TDR Capital, the private equity owner of a leading grocery chain, reportedly stalled over price disagreements, according to Financial Times. The uncertainty only adds to the sense of a company at a crossroads.

James Quincey, Coca-Cola’s chief executive, has publicly acknowledged that the Costa acquisition has ‘not quite delivered’ on expectations. The deal was supposed to catapult Coca-Cola into the lucrative world of coffee, opening up new growth avenues. Instead, it has become a cautionary tale about the volatility of retail—and the difficulties of predicting consumer tastes.

The story of Costa’s struggle is also a story about Britain’s changing coffee culture. Decades ago, Costa helped pioneer the high street café boom after being founded by Bruno and Sergio Costa in 1971. Today, with more than 2,700 cafes across the UK and Ireland, the chain is an everyday presence. But the market it once dominated is now fragmented, with both bargain-hunters and trend-seekers demanding more from their coffee experience. The rise of alternative brands and the growing appeal of convenience—think supermarket coffee counters, vending machines, and home brewing—are all chipping away at Costa’s customer base.

There are questions swirling about Costa’s future. Will Coca-Cola find a willing buyer at the right price? Can the chain reinvent itself to win back customers, perhaps by lowering prices, updating menus, or investing in store upgrades? Or will it continue to lose ground to rivals that better match the mood of the moment?

For now, Costa remains a fixture on British high streets, but its position looks less secure than ever. The next year could prove pivotal, not just for the chain but for the shape of coffee retail in the UK. As the market continues to evolve, only those able to adapt quickly—and connect with consumers’ changing preferences—are likely to thrive.

The facts paint a picture of a once-dominant chain facing the realities of a transformed marketplace. Costa Coffee’s struggle to balance rising costs, intensified competition, and shifting consumer demands is a warning to any brand resting on past success. The next chapter will depend on whether Costa and its owners can innovate, cut losses, and rediscover their edge—or risk fading into high street history.