1. Introduction
In 2022, Costa Coffee was recognized as the World’s 2nd largest brand in the eating out sector. The enormous success of Costa Coffee makes it an interesting case to study what makes brand so successful.
This article presents the Costa Coffee SWOT analysis. The article highlights key internal and external environmental factors that have strategic implications for the company.
2. Company Overview
| Company name | Costa Coffee |
| Year founded | 1971 |
| Headquarters | Dunstable, UK |
| Industry | Coffee shop (restaurant) |
| CEO | Philippe Schaillee |
| Number of countries | 38 countries (4 continents) |
| Number of employees | 18,412 |
| Number of outlets | 3,884 |
| Costa Coffee revenue 2022 | $43 billion |
| Costa Coffee brand worth | $5.1 billion |
Costa Coffee products – Latte, cappuccino, flat white, espresso and cortado, hot chocolate, pastries, sandwiches, cakes, teas, snacks, and iced coffees.
Costa Coffee key competitors – Starbucks, Greggs, Café Nero
3. Costa Coffee History
History of costa coffee began in 1971 when Bruno and Sergio opened a small roastery in n Fenchurch Street. Origin of Costa Coffee was London, where Costa Coffee was born and blended. After 52 years, Costa Coffee has become UK’s most famous brand.
4. Costa Coffee SWOT Analysis
4.1. Costa Coffee Strengths
SWOT analysis of costa coffee identifies nine key business strengths:
4.1.1. Market leadership
Costa Coffee holds strong market leadership position. Following graph shows how Costa dominates the market based on number of outlets:
Source: Statista
4.1.2. Worldwide revenue growth
Costa Coffee is performing well in different countries. Following graph shows the Costa’s constant worldwide revenue growth:
Source: Statista
4.1.3. Strong brand preferences
A survey with 4000 British customers confirmed that Costa Coffee is the most preferred brand. Costa Coffee has successfully maintained the top position as ‘most preferred brand in UK’ for last 12 consecutive years.
4.1.4. Innovation as growth engine
Costa Coffee considers innovation as the growth engine for global expansion. It spearheads market innovation with innovative products, new store formats, and digital integration.
A previous customer survey revealed that 57 percent of the customers are open to trying the drive-thru. Considering this trend, Costa Coffee remained at forefront of meeting the growing demand for this store format.
In 2020, Costa opened 75 new drive thru sites, and became the leader in UK restaurant industry by drive-thru outlets.
4.1.5. Well-diverse portfolio
Costa Coffee has a well-diverse portfolio. It offers six main coffees- latte, cappuccino, flat white, espresso and cortado. These coffees are available in three sizes- Massimo, medio and primo. Costa Coffee also offers hot chocolate, pastries, sandwiches, cakes, teas, snacks, and iced coffees.
4.1.6. International presence
Costa Coffee has strong presence at international stage. With 3,882 branches worldwide, Costa Coffee eyes at the global expansion:
Source: Business Insider
4.1.7. Instore atmosphere
Alike Starbucks, Costa Coffee offers pleasant instore environment that enhances the overall customer experience. It offers relaxing atmosphere. Costa’s relaxing and pleasant instore experience is one of the reason why it is nation’s most favorite brand.
Have a look on Costa’s coffee shop color scheme and design:
Source: Business Insider
4.1.8. High product quality
Costa Coffee has built strong brand reputation based on high product quality. The high product quality makes the Costa receive various awards.
4.1.9. Ethical branding
Costa Coffee is recognized as the ethical food brand of UK. In 2018, Costa won world’s most ethical brand, mainly due to its impactful and ambitious sustainability programs.
4.2. Costa Coffee Weaknesses
SWOT analysis for costa coffee identifies seven key weaknesses that affect the company performance.
4.2.1. Supply chain issues
Costa Coffee frequently faces supply chain issues. In 2021, Costa was hit by the product shortage in UK. The supplier issues induced Costa to cut the menu, and even some shops run out of coffee.
Costa is still struggling with the supply chain issues, which can affect its revenue, and cause customer dissatisfaction.
4.2.2. Mobile app
Although Costa has invested heavily on latest technologies, but its mobile app is not up to par, particularly when compared with the Starbucks. Unlike Starbucks, Costa does not offer mobile ordering service. Customers can only use the Costa app to search nearby stores and collect loyalty points.
4.2.3. Higher prices
Costa charges higher prices than Starbucks, which can encourage the price sensitive customers to switch to Starbucks:
| Costa Coffee | Starbucks |
| Regular price = £2.40 per 500ml Price per 100ml = £0.48 Large price = £2.70 per 600ml Price per 100ml = £0.45 | Regular price = £2.40 per 500ml Price per 100ml = £0.48 Large price = £2.70 per 650ml Price per 100ml = £0.42 |
4.2.4. High sugar coffee
Costa’s coffee contains higher sugar than Starbucks, which can deter health conscious. Guardian noted that Costa’s large Latte cup contains 20 teaspoons of sugar compared to Starbuck’s extra-large signature hot chocolate that contains 15 teaspoons of sugar.
4.2.5. Limited geographic presence
Costa Coffee has limited geographic presence compared to its competitors, as depicted in following table:
| Brand | Number of countries |
| Costa Coffee | 32 |
| Starbucks | 80 |
| Dunkin Donuts | 36 |
4.2.6. Poor marketing
Costa Coffee needs to improve its marketing practices. In 2021, Costa ad confused the customers over ‘bacon roll and coffee meal deal’. Later, brand apologized, and faced flak for poor advertising.
4.2.7. Product recall
Costa coffee recently recalled its glass heart cup to avoid the choking risk. There was risk of small glass heart getting detached from the cup, which young children could place in their mouth, and possibly choke.
Such product recalls can hurt the brand image.
4.3. Costa Coffee Opportunities
4.3.1. Healthy product range
The trend of adding healthy items in food menu is on rise due to consumers’ growing health consciousness. A 2022 research showed that coffee drinkers’ curiosity about health benefits has increased, as online searches have skyrocketed 650%.
Considering this trend, Costa may consider adding more healthy items in menu.
4.3.2. Mid-tiered products
As customers are becoming more price sensitive with time, Costa may consider adding more affordable items in its menu to target the growing middle market.
4.3.3. Expansion in Middle-East
Today, branded coffee shops have become a big business in Middle Eastern region. The World Coffee Portal considers Middle East as the most attractive region for coffee brands. Middle East coffee market grew with 10.5% in 2022. Costa may consider expanding in this region to fuel the growth.
Here is a snapshot of growing Middle East Coffee industry:
Source: World Coffee Portal
The analysis considers Morocco, Saudi Arabia and Iraq as the fastest growing countries in Middle Eastern region (based on number of coffee outlets).
4.3.4. Diversification
Costa Coffee can pursue related diversification strategy. For instance, by taking the benefit of strong brand image and customer loyalty, Costa may start selling coffee making equipment.
4.3.5. Plant based products
The products carrying ‘plant based’ labels are outpacing the growth of non-GMO, gluten free and organic products, as depicted in following graph:
Source: New Hope Network
Costa may take it as an opportunity, and start offering plant based milk and a variety of plant based products in its coffee shops. It will attract a broad customer base, particularly vegans. However, Costa should learn from Tim Hortons who failed to launch plant based products due to ineffective marketing strategies.
4.3.6. Online ordering
Customers’ preferences for online food ordering are growing with time. Costa should improve its mobile app, and start taking online orders with home delivery option to expand the market reach.
4.3.7. Latest technologies
Costa Coffee may invest on the latest technologies to augment the customer experience. Some possible technologies are- RSI reducing gizmos, back to black, foam on demand technology, and snap chilling technology.
4.4. Costa Coffee Threats
4.4.1. Intense competition among existing players
The competition in the global coffee market is getting intense. The industry rivalry is high due to large number of suppliers and customers. Growing rivalry and thinning margins could affect the Costa’s financial performance.
4.4.2. Growing competition from small coffee brands
In UK, growing number of smaller coffee chains (like Coffee#1) have started giving tough competition to the big coffee brands like Costa coffee, Starbucks and Blue Bottle.
4.4.3. Discrimination and sexual harassment allegations
Costa coffee is facing discrimination and sexual harassment allegations. In 2021, court ordered Costa Coffee manager to pay €20,000 for sexually harassing 19-year old female worker. Such allegations can threaten the Costa Coffee’s brand image.
4.4.4. Rising inflation
As per BBC, skyrocketing inflation and rising prices of coffee beans are inducing coffee brands to raise their prices. It can affect coffee brands’ sales and profitability.
4.4.5. Growing negative sentiments towards coffee beverages
The possible negative health effects of coffee (like insomnia and anxiety) deter health conscious customers from consuming coffee.
Following graph shows the rising health consciousness trend, as 71% of the survey respondents (n=2000) considered ‘eating healthier’ as their new-year resolution:
Source: Statista
4.4.6. Growing coffee substitutes
Various coffee substitutes are emerging (like chicory plant) that threaten the Costa Coffee and other market players.
5. SWOT Analysis Costa Coffee
Costa coffee official SWOT analysis
| Costa Coffee Strengths Market leadership Worldwide revenue growth Strong brand preference Innovation Well-diverse portfolio International presence Instore atmosphere and high quality Ethical branding | Costa Coffee Weaknesses Supply chain issues Mobile app limitations Higher prices High sugar coffee Limited geographic presence Poor marketing Product recall |
| Costa Coffee opportunities Healthy product range Mid-tiered products Expansion in middle-east Diversification Plant based products Online ordering Latest technologies | Costa Coffee Threats Intense competition among existing players Growing competition from smaller shops Discrimination and sexual harassment Rising inflation Growing negative sentiments towards coffee as unhealthy beverage Growing coffee substitutes |
6. Recommendations
• Costa Coffee should resolve its supply chain issues by strengthening the relationship with suppliers.
• Improve mobile app and introduce home delivery option.
• Revisit the pricing strategy to expand the reach to the middle class segment.
• Reduce the sugar level in its coffee.
• Increase the geographic presence by entering in the Middle East market.
• Improve marketing strategy by bringing clarity in its advertisement.
• Invest more on latest technologies to augment the customer experience.
• Add healthier options, and introduce plant based products to diversify the menu.
7. Conclusion
Costa coffee UK SWOT analysis suggests that Costa is the biggest market player in the UK market. However, Costa Coffee should overcome its key weaknesses (pricing strategy, improving mobile app, lowering sugar, and enhancing marketing strategy) to leverage the opportunities, and reduce the threats.
To know more about Costa Coffee’s external business environment, read our article ‘Costa Coffee PESTLE analysis’.
8. References
Leading coffee shop chains UK 2022 | Statista. (2022, July 27). Statista.
Costa Coffee: revenue 2010-2019 | Statista. (2022, July 27). Statista.
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CNS MEDIA. (2022, March 30). Coffee drinkers curious about health benefits, online searches skyrocket 650%. .foodingredientsfirst.com/.
Branded coffee shops become big business in the Middle East. (2022, December 14). World Coffee Portal.
Branded coffee shops become big business in the Middle East. (2022b, December 14). World Coffee Portal.
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Deegan, G. (2021, September 17). Costa Coffee ordered to pay €20,000 in sexual harassment case. The Irish Times.
BBC News. (2022, November 30). Coffee prices jump as food inflation hits new high.
McCarthy, N. (2019, January 2). Infographic: The Top New Year’s Resolutions For 2019. Statista Infographics.
