I was the brand manager at Costa Coffee between 1998 and 2000. I joined the company three years after Whitbread acquired the business from the Costa brothers.
Smell the Coffee
At the end of the last century Whitbread was adept at identifying the opportunities presented by the changing consumer mood.
Whitbread was established in London in 1742 with a brewery in Chiswell Street, next to what is now the Barbican. Whitbread was successful and became a broader hospitality group and a FTSE 100 company. However, by the end of the last century it was becoming clear that, after 200 years, brewing was in decline.
Necessity drove invention; Whitbread identified a new opportunity in value-for-money causal family dining at venues that were clearly pubs and not restaurants. Unstuffy and affordable, these venues found a ready market. The first Brewers Fayre opened in 1981. By 1995, there were 280.
Brewers Fayre in particular exploited the new consumer desire for more informality in dining out; no need to book a table, a kitchen that remained open all day, ordering food at the bar and no social pressure to wear a jacket or put on a better pair of slacks. Brewers Fayre welcomed – and catered for – children. The environment was about food rather than drink and families could relax in the knowledge that they wouldn’t have to share space with a coachload of Millwall fans on their way home a disappointing result at Kenilworth Road. Rising disposable incomes made casual dining a regular and affordable treat.
For a while Brewers Fayre was the pride of Whitbread, a cash cow that more than compensated for the declining revenue from brewing. Buoyed by this success, Whitbread sought new demand spaces and returned to horizon scanning by enlisting the help of the Henly Centre for Forecasting. Paul Flatters – Trajectory’s CEO – was one of that team. Henley saw a new opportunity around the ‘third space’ – a place that was neither home nor office but a comfortable space that could be used for a variety of purposes; meeting friends, causal business meetings, a place to kill time between appointments or part of a shopping trip. Notably, these venues did not serve alcohol. These places were coffee bars.
Encouraged by Henley’s foresight, Whitbread acquired Costa Coffee from Bruno and Sergio Costa in 1995.
As with Brewers Fayre, Whitbread had moved at the right time and was able to capitalise the changing consumer mood. They moved quickly to open cafes across Britain to establish scale before Starbucks brought their over-priced, over-roasted and over-here outlets to Blighty.
Changing times
Brewers Fayre and Costa Coffee were successful brands, built on consumer foresight.
Brewers Fayre and Costa Coffee were also undone by changing tastes and – in particular – rising consumer aspirations.
In 1991, The Eagle pub opened on London’s Farringdon Road. The Eagle is credited with creating a new genre; the gastropub. This new venture was located a short walk from the offices of The Guardian – an entirely helpful proximity that gave The Eagle a profile that it may not have achieved had it been located in Hemel Hempstead.
The Eagle’s gastropub template was enthusiastically adopted by many others. The CGA Strategy Pub Market Report 2024 estimates that one third of British pubs are now gastropubs.
While gastropubs were not competitors for chains like Brewers Fayre, they did have an insidious influence in that they moved the game on by resetting consumer expectations. Casual diners came to expect more sophisticated cuisine from pubs and the term ‘pub grub’ was largely scraped off the griddle pan of history. In 1999, both Gordon Ramsay and Jamie Oliver made their television debuts. Cooking was now exciting and cool in a way that it had not been before. A volatile man from Glasgow was so passionate about cooking that he was winning multiple Michelin stars and machine-gunning hapless maitre d’s with large-calibre profanities in front of a startled Channel 4 camera crew. In this new context, brands like Brewers Fayre seemed to belong to a less sophisticated age. They had a place but their offering was simplistic and very 1995.
Whitbread still had Costa and it continued to be a growth engine until they sold the brand to Coca-Cola in 2018 for £3.9 billion. They had paid just £19 million for the brand twenty three years previously.
Last month, the Financial Times reported that Coca-Cola is looking to offload Costa. Coke’s Chief Executive was quoted as saying that Costa had “not quite delivered” and was; “not where we wanted it to be from an investment hypothesis point of view.”
One of Costa’s difficulties is the arrival of new and premium competitors who have moved the game on again. Black Sheep is one such operator.
St Albans in Hertfordshire has a Black Sheep café. It’s about 100 metres from a Costa Coffee. Last week I visited both. Black Sheep was full of the Hertfordshire jeunesse doree, with their headphones, laptops, cups of matcha and barrel-legged jeans. Business was brisk and there was a buzzy atmosphere about the place. Meanwhile, down the street at Costa, the atmosphere was different thanks to an older and seemingly exhausted clientele. Sodden napkins and spent sandwiches remain uncleared from tables. Costa doesn’t do matcha. It feels a bit unloved. It feels like the past.
Speaking to the BBC about Costa, Claire Bailey of the The Retail Champion, said; “I feel like businesses that don’t reimagine themselves and don’t respond to consumer behaviour, and perhaps get a little complacent, are the ones who end up in trouble.” It’s hard to disagree.
The future
Trajectory has worked on two projects on the future of retail in the last 18 months. That work has identified a number of bigger themes that will influence how coffee shops and third spaces are used in the future.
- For many consumers – and younger ones in particular – retail experiences mean more than going to the shops. Our survey data shows that a majority of people feel that shopping is only enjoyable when combined with leisure activities. It’s a larger experience that involves socialising and spending time in cafes and restaurants. Many are looking for a blend of entertainment, discovery, leisure and shopping. To succeed in this environment, coffee shops need to feel contemporary and offer a rich experience. Style and contemporaneity are important. Retailers are positively or negatively affected by the quality of leisure options that surround their shops.
- Visiting independent outlets or smaller retail chains is more motivating to many than using large chains. Again, younger consumers are more attracted to independents than their older counterparts. Partly this is because independents provide the stimulation and new experiences that enliven leisure / retail trips. In this context, familiar, omnipresent brands with huge scale are less appealing.
- One of the most potent consumer trends – and one that doesn’t always get the attention it deserves – is rising consumer expectations. Sometimes those expectations build in a gradual, linear way and sometimes there are jumps in aspiration as consumers are suddenly exposed to new ideas and concepts. Brands need to understand broader consumer aspirations and how they are changing. Consumer foresight is a way of achieving this.
- Premiumisation is related to rising consumer expectations. In 1995, Costa Coffee and Starbucks were both premium offers. A combination of brand management decisions, familiarity and new competitors have changed the context. Costa now seems quotidian while Black Sheep is where we’d like to be in 2025. It’s difficult to be both mass market and premium.
Conclusions
The twin stories of Brewers Fayre and now Costa Coffee prompt a few conclusions:
- A lot of conventional research doesn’t pick up unfulfilled aspiration. Foresight work is attuned to the early identification of future wants and needs. One of the most rewarding aspects of horizon-scanning is appreciating the broader context. That perspective is valuable in picking up those – sometimes unexpected – factors which influence consumer wants and needs.
- Consumer foresight needs to be a continual process rather than a one-off exercise.
- As a recovering brand manager, I am particularly sensitive to a brand being stretched too far. It’s difficult for Costa Coffee to position itself as an operator of premium cafes when it has vending machines in petrol stations.
- Modern pub operators have been astute in creating a raft of branded concepts to cater for different consumers, locations and occasions rather than relying on a one-concept-fits-all approach.
- A proven concept can come undone surprisingly quickly.
Here’s one last thought. When I was working at Costa in the late 1990s, I believed that the company should open a small number of unbranded coffee shops in locations where a branded shop might feel a bit incongruous. These would look like independents with the managers having a much larger degree of autonomy than in the branded estate. These shabby-chic units would be in cheaper secondary locations with a cheaper fit out (through using second-hand furniture) and they would use Costa’s beans to make the coffee. Food would be locally-sourced rather than from national suppliers. Each outlet would feel different to the others. The staff would wear their own clothes. We wouldn’t use NPS to evaluate them.
This idea was rejected on the basis that the Whitbread needed to focus on building the Costa brand; having a series of unbranded maverick outlets would be a distraction. Given that Whitbread increased the value of Costa by nearly £4 billion in twenty three years, I can’t say that they made the wrong decision.
Twenty five years on, there may be a greater opportunity for third-place brands to express themselves through a greater variety of outlets. A younger generation of leisure seekers are motivated to support independent operators and smaller chains. Consumer expectations continue to ratchet up.