costa coffee case study pdf

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Costa Coffee: Helping consumers find their closest cup

About Costa Coffee

Founded in London in 1971, Costa Coffee is now the UK’s largest coffee store chain and the world’s second largest, with 4,000+ stores in 31 countries. Its latest digital innovation is ordering via the Costa Coffee and delivery partner apps.

Tell us your challenge. We're here to help.

About Snowdrop Solutions

A Google Cloud Premier Partner, Snowdrop Solutions delivers location intelligence for big brands.

Costa Coffee navigates consumers to their most convenient eat-in, takeaway, drive-thru, partner stores and delivery platforms.

• Ensures click-and-collect requests are made to the correct Costa Coffee store, saving time and costs by preventing mistakes
• Provides accurate information on store opening times and locations, cutting down on waiting time for consumers
• Helps store team members to prepare for demand by combining navigation tools with online ordering

Costa app helps consumers find their nearest Costa location

When you can count the number of stores you have on one hand, it’s easy to list their addresses on a website and show your consumers how to reach them. With more than 4,000 coffee stores spread across 31 countries, Costa Coffee recognized it needed a sophisticated location intelligence solution to intuitively direct its consumers to their nearest Costa Coffee and highlight which services are available where and when.

Since it was founded in 1971, technology has played a crucial role in taking Costa Coffee from a single roastery on London’s Fenchurch Street to a brand found on highstreets, grocery stores, and store cupboards in homes across the world. In 2020, when the coffee store brand wanted to ensure that its consumers were able to continue enjoying their cup of Costa Coffee amidst COVID-19 travel restrictions, the company once again turned to technology to bring new ideas and services to life.

The company wanted to make consumers aware that Costa Express machines remained operating in petrol stations and forecourts up and down the country, even when Costa Coffee stores closed. It also wanted consumers to know that their nearest store offered the facility to order and pay online (and complete a minimal contact collection), and that local stores offered delivery services via partners. Costa Coffee recognized that accurate location data was required to keep consumers informed and safe during an unusual year.

When Covid hit, the company focussed on rolling out more ways to order to more locations. Having used Google Maps Platform in its website and mobile app for years, it knew it could be the solution.

Making it as easy as possible for consumers to get what they need

When Costa Coffee launched its mobile app in 2017, it wanted to provide location intelligence features that would make its consumers’ journeys quicker and easier. When a customer imputed their location in the app, for example, it would pop up the address of their nearest store and its opening hours. But Costa Coffee wanted more. How about an interactive element that gave consumers the option to order online and show up when their order was ready for collection? These ideas would decrease waiting times, which in 2020, due to COVID-19 safety measures, was a matter of security and precaution, in addition to convenience.

To bring these ideas to life, Costa Coffee turned to its long-standing Google Cloud Premier Partner, Snowdrop Solutions . "We decided to leverage more Google Maps Platform capabilities because our developers find it easy to work with, and it supports all the functionalities we need, from routes that assist consumers to our stores to services such as click and collect," explains Gordon Lucas, Global Head of Digital Engineering at Costa Coffee.

"We decided to leverage more Google Maps Platform capabilities because our developers find it easy to work with, and it supports all the functionalities we need, from routes that assist consumers to our stores to services such as click and collect."

With a small web development team based in its UK headquarters, it was also important for Costa Coffee to be able to build in functionality that can be seamlessly rolled out across its multiple territories around the world. To that end, Costa Coffee embedded Google Maps Platform within its mobile app and international website, using the Geocoding API to create visual place markers illustrating Costa Coffee locations on its maps.

To save users time, they also leveraged Place Autocomplete to predict addresses and check their accuracy when consumers are making an online order. "The Places API powers our click-and-serve feature, where baristas bring orders to consumers’ cars. Now consumers can see how long their drive to the nearest service is," explains Lucas.

Relying on accurate location data to deliver services safely during COVID-19

When the pandemic and lockdowns forced stores to adapt in 2020, the new Google Maps Platform solutions employed by Costa Coffee online became even more invaluable for the business and its consumers. "Our Store Locator became crucial during lockdown, when opening times changed and restrictions looked different depending on where stores are based, each complying with their local lockdown measures," explains Lucas. "Having our Google Maps Platform solutions in place then meant that we were always able to show our consumers which stores or drive-thrus near them were open and safely serving great coffee during a time when, more than ever, they sought comfort in their favourite Costa Coffee beverage. That’s why our Store Locator quickly became the most visited page on our website."

"The Places API powers our click-and-serve feature, where baristas bring orders to consumers’ cars. Now consumers can see how long their drive to the nearest service is."

Although not part of the development specification, Google Maps Platform quickly became a vital part of Costa Coffee’s internal COVID-19 hygiene initiative too. While hundreds of its stores were forced to temporarily close, Costa Coffee’s 9,000 Express machines in grocery stores and petrol stations were working overtime when they were some of the few places selling cups of coffee. "Our mobile ordering system lets you find an Express machine, scan your order request, and pick up your drink without touching the screen," says Lucas.

The hands-free order-and-collect system was adapted for standalone stores too, allowing users to find and select a store, place an order, avoid queues, and pay and collect products, speeding up the transaction process and minimizing the risk of transmission between consumers and baristas.

"At the end of the first lockdown, for example, we saw huge consumption numbers on our mapping technology as people were trying to find their nearest Costa Coffee and eager to enjoy the experience of buying a coffee or snack, something that was normal pre-lockdown but had by then become a ‘treat’," says Lucas.

Location intelligence is also used to improve the experience of consumers from when they first order a cappuccino and cake, to when they arrive at a Costa Coffee store to enjoy it.

"Google Maps Platform is now a key part of our digital operations. It helps us to make our communications more relevant to consumers and boost sales by ensuring that consumers always know where and when to get their cup of Costa Coffee."

Bringing consumers around the world closer to Costa Coffee

Costa Coffee has not changed its Mocha Italia Signature Blend in 50 years, but it is continually using the latest technology to improve its distribution, accessibility, and customer service. In its latest development, it is trialling robotic coffee bars in the US, and Google Maps Platform will be integral to raising users' awareness of their whereabouts too.

"Google Maps Platform is now a key part of our digital operations. It helps us to make our communications more relevant to consumers and boost sales by ensuring that consumers always know where and when to get their cup of Costa Coffee," says Lucas. "That’s why Costa Coffee continues to innovate and experiment with Google Maps Platform to ensure that wherever our consumers are in the world, they are never far from a Costa Coffee Americano or classic Latte."

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How Coca-Cola and Costa Coffee are forging ahead with global expansion

Main image: A Costa Coffee store in Shanghai, China. Inset: (Above) Dominic Paul, CEO, Costa Coffee, (below) Jennifer Mann, President, Coca-Cola's Global Ventures Group (GVG)

Costa Coffee: British icon, global brand

"We have a long track record of disrupting the UK coffee market through different formats and channels" –  Dominic Paul, CEO, Costa Coffee

Costa's £38m UK roastery produces 45,000 tons of coffee annually and supplies the company's global portfolio. © Costa Coffee

“Coca-Cola has been very respectful of our brand and our heritage. Our operating model means that we’re connected to Coca-Cola, but not integrated within it. That’s important because we can benefit from Coca- Cola’s support, while continuing to operate as the Costa Coffee brand that customers know and love,” says Costa’s Paul. It’s a partnership that holds the potential to supercharge growth for both firms across café, vending and retail segments in international coffee markets that could otherwise prove difficult for each firm to navigate in isolation. “Costa is a good fit – and the best way – for Coca-Cola to add a global coffee platform that will complement our existing systems,” says Global Ventures Group President Jennifer Mann. “Coffee is one of the fastest-growing beverage categories in the world. It is also a category with many different elements, from vending to coffee shops to roast-and-ground to instant to pods and capsules. Today, with the growth in coffee and hot beverages, it is more important than ever that Coca-Cola makes a serious and significant investment in the category, because it’s the right thing to do to serve our consumers with more of the drinks they want.” Coca-Cola’s purchase of Costa Coffee forms part of a global trend of coffee market consolidation blurring the lines between hot beverages, soft drinks, cafés and retail. As coffee investments become increasingly lucrative, large conglomerates, such as Nestlé and JAB Holdings, are vying for supremacy across burgeoning growth categories, such as premium coffee and ready-to-drink (RTD) products. “Coffee is a big business with many formats. It’s also a very fragmented business. No single company in the world has a strong foothold across all parts of coffee. This presents a huge opportunity for Coca-Cola,” says Mann.  

Putting a price on excellence

When the Costa Coffee acquisition was announced in August 2018, analysts at Credit Suisse suggested Coca-Cola had paid too high a premium, valuing the UK coffee chain at £2.5bn ($3bn). Yet compared to the $7.1bn Nestlé paid to license Starbucks-branded retail products in 2018, Coca-Cola has not only acquired Costa’s branding rights but also the business’ substantial intellectual and material assets. These include nearly half a century of coffee knowledge, and crucially, scaled coffee self-sufficiency. Opening in 2017 after two years of construction, Costa’s £38m UK roastery produces 45,000 tons of coffee annually and is the beating heart of its global retail operations.  

"One of the strongest opportunities we see is to expand the availability of Costa Express with our customers in places around the world" –  Jennifer Mann, President of Coca-Cola's Global Ventures Group (GVG)

As Mann puts it; “Costa is an incredible British success story. The team has built a successful brand and business with proper coffee at its heart. They are experts when it comes to coffee.”  

We are only beginning to see how Coke is harnessing Costa’s significant global resources and knowledge. The deal gives the US beverage giant a strong coffee platform in more than 30 countries across Europe, Asia- Pacific, the Middle East and Africa, across which Costa already has an established retail presence. Since the 2018 acquisition Coca-Cola has already added 1,200 Costa Express self-serve machines to Costa’s pre-existing 8,000+ global portfolio.  

“One of the strongest opportunities we see is to expand the availability of Costa Express with our customers in places around the world. This is an example of bringing together the strengths of the Coca-Cola system and Costa Coffee,” says Coca-Cola’s Mann. Another high-profile development has been the launch of Costa Coffee’s hotly anticipated RTD coffee range. With Coke’s soft beverage marketing acumen and bottling infrastructure and Costa’ highly respected coffee credentials, RTD is an eloquent fusion of each firm’s expertise. “We are looking to combine the great coffee knowledge at Costa with our marketing expertise, global scale and distribution credentials,” adds Mann.  

Waking up to smell the coffee competition

Costa Coffee stores in the UK (L) and China (R). The company has over 4,000 stores and 9,000 vending machines across 32 markets. Image © Costa Coffee

Herein lies one of the biggest challenges for Coke’s global coffee strategy. Costa may be a revered global brand, yet except for a brief trial in Canada that was discontinued in 2016, the coffee chain is virtually unknown in the Americas. In the US, Costa faces an uphill struggle to garner brand recognition in a crowded market dominated by market leaders Starbucks and Dunkin’, which already hold two-thirds of the branded coffee chain market between them. German conglomerate, JAB Holdings, is also exerting significant influence in the US. Since the early 2010s JAB has amassed nearly 30 café and retail coffee brands. With a portfolio containing established businesses such as Panera Bread, Peet’s Coffee, Stumptown Coffee Roasters and Caribou Coffee, Allegra research reveals JAB is now the third-largest branded coffee chain business in the US. Combined, Starbucks, Dunkin’ and JAB control a princely 80% share of the US branded coffee shop market. Furthermore, the $18.7bn amalgamation of JAB’s soft drinks and retail coffee businesses in 2018 to create Keurig Dr Pepper is recasting coffee in the US soft drinks market. This is enabling JAB to push coffee products further and faster through Dr Pepper’s retail channels, which is now the third-largest beverage distribution company in the US behind Pepsico and Coca-Cola. For these reasons, at least in the near-term, it makes sense for Coca-Cola and Costa Coffee to focus on the latter’s strong UK and European presence , as well as growth markets in the Middle East and China, both of which represent “huge potential” according to Costa’s Paul.  

"By combining our resources and expertise we can become a world leader in coffee" –  Jennifer Mann, President of Coca-Cola's Global Ventures Group (GVC)

Allegra research shows the Middle Eastern coffee shop market grew 7.8% in 2018, with Costa Coffee the third-largest branded coffee chain and holding a 4.5% outlet share across the region. In China, Costa Coffee posted strong 2018 sales and plans to operate 1,200 stores by 2022. “We intend to grow within those markets where we already have a presence along with selective expansion into new markets,” explains Paul. While international growth across retail products and self-serve are important for Costa, Paul reiterates that brick and mortar stores will always play a core role in the Costa Coffee experience, especially in its flagship UK market. “Our store portfolio remains very important to us, as does the role we play across thousands of high streets and communities within the UK. We continue to invest in our stores and develop new formats, fit for purpose in areas such as travel locations. The growth in both RTD and our Costa Express machines means we can provide customers with convenient access to their favourite Costa, wherever they are and whatever the occasion.”

Breaking new ground

Costa Coffee's range of RTD coffee range launched in June 2019. Image © Costa Coffee

“We believe Costa Coffee is exceptionally well placed to benefit from the growing coffee trend as our brand is truly centred on coffee quality and expertise,” says Costa’s Paul. “We continue to invest in our digital platforms, delivery partnerships, new product innovation and our store environments – providing our customers with their favourite Costa product whatever the occasion.”  

The Allegra view

Combining the extensive skillsets of both firms makes sound strategic sense. Costa Coffee has the heritage, assets and expertise to deliver the expectations of increasingly sophisticated global coffee audiences, while Coca-Cola wields immense marketing firepower and global beverage distribution knowledge. Until now, both firms have had major gaps in their respective market approaches and this deal should open doors to new markets opportunities around the world. For Coca-Cola, the deal has delivered a credible coffee offer within its immense beverage portfolio, while Costa Coffee can now realise true global success beyond the UK and a handful of select international markets. Together the two entities can achieve greater opportunities across physical stores and premium vended coffee solutions, as well as the fast-growing RTD coffee segment. This looks like a commercial arrangement made in heaven – and a timely one at that. Now, with a supercharged investment and cross-channel global expansion strategy, only time will reveal the limits of what these titans can achieve together.  

From an article originally published in  Issue 2 of 5THWAVE .    Subscribe to 5THWAVE to receive each edition in print and digitally or sign up to our newsletter and be the first to read the latest articles and updates on World Coffee Portal research

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Barn’s kickstarts international expansion with bahrain store, austria’s aïda to venture overseas this year with stores in germany and saudi arabia, avolta opens first costa coffee store in italy at rome fiumicino airport, featured analysis, enveritas’ big idea for coffee sustainability, the art and science of building wholesale coffee accounts, “what we’re doing translates across the globe” – 7 brew marketing director, nick newbill, fostering connections across the coffee community - a conversation with laughing man coffee.

Costa Coffee case study: prioritising people and productivity post-pandemic

As the impact and fallout of the global pandemic continues to effect the day-to-day operations of many businesses, managing and supporting your people has never been more important.

While we all want to jumpstart the economy by welcoming employees back to the workplace, employers have a huge responsibility to provide a safe, healthy, and equitable working environment.

As businesses evaluate their future working models, some may conclude that employees can continue work from home permanently.  Others who intend to reopen workplaces need a plan to do so intelligently and with sensitivity, preparing for a new normal of face masks and physical distancing.

There is mounting pressure for HR and people leaders to deliver strategically on top of baseline delivery.

Join experts from Costa Coffee and Ceridian as they discuss how technology has underpinned people strategy before and during the global pandemic, as well as how it will form part of the recovery.

This webinar will help you address the key challenges of:

• Employee wellbeing and how it impacts on productivity
• How company culture can really make a difference on retention of staff and the bottom line
• Managing a rapidly changing workforce including possible redundancies and changes to roles within the organisation
• Managing a remote workforce and how to get the best out of your people
• The challenges of getting back to the office (or not)

It provides real life examples of how Costa Coffee and Ceridian worked with the latest HCM technology to smooth the journey through the global pandemic up to today and future-proofed themselves against the challenges of the future.

Presenters:

With more than two decades in various leadership positions in HR, in high profile organizations such as easyJet, McAfee and Microsoft, Andy has demonstrable leadership expertise within high volume HR Operations and shared services from both a creation of and ongoing service delivery perspective.

In April 2019, Andy joined Costa Coffee which had just been divested from Whitbread and acquired by Coca Cola. As the UK’s largest and favourite high street coffee shop, Andy’s first assignment was to modernise and consolidate the numerous legacy HR and payroll systems within an accelerated timeframe. In March of this year, Andy’s team successfully deployed and went live with Ceridian’s Payroll and Workforce management technology, Dayforce, which has been adopted by 13,000 of Costa’s UK team members.

Wendy is responsible and accountable for the commercial and strategic growth of Ceridian Europe. Having spent most of her career working with organisations undertaking Global HCM and Payroll transformation, she has a wealth of industry experience. 

As a strong advocate for identifying value through shared insights, Wendy is cultivating a collaborative culture within Ceridian which is delivering tangible benefits to her team and customers alike. 

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Our latest news and analysis.

M&a case study: coca-cola acquisition of costa coffee.

For those with an interest in the coffee industry beyond their morning latte, this M&A case study takes a look at one of the largest transactions within the global coffee industry in a very long time.

The Coca-Cola Company (“Coca-Cola”) recently announced that it has acquired Costa Limited (“Costa”), the global coffee chain founded in London in 1971.

The $US5.1b deal followed an announcement back in April by Costa’s parent company, Whitebread Plc, of its intention to demerge Costa into a new, stand-alone company. Whitebread, which is listed on the LSE and was founded way back in 1742, also owns several UK-focused restaurant and hotel brands.

Under the transaction, Coca-Cola will acquire the Costa brand together with almost 4,000 stores across 32 countries (almost 60% of which are in the UK), over 8,000 self-serve coffee vending machines and a growing in-home coffee business.

According to the Whitebread announcement, the deal values Costa at 16.4X FY2018 EBITDA. Looking at both Starbucks Corporation and Dunkin’ Brands Group Inc as broad coffee industry peers, the acquisition multiple looks broadly comparable.

Importantly, given the size disparity between Costa and Starbucks as well as Costa’s limited global presence when compared to Starbucks in particular, the multiple appears to contain a reasonable control premium. This is a sentiment echoed by Whitebread’s board in correspondence with shareholders.

M&A Case Study – Strategic Rationale

What the Costa acquisition clearly demonstrates is that coffee in all its forms and formats remains a key element of Coca-Cola’s growth strategy. Given the company’s recently sluggish share price, the need to move beyond sugary drinks and into other categories like coffee is readily apparent.

Certainly in Australia, the motivation to diversify beyond soft drinks is becoming particularly pressing with the Cancer Council recently launching a campaign directly linking obesity-causing soft drinks and multiple types of cancer.

This is certainly not a new game for Coca-Cola. The company’s Australian offshoot, Coca-Cola Amatil, has been on the hunt for coffee acquisitions in particular as far back as 2005, buying out Melbourne-based roaster Grinders. The stated goal at the time was to use the acquisition to learn about the coffee business.

With Costa, Coca-Cola is buying a well-established coffee platform that the company rightly believes is scalable beyond Costa’s traditional UK market. Given the brand’s level of penetration within its home market, overseas growth is vital.

One growth avenue highlighted in statements by Coca-Cola’s CEO James Quincey is leveraging Costa’s coffee vending machines, particularly in the US, across the country’s millions of supermarkets, convenience stores, petrol stations and the like.

This would certainly seem to be a smart move that plays to Coca-Cola’s traditional strengths in logistics and distribution and which avoids the capital intensive and high execution risk associated with trying to take on Starbucks in a direct bricks and mortar shootout.

It is also interesting to note that in its announcement, Coca-Cola specifically identified China as a key market in which Costa has a growing footprint. A recent presentation by Starbuck’s China CEO, Belinda Wong, pointed to seemingly impressive growth numbers for the company’s China business.

China is clearly on Coca-Cola’s mind with this acquisition.

However, it is worth noting that Starbucks first entered mainland China way back in 1999 . So, it’s fair to say that a Costa-Coca-Cola China push is a long-term and uncertain play, though now with a far greater chance of success with the backing of Coca-Cola.

It will be interesting to see how this acquisition plays out. What is clear is that coffee is seen by multi-national companies the size of Coca Cola as a driver of their future global growth. We at CFSG share that view and remain keenly interested in coffee both as advisors and investors through companies such as Need a Barista .

If you would to discuss how CFSG can help you grow or exit your coffee-related business, we invite you to contact us .

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Please note you do not have access to teaching notes, costa's “filter” gets the right employees: turnover of customer‐facing staff falls by 20 percent.

Human Resource Management International Digest

ISSN : 0967-0734

Article publication date: 1 June 2005

Describes how UK coffee‐store brand Costa has reduced the turnover of its shop‐floor staff by almost 20 percent.

Design/methodology/approach

Sketches the relationship between Costa and assessment‐tool specialist PSL and explains the role of PSL in the turnaround.

Recounts how PSL custom‐built a personality questionnaire to help Costa to recruit the right people to work in its shops. Shows that the questionnaire has proved so successful that Costa has now introduced a separate selection tool for its store managers. Delivered online, it measures personal qualities and is specifically designed for assessing retail managers.

Practical implications

Contains plenty to interest recruiters working in sectors where high employee turnover is the norm.

Originality/value

Highlights the way in which lower employee turnover is helping Costa to maintain quality during a period of rapid expansion.

• Recruitment

(2005), "Costa's “filter” gets the right employees: Turnover of customer‐facing staff falls by 20 percent", Human Resource Management International Digest , Vol. 13 No. 4, pp. 21-22. https://doi.org/10.1108/09670730510599559

Emerald Group Publishing Limited

Copyright © 2005, Emerald Group Publishing Limited

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