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Thu 12th Dec 2013 - Breaking News - Costa Coffee to add 500 UK sites in five years
Costa Coffee to add 500 UK sites in five years: Whitbread’s Costa Coffee brand plans to add 500 UK locations in the next five years to take its UK estate from 1,711 sites to around 2,200 in 2018. The company told analysts this afternoon that it is in negotiations on 180 of these sites. Property director Clive Bentley forecast that 200 sites would open in city centres and high streets, 100 would be in retail parks and drive-thrus, 80 would be located at universities and within offices, 100 would be located as concessions in stores like Next and Primark and 75 would be in transport hubs. Bentley pointed to Chelmsford of an example of Costa sales being developed through ten different channels, which had driven collective Costa sales from £10,800 per week in 2005-2006 to £62,400 now, with £80,000-a-week forecast for 2017-2018. Bentley also indicated the returns available to Costa in small towns such as Stokesly in North Yorkshire, which has a population of 1,700, yet produces average weekly sales of £6,900 and makes a 26% annual cash contribution – demographic experts place the town at 2,443 in its list of populated hubs. Bentley said information captured on customer demographics through its loyalty scheme allows the company to understand the number of potential Costa customers in a particular town. Bentley argued that you “can thrive on high streets if you can adapt and innovate”. On rent inflation, he said: “We’ve seen less than 1% per annum rent inflation in the last five years – and 80% of our stores have seen nil increase on rent review. It’s supply and demand – there’s an awful lot of property vacant.” Costa UK retail director Jason Cotta reported that Costa Coffee now has 2.3 million customers signed up for its loyalty scheme, with demographic insights captured on 1.3 million on them. Price-points have been held for three years and now range between 15p less than Starbucks - and up to 40p lower for the current Christmas drinks range. Average transaction value at Costa is £3.83 and coffee is now 49% of sales, with 69% of sales involving eating and drinking on site. Food sales account for 29% of total shop sales – and a key area where sales will be developed. Another 15 to 20 items would be added to the food menu in the coming year. A giant chocolate teacake is selling 20,000 items a week. Cotta reported that Costa’s summer beverage range had captured one-third of all drinks sold at their peak during the warm weather. He told analysts that Costa now had 13 drive-thus with 40% of sales at these sites through windows. “This business looks incremental,” he said. Staff turnover among Costa’s 10,000 UK staff has dropped from 120% in 2003 to 38% currently, a 82% percentage drop. Staff are paid above the National Minimum Wage and Whitbread does now have any zero hours’ contracts. Cotta told analysts that there was a direct correlation between staff engagement and better sales. Top quartile shops have 2% staff turnover and 9% net promoter score advantage over bottom quartile stores, which is worth 2% in like-for-like sales growth. Chris Rogers, managing director of Costa Coffee, reported that Costa’s market share has grown from 7% to 11% of the UK market since 2009. He argued that long-term societal trends had worked in favour of the coffee market, such as the rise of the internet, mobile working and female spending power. He forecast that the coffee market in the UK would continue to grow. Consumers in Finland get through of 12.2 kilograms of coffee per capita each year compared to 2.8 in the UK. Rogers also told analysts that like-for-like sales growth in 2012 was 7.2% in the regions compared to 5.2% in the London area, with 44 consecutive quarters of like-for-like growth.
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