Costa Coffee’s Losses Tell a Larger Story About the High Street’s Middle Ground

The impact was anything but subtle, even though the figures appeared quietly in Companies House filings. In 2024, Costa Coffee’s operating losses more than doubled, going from £5.8 million to £13.5 million, despite a slight increase in revenue and the brand’s continued near-ubiquity on British high streets.

The contradiction is startling at first. Although a company with £1.2 billion in annual revenue is unlikely to use the language of decline, the growing disparity between sales and profitability reveals a more nuanced picture of expenses, competition, and shifting consumer preferences.

Costa’s strength for years was its widespread presence. It used to be a reliable fixture in everyday routines that neatly translated into stable margins, and you could find it in city centers, hospitals, service stations, railroad platforms, and retail parks.

That reasoning is no longer sound.

Not collapsed, but softened enough to matter, high street foot traffic has decreased, especially for a chain whose business model relies on volume rather than rarity. A few fewer commuters per store multiplied by thousands of locations quickly becomes a structural issue.

Value-led competitors have advanced remarkably quickly. These days, Greggs and McDonald’s offer competent coffee at prices that feel drastically lower to customers who are watching every penny, particularly during a protracted cost-of-living crunch.

Conversely, independents and smaller premium chains have become more appealing. Better cuisine, more peaceful areas, and a well-developed identity are now especially advantageous in areas where patrons hang out rather than rush.

It is now uncomfortable to stand in the middle, where Costa sits.

Poor harvests and pressures on the world’s supply caused coffee bean prices to soar in 2023 and 2024, while labor shortages and policy changes led to wage increases. Although these pressures are not specific to Costa, their effects are amplified by scale.

Managing thousands of stores is incredibly adaptable in good times and harsh in bad. Until resilience subtly deteriorates, every additional expense—whether it be energy, rent, or personnel—is multiplied.

The tension is reflected in the brand’s own pricing. Costa is no longer affordable enough to be the clear value option, but it’s also not unique enough to command the premium enjoyed by more carefully chosen rivals. Even if they don’t express it, customers pick up on these distinctions fast.

Costa frequently reported profits between £60 million and £100 million prior to the pandemic. Investor expectations are influenced by that memory, which makes recent losses seem more severe than the absolute figures would imply.

Here, ownership is important. In an attempt to turn a British coffee chain into a global growth engine, The Coca-Cola Company paid £3.9 billion to acquire Costa in 2019.

Rather, reports now indicate that Coca-Cola has considered selling for about £2 billion, a price that subtly recognizes how much the initial investment thesis has changed.

Coca-Cola’s CEO acknowledged Costa had “not quite delivered” during an earnings call last year. The statement sounded measured but conveyed clear disappointment.

It seemed like a turning point at that moment.
When I read that quote, I thought about how uncommon it is for a parent company the size of Coca-Cola to openly acknowledge misalignment rather than patience.

The losses are not existential in and of themselves. Due to tax credits and dividend income, Costa even reported a £67 million post-tax profit in 2024—an accounting detail that muddies the headline story.

However, operating losses are important because they show how well the business is doing overall, excluding financial engineering and one-time offsets.

The term “peak Costa,” which stands for market saturation rather than collapse, has started to be used by analysts. With over a third of the market and about 2,700 stores in the UK, growth through expansion is no longer a simple lever.

The only thing left to do is optimize, and optimization is more difficult than opening new stores.

Closing places could mean giving up presence. Price increases run the risk of driving consumers to less expensive options. Reducing expenses runs the risk of compromising the experience that still attracts customers.

Costa has tried things out. With differing degrees of success, limited-time value offers, collaborations with convenience stores, and menu adjustments have been implemented. While some initiatives are remarkably successful in increasing short-term traffic, they don’t address the larger positioning conundrum.

Additionally, consumer behavior is changing. While older customers continue to be pragmatic and price-sensitive, younger customers are increasingly favoring matcha, cold brews, or independent cafés that feel less corporate. It is possible, but not easy, to serve both groups under a single brand.

More alarmist interpretations of the accounts are tempered by the fact that Costa continues to lead the UK market despite a slight decline. But just as easily as confidence, market leadership can lead to complacency.

The international question is another. Compared to its domestic dominance, Costa’s global footprint is still small, and expanding overseas at a time when margins are already under pressure carries risk.

However, the narrative isn’t just defensive. Costa’s size gives it advantages over smaller competitors, such as procurement power and operational data that, when used effectively, can lead to noticeably increased efficiency.

Transforming those benefits into a more understandable offer for clients who now demand either unmistakable value or unmistakable character is the difficult part.

Securing funding continues to be the largest challenge for medium-sized businesses. Strategic clarity is Costa’s challenge.

Coca-Cola’s readiness to entertain a sale implies that patience is limited, but it also creates the possibility of reinvention under a new ownership, possibly one that is more concerned with retail nuances than beverage portfolios.

More than anything, the 2024 numbers show that familiarity no longer ensures profitability. Although Costa is still a part of British culture, the economics of that familiarity have changed.

Losses do not constitute a verdict. They serve as a signal.

They paint a picture of a company at a turning point, still big and relevant but compelled to reconsider how scale, price, and identity mesh in a market that no longer automatically favors the cozy middle.

The lesson is already evident, regardless of whether Costa’s next chapter is written under Coca-Cola or a new owner. Eventually, growth based on being everywhere gives way to the more difficult task of determining exactly what you want to be and why clients should continue to choose you in the future.