Fri 23 Nov 2018 • European Coffee Symposium
Q&A WITH COSTA EUROPE MD, ANDRZEJ JACKIEWICZ
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How is the European coffee shop market performing currently?
The European coffee shop market has been growing immensely, with revenue growth in the range of 7-10% per annum across branded coffee shops and independents. It’s a really exciting market, the business has been on a great run for the last few years and I think this will continue for the next few years at least.
Which markets are performing particularly well?
The Czech Republic, which had some difficulties a couple of years ago, is doing much better and today is my second-fastest growing business after Poland. Smaller markets like Hungary and Bulgaria have also been enjoying really positive growth over the last couple of years.
Generally speaking, but especially in Central and Eastern countries, European consumers have more money in their pockets, they’re going out and spending more and this a key driver for growth. If you look at Poland, this year GDP growth is going to be almost 5%, last year it was more than 4%. As people have more disposable income, they’re willing to pay a little more for quality coffee and will visit a proper coffee shop rather than just have coffee at home. Clearly this helping coffee shop businesses.
Europe also benefits from the fact that many of its markets are considered safe places for people to travel. If you look at like-for-likes in European tourist destinations – Portugal, Spain, but also smaller markets – Cyprus, Malta and even Bulgaria have all experienced strong double digit like-for-like growth. We are also enjoying a very promising cooperation with Deutsche Bahn in Germany, where we opened our first store in Berlin, and will be opening another one in Karlsruhe very soon.
Premiumisation is taking hold across many European coffee shop markets, how is Costa Coffee catering to increasingly sophisticated consumers?
Consumers are looking for increasing quality across products and proposition, but our coffee credentials remain the core of everything we do. This is what we call our ‘coffee-first strategy.’ First of all, we make sure that when customers come to our stores, they’re having the best possible coffee experience – anytime, every time and any place. We achieve this starting with comprehensive training for our baristas then checking the quality of our proposition by following up on delivery. But we’re also looking at the vision more holistically, so this connects with things like store design and our food offer, which is becoming more important. Customer service is also more critical than ever.
I think consumers are looking for repetition of in-store experience in branded coffee chains but are also seeking the unique experience offered by independents. This is the dilemma large chains face; they want to have a scalable business, but they also need to understand the boutique at scale concept, which is becoming more and more important. So, we’re exploring how to make new store openings a little more unique, localise more while retaining Costa’s core brand identity.
Do you think Italian coffee culture will continue to be a strong influence in the coffee shop industry?
Italian influence is the blueprint for Costa Coffee and from that perspective it’s going to stay. Lots of innovations these days come from the New World, places like Australia or New Zealand, but clearly Italy has a role to play here as well. The question is: What is the future for the coffee industry and will we be taking steer from Italian coffee heritage? I think in terms of coffee quality and espresso machines, we certainly will. But in terms of innovation there are probably going to be number of places to show the way.
Can branded chains succeed in the Italian market?
It’s a question of whether Italy is ready for more global coffee shop businesses. I would say they are starting to be, more so in the north, but if we had been talking five years ago, I would have said no. Today I think they’re more open to branded coffee shop businesses and Starbucks’ entrance with a new roastery and planned expansion will be a part of that. But it’s not going to be easy to crack, it’s a long-term game, a long-term investment. There probably is a window of opportunity coming in the next couple of years for branded coffee chains like Costa Coffee, Starbucks and a few others to grow in Italy.
What’s behind Costa’s sustained success as the largest coffee chain in Europe?
Our perfect delivery of coffee experience, our coffee quality and credentials – we don’t compromise on these. The consistency and quality of the coffee has been key to our success – that’s the number one reason. The second reason is that most of our European business is with franchise partners and we’ve really learned how to work with them on quality and share our expertise in running the business while allowing them flexibility when they require. We don’t compromise our core offer, but whenever we need to develop food, for example, we do it locally. This is helping us a lot in Europe. Thirdly, we’re making sure we’ve got the right partners and focussing on the right priorities and cooperating on the business plans we have put in place.
What will be the major developments for Costa Coffee in 2019?
A key piece of our future is our plans with Coca-Cola, which we’ll be working out next year after regulatory approval. That’s going to open new territories we’d never thought of before. It’s a super interesting time for Costa – we’re leveraging a system that is highly global, will be highly attractive for our business and will now be part of Coca-Cola’s huge global presence. Coco-Cola boss, James Quincey, says he wants to run Costa, ‘connected but not integrated.’ I think this says a lot on its own. He understands that future success is going to be leveraged from the Costa brand.
Published: 23rd November 2018