Ignoring Fancy Drink Trends Cost Some Coffee Chains The “Matcha Generation” – CoffeeTalk

Costa Coffee, a leading coffee chain in the UK, has lost its matcha generation due to changing coffee and tea drinking trends, particularly among younger generations. The chain’s owner, Coca-Cola, is reportedly looking to sell the chain, with one analyst suggesting it could go for £2bn, about half of the $4.9bn (£3.9bn) it paid in 2019.

Blank Street Coffee, which began in Brooklyn in 2020, has gained a cult following with its rainbow array of matcha drinks, including celebrity fans Molly-Mae Hague and Sabrina Carpenter. The popularity of Blank Street has been driven by its TikTok appeal, with fans posting videos of themselves ordering in its minty fresh decorated cafes or at free tattoo pop-up events.

The worldwide matcha craze means supplies of the bright green Japanese tea are drying up and the demand is pushing up prices. Starbucks and Pret have jumped on the trend with an iced matcha latte and Nero a strawberry and vanilla iced matcha latte. Popular national chains like Gail’s and Black Sheep Coffee also offer green matcha waffles.

Gen Z is increasingly seeking out a new luxury drink as an affordable treat, as the cost of living remains high. Matcha is traditionally considered to contain antioxidants and have a more tempered caffeine effect than the “high” and “crash” of regular coffee but there is some debate over any proven health benefits. Costa serves a variety of frappé and fruit coolers, but these contain syrups and can be topped with whipped cream, which may not appeal to the clean-living green-juice sippers among us.

With the rising popularity of home coffee machines, chains have to come up with special reasons to get customers through the door. Clive Black, vice chairman of independent investment group Shore Capital, says that Costa is not the only brand struggling with the changing UK coffee market. The rise of smaller chains and artisanal independent stores have also “eaten into the share” of the major chains.

Young people increasingly care about spending choices, and when a coffee can cost you the best part of £5, you expect something you can’t make yourself. Clare Bailey, independent retail analyst and founder of The Retail Champion, believes that businesses that don’t reimagine themselves and respond to consumer behavior, and perhaps get a little complacent, are the ones who end up in trouble.

In conclusion, the global matcha craze has led to a shift in coffee consumption, with younger generations preferring smaller, independent coffee chains. As the cost of living continues to rise, it is crucial for coffee chains to adapt and adapt to this changing market.

Coca-Cola’s chief executive James Quincey has admitted that Costa, a coffee chain, is not where it wanted to be and is exploring new avenues for growth in the category. Costa, which began as a London roastery in 1971, has expanded to over 4,000 stores and operations in 50 countries. In the 2023 financial year, Costa reported revenues of £1.2bn but experienced an operating loss of £14m due to inflationary pressures. Coca-Cola is working with investment bank Lazard to explore its options for the coffee chain, including a potential sale.

The number of branded coffee chain outlets across the UK has increased from 9,800 five years ago to 11,450, while the number of independent coffee shops has also risen from 11,700 to around 12,400 now. With so much choice, competition to attract customers heats up. Mimoza Emsa, who used to drink Costa, now always goes to Pret because it’s close to her work and offers its subscription which offers discounts.

Costa and similar chains are not as quick and cheap as Greggs or McDonalds coffee but don’t offer the higher-end experience for when people want to treat themselves. Retail analyst Clare believes that middle-road retailers struggle because they are neither one thing nor the other.

Despite these shifts, Costa still has loyal customers, such as Rafik Khezmadji, who comes to Costa because it’s close to work but also enjoys being able to sit outside and savour his coffee. For 20-year-old fashion business student Megan Penfold, the coffee at Costa is “not the worst and not the best.”

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