The Costa Coffee

Ken Mark
Julian Birkinshaw

LBS REF: CS-13-013

Costa Coffee: A Proposal to Build the Next Generation
Self-Serve Espresso Bar
The Victorian, yellow-bricked arches that framed Costa Coffee’s Lambeth Roastery shook
as a freight train rumbled across the tracks above. It was an unassuming home for a
business with such promise. “It seems fitting”, thought Jim Slater, Managing Director of
Costa Enterprises, as he walked past the property’s black iron gates, “that these old walls,
where we still hand-roast 6,000 tonnes of coffee annually, could become the new home to
what would be the most innovative project in Whitbread’s 270 year history.”
A year earlier, in December 2011, Whitbread PLC, a UK-based hotel, restaurant, and
coffee shop chain, had split its Costa Coffee unit into four divisions, with teams focused on
different aspects of the coffee business’s growth initiatives. Among them, Costa
Enterprises focused primarily on driving coffee sales through the UK corporate franchise
business, “Proud To Serve” wholesale business, and newly acquired Coffee Nation, a fleet
of fresh bean-to-cup self-service coffee vending machines (“concessions”) founded by
entrepreneur Scott Martin, 11 years earlier. The acquisition rationale was that Coffee
Nation could access opportunities beyond the practical or economically attractive reach of
Costa Coffee’s premium high street cafés.
Slater had been handed the task, among other things, of expanding Costa Express across
the UK and select European locations. The stated plan was to grow Costa Express to
3,000 sites, a seemingly realistic goal given that Costa Express dominated the UK
forecourt market and that there were discussions underway with large partners –mostly
forecourt operators—willing to operate several hundred machines each. “With the Express
business model proven, the real challenge will be scalability”, thought Slater. “If the
product and supply chain allow, our near-term goals...