The news that Whitbread is set to expand its Costa Coffee chain will be welcomed by the millions who can’t go without their high street caffeine fix. The company also plans to increase the number of hotel rooms provided by its Premier Inn brand.
Whitbread set out its plans at the same time it announced a 20% increase in profits, after sales rose by 11.5% in the year up to the beginning of March. The global expansion of its leisure commercial property empire is expected to create 2,500 jobs in the UK over the next five years.
Costa Coffee has been one of the most successful leisure commercial property operators on the high street during the recession, mainly due to its attractive offers to cash strapped Cappuccino, Latte and Espresso drinkers. Likewise, Premier Inn has prospered by offering rooms at budget prices.
According to Whitbread chief executive Andy Harrison, Costa Coffee, which the company acquired in 1995, had an “outstanding year” with like for like sales up by 5.5%. He also reported that Premier Inn had seen a 3.2% increase in profits over the same period.
The ambitious expansion plans, which will cost £350 million, will increase the number of Costa Coffee leisure commercial properties worldwide to 3,500 and the number of Premier Inn hotel rooms to over 65,000.
This represents a doubling in the number of Costa Coffee commercial properties – which currently stands at 1,871 – and a 50% increase in capacity at Premier Inn, which already has over 43,000 hotel rooms.
Andy Harrison says the expansion is an opportunity for Whitbread to build on its good results and take advantage of commercial property availability.
He said; “We see a significant opportunity for Whitbread, building on our good returns on capital and the availability of quality sites. This is an exciting and profitable plan to build on Whitbread’s success and to create substantial value for our shareholders.”
On the same day that Whitbread announced its plans for the expansion of its leisure commercial property chain, Costa Coffee’s US rival Starbucks also announced favourable trading figures.
The company, which was founded in 1971 and is the largest coffeehouse company in the world, reported an 18% rise in global profits on the previous year. However, this figure disguises a 1% fall in European profits following difficult trading conditions.
Starbucks chief financial officer Troy Alstead said; “The European macroeconomic environment is very, very difficult and has taken a turn for the worse in the last couple of months and that certainly impacts us.”
The growth of coffee shop leisure commercial properties on UK high streets over recent years has been prolific. Alongside chains like Costa Coffee and Starbucks there are a host of independents in the market, like Idler Academy in Notting Hill and Prufrock Coffee in Shoreditch.
Following Whitbread’s announcement, the Guardian conducted a poll asking its readers; “Is there space for more coffee shops in the UK market?” The results showed 70.7% thought there were too many jostling for space already, while only 29.3% believed there was sufficient demand for more.
Are Guardian readers right? Has the market for coffee shop commercial properties on our high streets reached saturation point. What do you think?
