Costa Coffee

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Costa Coffee

Costa Coffee was founded by Italian brother Bruno and Sergio Costa in Lambeth, London in 1971. Then in 1995, Costa was sold to Whitbread Company as its subsidiary. During the period of global economic recession, 2009, Costa achieved a remarkable level with 60% profit increased and 23% revenue increased1. Moreover, as the largest coffee chain in UK, Costa paid £36m for the acquisition of ‘Coffeeheaven’ at the end of 2009. So far, Costa Coffee operates in 28 countries with the total number of 1,600 stores2. Then what are the key successful factors which made Costa expanded quickly with high profitability in the fast growing and competitive coffee industry? In order to answer this question, I will apply PESTLE Model and STP Process to analyze the strategy and marketing issues.

Strategy: PESTLE
As a component of the marketing environment, the macroenvironment include many factors which have great effect on the decisions of strategies.

In 2010, the new government, coalition government (Cameron Ministry), published several new policies which caused the decrease of the poll rating for the party3. And one of them is the Taxation policy. During the past two years, the VAT rate had a fluctuation: decrease from 17.5% to 15% and back to 17.5% in 2009/2010 and increase to 20% in 2011. Clearly, the low VAT rate means lower price to customers and then lead more sales. Also the 20% VAT rate will affect the Costa customers since they may try to stop buying or purchase less to resist the VAT raise.

Due to the increasing demand of high-quality coffee, the company who holds certified coffee beans and fair trade coffee beans will gain more product differentiation advantage. From 2008, Costa Coffee has started to convert its entire coffee supply to sustainable grown beans4 which was from Rainforest Alliance Certified™ Farms. Also, in order to implement the Fair Trade, in 2006 the Costa Foundation was set up to support the coffee growers lived in...
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