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Does the new Costa coffee hybrid proposition pose a threat to bars and pubs?

Published:  28 October, 2016

In October 2016, Costa became the latest major UK coffee chain to offer its customers two hits instead of one: caffeine and alcohol all under one roof. 

In October 2016, Costa became the latest major UK coffee chain to offer its customers two hits instead of one: caffeine and alcohol all under one roof. Their chosen guinea pig was the Wandsworth branch, where regulars can now imbibe a range of beverages - including Pinot Grigio, Sauvignon Blanc, Cabernet Sauvignon, Cider and Prosecco - in addition to the standard coffee/tea offering.

"The Wandsworth branch is now open until 9pm Monday - Saturday and until 7pm on Sundays. The later opening hours are in line with changing consumer habits and customers wanting somewhere to sit later into the evening that isn't a pub or bar. We will review plans for more stores following a successful trial - we always listen to what our customers want and refresh our offering accordingly." says Jason Cotta, managing director of Costa Coffee UK and Ireland.

This move by Costa comes at a time when the total on-trade wine market in the UK continues to shrink, albeit with the premium sector remaining buoyant. But the news will hardly thrill the mainstream pub/bar segment, which continue to lose precious market share to the off-trade.

Yet at first glance, this announcement by Costa is hardly earth-shattering or perhaps even cause for concern. Historically, Europeans have often embraced boozing where they caffeinate and a growing number of venues across the UK are following suit.

Both Starbucks and Pret a Manager have introduced alcohol into a select number of stores this year, joining a growing firmament of independent, 'Beer Cafes' across Britain which fuse the laid back look of continental coffee shops with craft-beer on tap.

Indeed, according to the research company M&C Allegra, a fifth of people in the UK would visit coffee shops more often if they sold beer. London in particularly is full of such venues, including the hipster haunt Look Mum No Hands!, which continue to thrive despite significant competition from big brands.

However, while the premium/niche on-trade segment may well be insulated from the rise of hybrid coffee bars, the mainstream sector could be in for a rough ride. In an era when spending your evening in a high-street pub is hardly fashionable - particularly to young parents and older female professionals - chains like Costa and Starbucks offer an attractive alternative, in a safe and comfortable environment.

Also, unfortunately for pubs, the number of coffee shops cluttering up our high street continues to rise: there are over 21,000 chain branches open in the UK today, a number that is predicted to hit 30,000 by 2025.

Moreover, there is no immediate reason to think that the Costa concept won't catch on - Starbuck's CEO, Howard Schultz, has already announced his plans to open at least 100 licensed venues across the globe, including Manchester and Birmingham, due to the success of their trial scheme earlier this year.

Nonetheless, the majority of the trade remain bullish in the face of Costa's potential desire to make coffee/alcohol shops a permanent feature of the high-street. "The Costa initiative is a joke - have you seen the wine list?" laughs Ted Sandbach, owner of the Oxford Wine Cafes.

He continues: "Can you imagine a worse environment in which to drink wine? I'm actually surprised that licenses are being granted; all Costa are offering is sic wines, three beers and a cider. All complemented of course by perfect décor and knowledgeable staff - I think not!"

Owen Morgan, owner of the Bar 44 chain in South Wales, underlines the point that a sizeable number of consumers seek out an adults-only environment, something Costa cannot hope to provide. "This scheme may threaten the cheaper end of the market, however I really hope not - Costa should stick to what they do best," exclaims Morgan.

"It all depends on what type of atmosphere they create in these hybrid brands. My local costa is often full of school children enjoying hot chocolate and the like, would they be attracting that kind of demographic in a hybrid shop/café and would you want a glass of wine in them?" he adds.

But ultimately, as with any trial scheme, its success will depend on the strength and consistency of Costa's longer-term offering, and of course the competitiveness of their price-points. At the moment, the branch's alcohol selection is hardly extensive and of premium quality, which suggests that at least discerning consumers will probably look elsewhere for their alcohol fix.