Costa goes back to school to find growth

Guest post from David Nichols, Managing Partner (Global) and head of invention

I was attending an open day at a school recently and was surprised to hear the Headmistress inviting potential parents to visit their Costa café.  Sure enough, there was a small but fully operational Costa with staff and students enjoying ‘grown up’ coffee at break times.  Costa is the UK’s no.1 coffee chain and competes with Starbucks, Cafe Nero and a host of other chains for high street locations. 

The market has become hugely competitive with coffee shops seemingly every other store in busy town centres.  Costa has been hard at work developing new formats to extend its reach, find new "routes to consumer" and grab more ‘share of throat’. They have Costa Express self-service vending machines popping up in garage forecourts and offices, a ‘Proud to Serve’ offering for pubs, bars, and restaurants. They have also successfully pushed into Travel & Leisure, Hospitals and higher education.  There are even a few ‘Drive-Thru’ Costa stores!

The push into schools is the next part of this strategy. Here are some take-outs from what they have done:

Niche can be good: Too often marketers see the word ‘niche’ and turn away.  But many niches can be profitable if you can be the leader brand in the defined segment.  Which is the most profitable car company?  Porsche, the leader in high performance sports cars.  Which Laptop maker makes the most profit?  Apple, the leader brand in premium computers over $1,000 vs the ubiquitous laptop PC.  Costa have discovered a niche full of untapped coffee occasions and with just a little tweak of their business model have accessed it.

Go Early: The other benefit to this approach is that Costa is driving trial amongst a whole new generation of coffee drinkers.  Serve them well and keep the brand relevant and teenagers will leave school with a taste for Costa coffee rather than Starbucks.  This is a long term brand building benefit but is the equivalent of Pampers making sure they are the first to be offered to new mothers (usually before they even leave the hospital) to ensure they are mum’s trusted brand for the duration.

New distribution sells more: We’ve said it time and time again, but new distribution is the only sure way to increase sales.  Increasing your Twitter followers or Facebook ‘Likes’ may feel good, but there is no direct way to see if it helps you sell more.  Conversely, if you put your products on sale in more places you will sell more. Period.  Costa have done just that and, if they run with it fast enough, may sew up the lions share of this market before the others can get in.

Summary

Profitable niches exist in many markets – even yours.  As society evolves, things that may once have been impossible (cafes in schools) start to become realistic opportunities.  Keep looking for new distribution, or just go back to school like Costa have. 

N.B. Their next step is taking on the mighty Nespresso, Brandgym’s ‘best brand in the world’ no less.  They have teamed up with Tassimo to create their own in-home coffee ‘system’ to try and grab a share of the large ‘at home’ posh coffee market.

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