Brits are fed up with overpriced coffee

We don’t lead the world in Artificial Intelligence. We can’t keep up with the Chinese in making electric vehicles, and as for building high speed trains it is best not to ask. Still, there was one sector of the global economy where the British were world beaters. When it came to making ridiculously expensive milky caffeine-based drinks our entrepreneurs could match anyone. But hold on. There are now signs that Britain has turned its back on overpriced coffee – and the chains are running into trouble.

Pret a Manger is no longer the booming business it once was. It has emerged that its owner JAB, which bought it from the private equity firm Bridgepoint for £1.5 billion in 2018, had written down its value. It made a loss of more than £500 million last year. Its great rival Costa is not in much better shape. Coca-Cola paid almost £4 billion when it bought the chain from Whitbread, also in 2018. But it is now hawking it around, with a price tag of only around half that. Coffee chains have turned into a terrible investment. They are a licence to lose money. 

Of course they may be able to turn that around. Pret is launching a meal deal to compete with the supermarkets, and Costa may be able to expand significantly into food (although no one who has been unfortunate enough to buy a Costa sandwich would feel very optimistic about its chances). If the chains rationalise their stores it may reduce competition and make business a little easier for everyone.

The trouble is, there is not much sign it is going to work. The real problem is that the chains are charging way too much for a product that is not actually very good. Over the last two years alone the average price of a coffee has risen by 19 per cent. Add in a couple of shots, or switch the milk, and each cup often costs £5 or more. At the same time, the chains became ever more bland and homogenised. A funky, artisan coffee shop might be able to change a fiver a cup. But a Costa in a Shell garage? Not so much. In a free market, companies have to offer consistently good value for a decent product. The coffee chains forgot that simple rule. And as the British give up on overpriced coffee it will prove a very expensive mistake.