Costa is preparing to step up its hot food offering in the UK after completing a roll-out of MerryChef ovens and microwaves across its estate.
Installation of the new MerryChef ovens has been taking place in stores around the country during the past year ahead of the introduction of new hot food ranges over the next 12 months.
The launch will start with a new “better breakfast” offering during the coming weeks.
Deployment of the MerryChef ovens, which are manufactured in Sheffield by Welbilt (formerly Manitowoc), is expected to deliver the speed and consistency that the chain wants from hot food production.
Investment in new kitchen equipment forms part of a broader strategy to ensure the company remains up to speed with what customers want, especially given the choice on offer from other operators.
“The market and competitive landscape continue to evolve with more food-led operators now offering coffee and, while convenience and coffee quality remain the top decision criteria, customers are becoming more demanding in the way their priorities are met,” it said.
“At Costa we are focused on meeting this challenge and serving the best quality coffee and fresher food via more tailored store designs, with a complementary digital experience.”
A new till system will also be installed this year, enabling faster service and new functionality to provide the platform for further Pay & Collect trials towards the end of 2017 and a wider roll-out thereafter.
Preliminary annual accounts published this week reveal Costa generated an operating profit of £158m on sales up 11% to £1.20 billion. UK like-for-like sales grew 2% to £1.05 billion.
Costa added 255 new stores worldwide last year and installed a further 1,585 Costa Express machines. It now operates 6,801 machines globally. The machines are being upgraded with new management systems, which will enhance its scalability and allow it to monitor and control the machines and their content remotely.
“In 2017/18, we expect our Costa initiatives to drive positive like-for-like sales growth, with the investments we are making in the first half delivering benefits in the second half. We do, however, expect the consumer environment to be tougher than last year,” the company said.
The market and competitive landscape continue to evolve with more food-led operators now offering coffee”
Costa currently operates 2,218 stores but has ambitions to reach more than 3,000 units in the medium-term. Internationally, where it operates more than 700 stores, it is heavily focused on driving franchise agreements. In France it recently moved to a franchise-only strategy and closed its five equity stores in the country.
“Our franchise business has grown rapidly over a number of years through our successful business model of great partnerships, efficient logistics and a focus on localisation and customer demographics,” it said. “Going forward we will select target markets with the highest potential for us to grow profitably and win market share.”
Costa’s performance in the UK during the past three months, meanwhile, highlights the extent to which its business is changing as consumer trends evolve.
Like-for-like sales from high street stores fell 1%, “reflecting the general retail trend and a more cautious consumer environment”, but travel and ‘drive thru’ destinations sparkled. “Drive Thrus are delivering very high sales volumes and returns and, together with travel channels, are our fastest growing category and will become a greater proportion of our estate going forward,” it said.
Costa expects Travel and Drive Thrus to account for nearly 30% of its future store growth, it said.