Costa Coffee’s main UK operation has returned to operating profit after two years of losses, giving owner Coca-Cola a stronger financial base for further store investment and expansion.
Costa Coffee recorded an operating profit of about £20m for 2025 after losses in each of the previous two years. Revenue increased by roughly 5% to almost £1.3bn as customer numbers improved and the business continued updating its UK estate.
The turnaround has coincided with changes to both stores and products. Costa has expanded its range of iced drinks, matcha and fresh bakery products while investing in formats intended to appeal to younger customers and support more purchases outside the traditional hot coffee occasion.
Around 50 UK outlets opened during the period, with another 50 planned, while a broader refurbishment programme is targeting approximately 250 stores a year. Digital ordering kiosks are also being introduced as the company updates the way customers move through busier locations.
Store economics remain demanding because labour, rent, energy and ingredient costs have all increased. Coffee prices have also been affected by weather and supply disruption in producing countries, requiring each location to generate enough additional sales to offset a more expensive operating base.
The menu changes form part of that response. Cold drinks can extend demand beyond the morning, while premium and customised products can support higher average transaction values. Costa has reported particularly strong customer growth among younger consumers, whose preferences include decaffeinated drinks and alternatives to conventional coffee.
Expansion outside the café estate is another part of the strategy. Its Podio machines target workplaces with a more automated coffee offer, while Costa remains active in home coffee and self-service channels. Those formats extend the brand without requiring the full cost of operating another staffed store.
Coca-Cola has reconsidered the future of the business during its ownership. A potential sale was explored, but the group ultimately decided not to proceed after failing to receive an offer it considered sufficiently attractive. The return to profitability strengthens the case for further operational improvement rather than selling during a weaker earnings period.
Competition remains intense as international chains, independents and convenience retailers improve their coffee propositions. The UK market is mature, so expansion has to be selective rather than relying on adding outlets in locations that already have substantial choice.
Investment in refurbished stores and digital ordering may increase throughput, although both require capital before the financial benefits are realised. Management will therefore need to show that the 2025 improvement can be sustained as the refurbishment programme accelerates.
The return to operating profit does not remove pressure from commodity and labour costs, but it changes the position from which Costa responds. After two loss making years, the company enters its next phase with revenue growing, customers returning and its owner continuing to invest in the estate rather than pursuing an immediate disposal.
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