A Glasgow-based retailer is calling for "revolution" and better margins in coffee-to-go model in the convenience sector, claiming that under the current norm, retailers are being left to shoulder the majority of costs linked to branded coffee machines .
According to businessman and retail operator Jay Javid, managing director of Pro Gro Group, the UK convenience coffee model is "broken". Pro Gro Group operates 12 convenience stores across Glasgow and surrounding areas under the Nisa Local franchise from CO-OP Wholesale, with four new locations opening soon.
Slamming Costa Express machines, Javid has raised how retail operators are being left to shoulder the majority of costs linked to branded self-serve coffee — including administration, servicing, cleaning, compliance and the cost of milk — while margins remain squeezed.
"To me as a retailer profit matters... brands in the coffee buisness need to wake up and smell the beans!
"How can a retailer survive on commissions of 5 - 20 per cent , pay for the milk from there own pocket pay for the electric and turn a profit? This doesn’t even cover the cost of cleaning the machine for our employees!," he wrote in his recent LinkedIn posts.
"No retailer in the UK should carry a burden in the name of a brand and certainly Pro Gro will not support it any more! If it doesn’t make money negotiate and if it still doesn’t work for you then stop supporting it in your business," he added.
A week later, Javid confirmed that all four Costa Express machines across its estate have now been removed.
He added that is now looking out for new partners.
"We had a strong relationship with Pret Express, but they’ve unfortunately exited the convenience market. This morning they removed their solution from our Hope Street branch and it will be missed.
"I wish Pret Coffee the best, but I’m also disappointed they walked away from the sector. If they’d stayed, I’d have replaced Costa with Pret across our estate without hesitation.
"Now we’re deciding what goes into those spaces next. There are plenty of options and we won’t be accepting unfair terms again," he wrote.
The post struck a chord across the sector, with many other retailers had since shared similar experiences of struggling to make branded coffee pay.
Truro-based convenience retailer Judith Smitham stated, "There is no other area of the shop which earns as little, once the expected retailer costs are deducted."
Retailer Ian Lewis, owner of SPAR Minster Lovell, stated, "I’m out of contract with Costa and you are absolutely right, the numbers just don’t add up.
One Stop retailer Priyesh Vekaria echoed the frustration when he commented, "This is so true and echoed across the entire convenience sector. We too are currently in the process of ending our relationship and are awaiting the uplift of our machine.
"I took on the concession with the mindset of 'a big brand' would bring footfall. Unfortunately 3 years on and no real beneficial return."