British coffee-shop chain operator Costa Coffee will further reduce its presence in mainland China by closing more stores this year. The company has already shut one in every 10 of its outlets as part of a retail restructuring.
Costa Coffee, a subsidiary of international beverage company The Coca-Cola Co., closed around 40 of its cafes in August. This included its big shops in Beijing, Shanghai, Nanjing and Hangzhou.
On Monday Costa Coffee said it would close additional stores between September and January. It said the decision was part of its retail strategy to adjust to reduced demand caused by the economic downturn and the virus pandemic.
Costa Coffee didn't immediately disclose the exact number of stores it would be closing or the number of employees it would be laying off. The company said it had no intention of exiting the China market. It said it was still committed to expanding in the region once the business environment improves.
Like other food and beverage retailers Costa Coffee's business in mainland China took a big hit following the spread of the coronavirus. While China may be slowly recovering, spending power and consumption is still at unprecedented lows given high unemployment and the lingering economic downturn.
China's freshly brewed coffee market's sales were 42.6 billion yuan ($6.07 billion) in 2019, according to UK consulting company Mintel Group Ltd. The market is expected to grow at 15.6 percent annually through 2024, according to its forecast.
Boutique cafes in China have proliferated in the past five years with the number of fresh-coffee shops in Shanghai doubling to around 8,000 stores, according to Shanghai Chain Enterprise Association.
Costa Coffee said late last week it planned to implement more measures to reduce costs. Apart from closing some of its underperforming branches around the world the company said it would to cut more than 1,650 jobs in the UK. This represents about a tenth of its workforce there.
The company, the UK's largest coffee chain, first entered China in 2006 with the opening of its Shanghai branch. In 2011, the company said it would open as many as 2,500 stores in China by 2022. At the end of 2019 the company had about 400 cafes in China.
The company was acquired by Coca-Cola in 2018 for around $5.1 billion. Internationally, Costa Coffee operates more than 4,000 stores. It has around 2,700 stores in the UK and around 1,200 outlets in 31 other countries.
