Caffè Nero says growth is ‘steady’ but coffee prices are likely to rise

Caffè Nero will continue opening new shops in the UK and overseas, but has warned coffee prices are likely to keep rising as the war in Iran and higher staffing costs feed through.The family-owned business, which has just bought the 15-store Compass Coffee based in Washington DC to convert to its main brand, is aiming to open as many as 30 UK stores and between 50 and 70 more this year across the 10 other countries it operates in.Gerry Ford, who founded Caffè Nero in 1997 and remains its majority shareholder, said the 1,151-outlet business, which employs 11,000 people around the world, was outperforming its bigger rivals Starbucks and Costa. Starbucks has been closing outlets in North America and Costa’s owner Coca-Cola recently ditched plans for a sale after losses widened and sales fell at established stores.Ford suggested those brands had expanded too rapidly and suffered from multiple management changes.“We have been more consistent in what we are trying to do. We have not had massive growth upswings. We are going at a steady pace,” he said. “We can expand more rapidly or slow down. We have more flexibility as not trying to hit a quarterly reporting target. We are able to have longer-term planning.Caffè Nero founder Gerry Ford said the chain was outperforming its bigger rivals Starbucks and Costa. Photograph: Phil Lewis/SOPA Images/Shutterstock“We don’t want to take over the world. We need to move to our own rhythm.“We never wanted to suffer the consequence of trying to be everywhere for everybody.”After buying up Nottingham’s 200 Degrees for about £9m in October 2024 and snapping up Wales’ Coffee#1 and former Tesco-owned operator Harris +Hoole in recent years, the business is expanding those brands as well as its eponymous chain.However, Caffè Nero’s plans for more acquisitions are on hold for at least a year as the group absorbs its series of recent acquisitions which have led to higher borrowing and related finance costs.In the year to May 2025, sales rose 13% to £587.6m from £519.8m. However, pre-tax losses widened to £41m from £34m as finance costs rose to nearly £78m from £69m a year before on higher interest rates and more borrowing to fund acquisitions.At the year end, the company had £481m of debt, up from £428m a year before, with £42m in a facility due for repayment in December.Ford says that underlying profits are up by a fifth and the new acquisitions bring new sources of profit and sales as well adding to debts.Growth continued last year with sales up 7% in the UK to £185.4m in the six months to November led by 5% growth at established outlets, helped by new products such as iced-matcha drinks and pistachio-flavoured croissants.He said Caffè Nero will keep a number of its new brands above the door, while the parent company helps with buying ingredients and back-office operations but leaves each chain’s management to “go for it” on operating and expanding.“The industry has absorbed a lot of costs in recent years and all it means is that we will open fewer stores in a year. If those costs were not coming in we would probably open more.”He says business rates and increases in the cost of employing people in the UK have only added to a rise in coffee prices – which tripled between the end of 2023 and early last year partly driven by the climate crisis which has affected crops in important growing regions such as Brazil and Colombia.Today, the price of Arabica coffee remains almost double that in 2023.The Caffè Nero group now has more than 650 outlets in the UK. Photograph: Chaz Bharj/Alamy“I have been doing this 29 years and the price of coffee goes up and down. Eighteen months ago it went up and it didn’t really come down,” he said.“The last three months it has come down a bit. We have got through the worst of it and the buying … will be more reasonable and normal. That will be very much welcomed by us.”However, Ford said that is not likely to lead to the price of a cup of coffee reducing as other costs remain high, including energy, which the conflict in the Middle East is only driving up again.He warned prolonged disruption could put the price of a cup of coffee up again. The average latte in the UK across all chains is already £3.76, up 35% in the past five years according to World Coffee Portal.“Typically prices go up but not down. I expect as the year goes on we will see,” he said.Caffè Nero began in 1997 when Ford, an American who studied in the UK and began his career working for a private equity firm after studying at Oxford University, bought a handful of London coffee shops and created the Italian-influenced brand.The group now has more than 650 outlets in the UK with Turkey its second-largest market with 112 outlets, followed by Poland where there are 93. The acquisition of Compass Coffee takes the total number of outlets in the US to 60 and adds a new coffee roasting facility to support further coffee shops.“We are not going to end up with 5,000 stores but there is a lot of white space as an independent premium,” Ford said. “No market is saturated at all.”