Wetherspoon to cut coffee prices in a bid to boost profits

Is there a new coffee price war about to start on Britain’s high streets? The Financial Times certainly thinks so, and that it will be the pub chain JD Wetherspoon that fires the first warning shot in the direction of Starbucks, Costa Coffee and McDonald’s.

With the proliferation of coffee shops in the United Kingdom coming at the expense of local boozers, Wetherspoon must be applauded for diversifying their menus and become a true one size fits all establishment that caters to a diverse range of clients. And because of this shift, they’ve reaped some healthy financial rewards.

At the heart of their recent success has been their popular breakfast menu, not to mention the introduction of competitively priced coffees. For a pub, their 900+ outlets don’t half do well first thing in a morning.

Despite recording a slight increase in net income for the six months to January 25^th ($41.1m compared to last year’s figure of $38.5), the company has announced plans to triple sales of coffee over the course of the next 18 months in order to secure their revenue streams.

Proof – if any were needed – that coffee is vital in this day and age.

The problem is that their traditional business model is being squeezed thanks to the proliferation of cheap supermarket deals which encourage people to drink at home rather. And then there is the tax issue, something which founder Tim Martin has spoken passionately on: “As previously highlighted,” he said in an accompanying statement to this announcement, “the biggest danger to the pub industry is the continuing tax disparity between supermarkets and pubs.

So, to combat this, the natural alternative was to focus on the morning trade and entice people in to purchase breakfast and hot drinks.

According to internal reports, the chain sells an estimated 50m coffees and teas per year.

So how are they going to sell 150m beverages per annum?

By cutting prices of course.

The group has announced that they will be selling Lavazza coffee for $1.5 (99p) and will offer free refills to all customers to help encourage and retain trade during the day.

But can they entice customers away from Starbucks, Costa Coffee and other independent coffee shops on a morning and in an afternoon? That is the key question here and one that we’ll have to wait a while to answer.