Coffee war may bring prices down

Costa Coffee promotes itself as the European rival to Starbucks. Established by two Italian immigrant brothers in the early 1970s, it was acquired by the listed leisure group Whitbread in 1996 and now ranks as the UK's largest coffee chain.

The company's Italian heritage is exploited to the hilt with Costa's advertising slogans promising consumers "the experience of real Italian coffee".

While Starbucks offers caffeine in every shape, colour and variety, Costa focuses on tradition and detail. Specialist baristas are employed in all of the stores to roast beans the "Italian way". Its promotional material stresses coffee is roasted by hand "rather than by the automated coffee machines used in some other chains".

The Continental theme is continued in the café interiors, which are fitted out with wood panelled floors, frosted glass and leather seating. According to the company, its "sophisticated interiors cost at least double what rival chains are spending".

To round off the Italian branding, Costa also offers a range of Italian breads and biscuits.

However, for Irish consumers the main advantage of having Costa and Starbucks in the market could be cheaper coffee prices. According to Michael Conroy of CB Richard Ellis Gunne and adviser to Tuli Holdings, which is managing the brand in Ireland, a large coffee from the local chains here is only a medium size in the UK.

He predicts that in the "short-run this could put some pricing pressure" on the current incumbents and may translate into cheaper coffee prices.

But local competitors claim multinationals, like Starbucks and Costa, will push prices up because "they have a standard pricing model and would look to impose that model".

Costa's expansion into Ireland comes at a time when its parent, Whitbread, has just approved the addition of 70 stores to the chain's 380-strong UK network in a bid to extend its lead over arch rival, Starbucks, by the end of this year.

It also aims to tackle the US coffee giant's global ambitions by rapidly expanding the Costa brand in the Middle East, where it is committed to opening at least 10 outlets a year.

The chain has 75 coffee bars in the region at present, and expects to have 300 stores there within the next few years.