Wednesday, 17 October 2012

Rob Burgeman: There's an awful lot of coffee in...London

Image: Mortefot
It seems to have been coffee week in London. On the one hand, global behemoth Starbucks have encountered a certain amount of turbulence as the press reported that the company has paid just £8.6m in Corporation Tax in the UK over the last 14 years and not a bean (sorry!) at all over the last three. There is no implication that Starbucks have done anything illegal here, rather that it has made full use of the allowances and accounting practices available to it to “optimise” its tax position. It should, of course, also be born in mind that, while the company may not pay much in the way of Corporation Tax, it employs a lot of people who pay income tax and use ancillary services that create jobs elsewhere in the economy.

In more positive news, Costa is doubling production at its London roastery and is building a third roasting unit to meet increased demand from its outlets in China. To give you an idea of the scale of the opportunity (or the size of the challenge if you prefer), the Beijing Coffee Industry Association estimated last year that average coffee consumption was three cups per person per year. Costa sources its coffee beans from Africa, Asia and Latin America, but imports almost all of it to London where it is processed and then re-exported – precisely the kind of “value added” activity that one would hope to see from British industry. It also shows how, even in these challenging times, good companies can re-orientate their businesses to focus on those areas of the world that can deliver growth.

“It is disgusting to note the increase in the quantity of coffee used by my subjects and the amount of money that goes out of the country in consequence. Everybody is using coffee. If possible this must be prevented. My people must drink beer.” said Frederick the Great in the eighteenth century. However, the global coffee phenomenon shows no sign of abating, with both Starbucks and Costa planning a huge increase in the number of stores globally over the next few years. During the 17th Century, stockbrokers were not allowed in to the Royal Exchange due to their uncouth manners (thankfully, greatly improved these days) and so had to operate from other establishments in the vicinity, notably Jonathan’s Coffee House. This was the origins of the London Stock Exchange. Perhaps one of these new coffee houses will witness the birth of a similarly venerable institution over the next few years!

Rob Burgeman
Divisional Director

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