Costa loses ground as changing tastes push Gen Z to matcha

Costa’s recent decline reflects a failure to adapt to shifting consumer preferences in a highly competitive market. Younger consumers increasingly favour substitutes such as matcha-based drinks, marketed as healthier and trendier than traditional coffee. Chains like Starbucks, Pret and smaller independents have captured this demand, while social media-friendly brands such as Blank Street generate added appeal. At the same time, rising living costs mean consumers expect more value or novelty when paying nearly £5 for a drink. With home coffee machines also reducing demand for standard lattes, Costa’s mid-market positioning leaves it squeezed between cheaper outlets and premium rivals.

How coffee chains like Costa lost the matcha generation - BBC News

1. Define substitutes and give two examples of substitutes for Costa Coffee mentioned in the article.

2. The article notes that consumer tastes are shifting towards matcha drinks. Explain how this change in preferences is likely to affect the demand for Costa Coffee, illustrating your answer with a demand and supply diagram.

3. Discuss the likely cross elasticity of demand (XED) between Costa coffee and matcha drinks offered by rivals.