A CUSTOMER backlash against Starbucks and Caffe Nero because of anger over tax avoidance has led to increased sales for Costa Coffee, which has cheekily rebranded itself: “the taxman’s favourite”.
Costa Coffee, which is part of the Whitbread group, revealed a 7.1 per cent increase in like-for-like sales in the 13 weeks to November 29 and reported a record £10 million was taken in UK coffee outlets last week.
The strong performance came amid growing criticism of rival coffee chain Starbucks, which has paid only £8.6 million in corporation tax in 14 years of trading and which has faced increasing public criticism.
Andy Harrison, chief executive of Whitbread, said the controversy was behind the sales boost: “Costa’s been the UK’s favourite coffee shop for quite some time and we remain the taxman’s favourite coffee shop too.”
Despite Starbucks offering to pay an additional voluntary £10 million in corporation tax the Seattle coffee giant has been hit by direct action and calls on social media for a boycott of its products and stores.
Starbucks was accused of “immorally” minimising its UK tax bill, as were Amazon and Google, by public spending body the Public Accounts Committee.
And the latest results from Costa have been interpreted as a sign that consumers are actively boycotting Starbucks stores as a protest against the company’s record on UK tax.
Analysts from Panmure said: “Costa’s performance is likely to have received a boost from the negative publicity around Starbucks’ tax affairs.”
Starbucks has been targeted by protesters from UK Uncut, who have used flashmob tactics to turn its stores into creches and disabled centres to highlight the services which are being hit by tax cuts.
Customers are also believed to be turning their backs on rival chain Caffe Nero - which paid no corporation tax last year - despite making profits of £40 million.
By contrast Costa paid £15 million in corporation tax on £377 million sales last year.
Activists from UK Uncut are continuing to organise protests against Starbucks and are believed to be planning further action against Google, Amazon and eBay - which have also come under fire for their avoidance of UK tax.
Murray Worthy of UK Uncut said: “What we are seeing in terms of customers changing their habits and in direct action against companies like Starbucks is an outpouring of anger about the injustice of tax evasion.
“I think the real issue is this shows how out of step the tax laws are with public opinion. It should not be up to consumers to have to change their habits - it is the Government’s job to be enforcing tax laws and they should be doing it.”
Robert Oxley, campaign manager of the TaxPayers’ Alliance, said the results showed people were becoming increasingly impatient with a system which allowed multinational companies to avoid paying their fair share of UK tax: “While many people may have changed where they order their skinny latte, sadly politicians haven’t changed what’s causing the problem with tax avoidance, the tax system. Many people are clearly unhappy that some big multinational companies can exploit loopholes and reliefs not open them. Consumer pressure might cause a few companies to change how they do things but ultimately that is letting politicians, the ones who designed our broken tax code, off the hook. We need a simpler, more transparent tax system so people can be confident that everyone is paying their fair share.”
Costa Coffee said a record £10 million was taken by its 1,200 UK stores last week, with 3.8 million customers coming through its doors.
In its third quarter results released yesterday Whitbread said total sales for 2012 were up 22 per cent to £734 million. The company has expanded rapidly over the year and is aiming to double in size to 3,500 stores worldwide by 2015/16.
Shares in Whitbread rose yesterday with reports that the group is expected to make a pre-tax profit of £347.9 million for 2012/13.