Why medium-sized coffee shops are struggling

Estimated reading time: 7 minutes

Key takeaways

• Mid-sized coffee brands currently face the sector’s toughest financial squeeze.
• They lack both small-brand agility and big-chain purchasing power.
• Costa, Starbucks, and Blue Bottle prove scale doesn’t guarantee stability.
• Survival depends on a clear niche and fast decision-making.

Coffee shops of every size are under pressure. Green coffee prices broke records in 2025, and analysts now describe a “new normal” of high prices and volatility expected to last at least two more years.

Rising rents, energy costs, and persistent labour shortages have thinned margins across the sector to their lowest in years. But struggles are not shared equally. Medium-sized coffee businesses, typically those operating between a handful and dozens of stores, are taking the hardest hit.

You may also like our article on how coffee shops can tap into food trends.

The mid-size squeeze

Part of the reason medium-sized coffee shops are struggling is structural. Mid-sized operators often fall into a financing gap: too large for the small-business grants and Small and Medium-sized Enterprise (SME) lending schemes designed for single-site independents, but too small to access the capital markets, procurement teams, and hedging tools that larger brands rely on. 

“It’s easy to feel invisible,” says a UK coffee shop and roastery owner, who asked to remain anonymous. “The support schemes assume you’re one shop, and the banks want you to have fifty before they’re willing to listen.”

A single-site independent can maintain its focus on quality while staying nimble as prices rise. If a supplier’s costs jump, the owner can switch roasters or change menus within a week. Larger brands, meanwhile, hold deeper reserves, stronger customer loyalty, and structural advantages such as long-term contracts and volume discounts that cushion price shocks.

Businesses in the middle get the worst of both worlds. They are too large to rely on the low overheads and quick decisions of smaller brands; changing suppliers means renegotiating contracts across ten or twenty sites, retraining staff, and reprinting menus. Yet they lack the purchasing volume to command the terms that large chains negotiate. 

Margins compound the squeeze. Mid-sized specialty operators built their reputations on quality, which means paying premium prices for well-sourced coffee. These premiums are manageable when the C market is stable, but with recent price swings, the commitment to quality directly eats into already-thin margins.

“Our customers come to us because of the coffee, and the moment we trade down, they’ll know,” says an anonymous source. “So we absorb the cost, and every time it gets harder.”

Learning from big coffee’s struggles

Scale is supposed to be safe, but the past 18 months suggest even the biggest names in coffee are vulnerable.

Coca-Cola spent much of 2025 trying to sell Costa Coffee, reportedly seeking about £2bn for a chain it bought for £3.9bn in 2019. The offers underwhelmed, and Coca-Cola abandoned the sale in January 2026. 

Costa’s operating losses tell their own story, more than doubling from £5.8m in December 2023 to £13.5m a year later as footfall softened and value-led rivals grew.

Starbucks has faced similar headwinds. Falling same-store sales through 2024 and 2025 prompted the company to appoint Brian Niccol as chief executive, and his “Back to Starbucks” turnaround plan focused on simplifying the menu, cutting waiting times, and restoring the in-store experience.

The strategy is working. The company posted its first quarter of revenue growth in more than two years, but the episode shows how quickly even the world’s largest coffee brand can lose its connection with customers, and how costly it is to win them back.

Blue Bottle offers another lesson. Nestlé bought a majority stake in the specialty brand at a valuation above US$700m in 2017. In March 2026, it sold the business to Centurium Capital for about US$400m, a 43% markdown after nearly a decade of ownership.

Each brand stumbled for a different reason: Costa on differentiation, Starbucks on experience, and Blue Bottle on growth that never matched its price tag. Together, the cases show that scale alone offers little protection. Coffee prices remain volatile, and consumer habits are shifting faster than large brands can respond. 

Lessons for medium-sized coffee brands

For mid-sized operators, the practical lesson is to stop trying to serve everyone and instead find a niche.

“The big chains taught us what not to do as much as what to do,” says an anonymous source. “The lesson for us isn’t to copy their scale; it’s to be unmistakably clear about why we exist. Big coffee can survive being generic, but we can’t.” 

Two UK brands illustrate the point. Black Sheep Coffee, which has grown rapidly over the last decade, has built its identity around “specialty-grade” robusta and a matcha-led menu, and now operates more than 130 cafés across the UK, Europe, the Middle East, Asia, and the US, with franchise-led growth accelerating. 

WatchHouse has taken a different route with its “Modern Coffee” concept, pairing considered design with quality food and coffee, and is expanding across London and New York after a US$14.7m funding round.

Looking ahead

Further consolidation in the coffee market looks likely. With Costa under operational review, Blue Bottle under new ownership, and private capital circling the sector, more mid-sized brands will face approaches from buyers or pressure to merge. 

Operators who want to stay independent need a plan for doing so, whether that means securing investment, franchising to fund growth, or downsizing to a smaller footprint.

The struggles at the top of the market carry a useful message: money and scale are not enough on their own, and agility matters more than ever. A brand that can reformulate its menu, switch sourcing, or test a new format in weeks holds an advantage.

For mid-sized coffee businesses with resources to invest, the opportunity lies in reaching consumers in new ways. Ready-to-drink products, matcha, and functional coffee all offer routes to new customers, and Black Sheep’s robusta-and-matcha playbook shows how quickly a distinctive product mix can drive growth.

The middle of the coffee market is a hard place to stand still. Rising costs, volatile prices, and consolidation pressure will keep testing mid-sized operators, while the stumbles of big coffee prove scale offers no guarantee. 

The businesses that survive will pick a clear direction, commit to it, and give customers a reason to stay loyal.

Want to grow your sales? Our marketing agency, PDG Media, specialises in helping coffee businesses grow. Get a free marketing audit today.

Why are medium-sized coffee businesses struggling more than others?
They fall into a structural gap: too large for SME grants and quick supplier switches, too small for the hedging tools, long-term contracts, and volume discounts that protect big chains. Premium sourcing commitments then further erode already-thin margins.

What do the struggles of big coffee brands show?
Costa’s doubling losses, Starbucks’ two-year sales slump, and Blue Bottle’s 43% markdown under Nestlé show scale alone offers no protection. Each stumbled differently, on differentiation, experience, and overvalued growth, while volatile prices punished slow responses.

How can mid-sized operators respond?
Pick a distinct niche and commit to it, as Black Sheep Coffee did with robusta and matcha, and WatchHouse with design-led “Modern Coffee”. Growth routes include franchising, ready-to-drink products, functional coffee, or securing investment to stay independent.

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