Pret’s £500m loss and the challenger brands eating Britain’s lunch

Pret A Manger’s recent announcement that it was scrapping its self-service coffee machines to focus on opening more traditional stores came against the backdrop of a £525m loss. The decision to pull machines across the UK just four years after launch represents more than a failed experiment. It’s a retreat that reveals something fundamental about how established brands are struggling whilst challengers surge.

While Pret goes back to basics, challenger Blank Street Coffee has tripled its annual turnover. Starbucks is quietly closing UK stores, whilst Grind posts record revenues. This isn’t happening in isolation. Globally, established brands are haemorrhaging market share to insurgents who’ve doubled their portion of industry growth since 2023. The UK coffee sector is simply the latest to see this phenomenon.

Why legacy no longer matters

The latest cohort of consumers rapidly gaining purchasing power is Gen Z – also dubbed the “matcha generation”. For this demographic, brand heritage doesn’t hold the same weight. Research shows that 64% are loyal to products rather than brands, and 43% of Gen Z shoppers admit to buying something purely because it was trending on social media.

No one associates Pret with matcha lattes or turmeric shots. Despite having a three-year headstart (Pret launched matcha lattes in 2019, Blank Street arrived in London in 2022), Pret failed to capture the cultural moment that saw sales of matcha boom by 202% in 2023. They had the product, but neglected the experience: tired interiors, rising prices, and a neglected brand identity. Blank Street, by contrast, offered great coffee in stylish spaces that felt worth sharing, and was rewarded with a growing market. Even when big brands aren’t late to trends, they are slow to resonate culturally.

These demographic shifts can explain why Pret’s Express machine experiment failed. Seeking to rival Costa’s 14,200+ self-service machines, Pret incorrectly assumed that distribution and convenience alone would win customers. But why would consumers want to pay £3-£4 for coffee from a machine when that price point demands craft and care? They chased revenue, whilst forgetting what originally drew customers to Pret: decent coffee in comfortable spaces at reasonable prices. As supplier costs rose and consumer spending fell, Pret found itself stuck – too expensive compared to the likes of Greggs and McDonald’s, yet offering far less than similarly priced coffee shops. Meanwhile, Blank Street understood something crucial: at that price point, today’s consumers want experience and authenticity, not just more ways to buy the same thing.

Incumbents keep missing the mark

So how do large organisations conduct extensive research, develop strategies, and still get it wrong? First, incumbents often prioritise scale over consumer demands. The rationale behind the coffee machines was to win over more customers “in places where there isn’t the right space to set up a new Pret shop”. Now, the chief executive recognises that customers are “much more price-conscious than ever”. Raising prices whilst the experience deteriorates is what pushes customers to competitors. Expansion is a necessary part of business, but it cannot happen at the expense of customers’ core needs: value, quality, and an experience worth paying for.

Second, established brands tend to suffer from portfolio paralysis. When operating hundreds of locations with complex supply chains, every change becomes an infrastructure project. A new brand starts with a blank slate, and can move more flexibly. By the time incumbents finish assessing the market, it has already moved on. Third, large organisations like Pret become resistant to anything too different. Corporate structures act like antibodies to change – either rejecting new ideas in favour of stability, or quarantining them so completely that they never integrate. In this respect, the self-service machines felt safe. In pursuit of risk avoidance, Pret opted to increase output, but this move did nothing to excite customers. Meanwhile insurgent brands succeed specifically because they take the creative risks that corporate committees would never approve.

Adapting strategy to match consumer reality

If a big chain’s strategy is defending market share through operational efficiency, such as automating services or cutting staff, the battle is already lost. Companies that are not creating new value and adapting to developing customer preferences will be a step behind when a smaller competitor inevitably emerges that is.

This doesn’t mean the long-established businesses have to constantly add new channels and products. In part, they need to harness what worked in the first place. Recent examples across retail show brands attempting to “refound” themselves – Nike doubling down on its athletic roots and growth, Starbucks rediscovering itself as a third space. But the crucial insight here isn’t just about the product. It’s about reclaiming the original culture: being honest about what isn’t working, rapidly responding to consumer demands, and calculated risk-taking. These challenger behaviours are the opposite of bureaucratic caution that develops as companies scale.

Blank Street isn’t winning purely because they make better coffee than Pret. They’re winning because they’ve designed an experience that fits seamlessly into a desired lifestyle, whilst delivering better value. Traditional advantages of big businesses – distribution, purchasing power, brand recognition – matter less when consumers prioritise the product over familiarity.

If established brands don’t disrupt themselves, someone else will. It will be better to capture that revenue – even at lower margins initially – than lose customers entirely to insurgents. For larger companies with the resources, capital, and infrastructure available to support experimentation, playing it safe is the riskiest move of all. The path forward Pret’s retreat from self-service coffee won’t doom the company indefinitely. But this episode should prompt serious reflection across the sector. Consumers have less disposable income, so they want better value for their money. With brand loyalty fracturing, having a good strategy isn’t enough anymore.

The brands that thrive over the next decade won’t be those with the longest history or largest footprint. They’ll be organisations that remain attuned to their changing consumer needs, and have the bravery to experiment, and abandon strategies that aren’t working. The matcha generation wants to know what brands are doing for them today, and what products feel authentic and worth their time. If the answer isn’t compelling, there’s an insurgent brand that already has it.