Recession? Pah! Coffee Nation has seized the moment to launch new machines and conquer a caffeine-loving market. Beth Phillips reports

The coffee sector has had a testing year. Starbucks is in the process of closing more than 1,000 stores across the globe and the price of coffee beans has rocketed. All this amid claims that takeaway coffee is a luxury consumers will sacrifice during a recession.

Not so, claims Scott Martin, CEO of coffee-vending company Coffee Nation, which operates 790 machines in cstores and forecourts. "The coffee market is in growth," says Martin, who started his career working under Sainsbury's CEO Justin King at Häagen-Dazs. "Coffee is a low-transaction product, sub-£2, and is part of daily life."

The company's research has found 6% of consumers are drinking more coffee than a year ago and 89% are drinking the same amount. Hardly earth-shattering, but Coffee Nation's sales, which were up 17% to £21.5m in the year to 31 March, give weight to Martin's bravado.

Indeed, he is so confident in his business that he's chosen the worst recession since the 1930s to launch two second-generation coffee machines and move the business into the public sector for the first time. The new 2G Touch machines have already been rolled out to 20 UK sites. Plans are in place to add 10 machines a month, with 200 set to be installed by the end of the year. 

One machine is a self-service vending machine aimed at cstores and forecourts, while the other is the company's first self-service unit that allows consumers to pay for their own coffee. Both have touch-screens for ordering and a large capacity so they only have to be refilled once a day. The 2G Touch machines will enable Coffee Nation to enter new sectors including universities, hospitals and offices.

"Over the next few months we are piloting the machines in all sectors," says Martin. "We are talking to redbrick universities, workplaces and railway stations. We're aiming for two dozen pilots in the next two months."

Coffee Nation has come a long way since it was founded in 1997. It is on its second private equity owner, having been purchased by Capital Partners in a £25m management buyout last April. It also boasts seven major contracts with companies including Tesco, Sainsbury's and motorway service area provider Moto.

Consumer tastes have also evolved, Martin believes. "Ten years ago, everyone was drinking instant coffee. Now everyone's an expert. They know the difference between a latte and a mocha and are demanding quality, gourmet coffee."

Coffee Nation's key point of difference is its price, which is significantly lower than other premium brands, Martin says. The company operates a three-tier pricing strategy for c-stores, motorway outlets and all other clients, ranging from £1.80 to more than £2. Prices will not change, he insists.

"We have no plans to do anything on price. If you reduce the price, sales drop because consumers become wary of the quality."

Indeed, quality is the reason Coffee Nation is sticking to coffee. Its mantra 'We don't do tea!' is emblazoned in large lettering on the wall of its Buckinghamshire HQ.

"We can't be a fanatical coffee company and put tea in our machines it wouldn't feel right," Martin says. "I'm not saying I'd completely rule it out, but until we can think of a way to brew tea to the same quality as our coffee, it's not going in."