Oxford Cambridge and RSA
Tuesday 20 May 2025 – Morning
A Level Business
H431/02 The UK business environment
Resource Booklet
Time allowed: 2 hours
* 1 9 4 2 0 7 6 5 6 1 *
INSTRUCTIONS
• Use this Resource Booklet to answer the questions in Section B.
• You can write on this Resource Booklet, but it will not be sent for marking.
INFORMATION
• The business described in this Resource Booklet is a real business.
• This document has 8 pages.
© OCR 2025 [601/4675/8] OCR is an exempt Charity
DC (DE) 342421/2 Turn over
for more: tyrionpapers.com
, 2
COFFEE#1
Coffee#1 is a UK coffee store brand which first opened in Cardiff in 2001. Since January 2022,
the business has been owned by Caffé Nero Ltd. By October 2023, Coffee#1 had 115 stores
across the UK.
Coffee#1 has four core values:
1. Perfect coffee – great care is taken in choosing the best beans to produce an outstanding 5
drink.
2. Comfort – coffee should be enjoyed with lots of soft seating and no hard wooden benches
in the stores.
3. Relaxation – coffee stores need to be a restful place to visit.
4. Well-informed service – a friendly team of baristas and managers are always available to 10
answer any questions.
The directors of Coffee#1 believe these core values differentiate the brand from other coffee
store brands. This market is dominated by four companies in the UK (see Table 1).
Table 1
The largest coffee store brands in the UK (August 2023)
Number of stores
Costa Coffee 2604
Starbucks 1240
Caffé Nero *625*
Pret A Manger 448
* Only includes stores operated using the Caffé Nero brand
Coffee#1’s 2022 financial report stated that its directors were confident about the company’s
future. The report did emphasise concerns about rising costs (especially energy), increased 15
competition in the market and high interest rates. The report also contained a set of financial
ratios (see Table 2).
Table 2
Financial ratios calculated from Coffee#1’s financial report
2022 2021
Current ratio 1.45 0.94
Gross profit margin 31.8% 20.4%
Net profit margin 20.3% 8.2%
ROCE 58.2% 22.0%
Debtor collection period 5.0 days 8.8 days
Stock turnover period 3.2 days 3.9 days
Source: Calculated from Coffee#1 Ltd – report and financial statements (31/05/22)
The branded coffee store market in the UK continues to experience strong market growth
(see Extract A).
© OCR 2025 H431/02/RB Jun25
for more: tyrionpapers.com
, 3
Extract A
UK branded coffee stores defy economic challenges
At the start of 2023, the UK market had grown in value by 12% over the previous year to 20
£4.9 billion. The number of stores increased over the same period by 4.4%.
Inflationary pressures have caused all major coffee store brands to increase prices.
However, rising sales indicate UK consumers still consider out-of-home coffee an affordable
luxury and are not reducing consumption.
The largest UK coffee store brands have responded to changing consumption patterns 25
by investing in new sales channels, including drive-thru, delivery, self-serve and smaller
stores. The firms are also seeking to keep operational and product costs low. Recently, price
consciousness has become an increasingly important consumer trend.
It is forecast that the UK branded coffee store market will exceed 11 600 stores and
£6.4 billion of sales by January 2028. 30
Source: Adapted from www.worldcoffeeportal.com/Latest/News/2023/January-(1)/UK-branded-
coffee-shop-market-defies-difficult-tra (19/01/23)
Staffing shortages remain a key challenge for all service sector businesses. Coffee#1 has
several policies to help it overcome this challenge (see Extract B).
Extract B
Human resources at Coffee#1
Adapted from www.coffee1.co.uk/team-benefits and www.coffee1.co.uk/disability-confident-employer. Item removed due to third party copyright restrictions.
UK consumers expect a high level of customer service which is a challenge for any service
sector industry. This is especially true for any company selling food and drink (see Extract C
and Table 3).
© OCR 2025 H431/02/RB Jun25 Turn over
for more: tyrionpapers.com
Tuesday 20 May 2025 – Morning
A Level Business
H431/02 The UK business environment
Resource Booklet
Time allowed: 2 hours
* 1 9 4 2 0 7 6 5 6 1 *
INSTRUCTIONS
• Use this Resource Booklet to answer the questions in Section B.
• You can write on this Resource Booklet, but it will not be sent for marking.
INFORMATION
• The business described in this Resource Booklet is a real business.
• This document has 8 pages.
© OCR 2025 [601/4675/8] OCR is an exempt Charity
DC (DE) 342421/2 Turn over
for more: tyrionpapers.com
, 2
COFFEE#1
Coffee#1 is a UK coffee store brand which first opened in Cardiff in 2001. Since January 2022,
the business has been owned by Caffé Nero Ltd. By October 2023, Coffee#1 had 115 stores
across the UK.
Coffee#1 has four core values:
1. Perfect coffee – great care is taken in choosing the best beans to produce an outstanding 5
drink.
2. Comfort – coffee should be enjoyed with lots of soft seating and no hard wooden benches
in the stores.
3. Relaxation – coffee stores need to be a restful place to visit.
4. Well-informed service – a friendly team of baristas and managers are always available to 10
answer any questions.
The directors of Coffee#1 believe these core values differentiate the brand from other coffee
store brands. This market is dominated by four companies in the UK (see Table 1).
Table 1
The largest coffee store brands in the UK (August 2023)
Number of stores
Costa Coffee 2604
Starbucks 1240
Caffé Nero *625*
Pret A Manger 448
* Only includes stores operated using the Caffé Nero brand
Coffee#1’s 2022 financial report stated that its directors were confident about the company’s
future. The report did emphasise concerns about rising costs (especially energy), increased 15
competition in the market and high interest rates. The report also contained a set of financial
ratios (see Table 2).
Table 2
Financial ratios calculated from Coffee#1’s financial report
2022 2021
Current ratio 1.45 0.94
Gross profit margin 31.8% 20.4%
Net profit margin 20.3% 8.2%
ROCE 58.2% 22.0%
Debtor collection period 5.0 days 8.8 days
Stock turnover period 3.2 days 3.9 days
Source: Calculated from Coffee#1 Ltd – report and financial statements (31/05/22)
The branded coffee store market in the UK continues to experience strong market growth
(see Extract A).
© OCR 2025 H431/02/RB Jun25
for more: tyrionpapers.com
, 3
Extract A
UK branded coffee stores defy economic challenges
At the start of 2023, the UK market had grown in value by 12% over the previous year to 20
£4.9 billion. The number of stores increased over the same period by 4.4%.
Inflationary pressures have caused all major coffee store brands to increase prices.
However, rising sales indicate UK consumers still consider out-of-home coffee an affordable
luxury and are not reducing consumption.
The largest UK coffee store brands have responded to changing consumption patterns 25
by investing in new sales channels, including drive-thru, delivery, self-serve and smaller
stores. The firms are also seeking to keep operational and product costs low. Recently, price
consciousness has become an increasingly important consumer trend.
It is forecast that the UK branded coffee store market will exceed 11 600 stores and
£6.4 billion of sales by January 2028. 30
Source: Adapted from www.worldcoffeeportal.com/Latest/News/2023/January-(1)/UK-branded-
coffee-shop-market-defies-difficult-tra (19/01/23)
Staffing shortages remain a key challenge for all service sector businesses. Coffee#1 has
several policies to help it overcome this challenge (see Extract B).
Extract B
Human resources at Coffee#1
Adapted from www.coffee1.co.uk/team-benefits and www.coffee1.co.uk/disability-confident-employer. Item removed due to third party copyright restrictions.
UK consumers expect a high level of customer service which is a challenge for any service
sector industry. This is especially true for any company selling food and drink (see Extract C
and Table 3).
© OCR 2025 H431/02/RB Jun25 Turn over
for more: tyrionpapers.com
