Costa Express has dropped the prices of all hot drinks sold through its coffee machines located in stores in response to the Government’s recent VAT cuts.

The change in VAT from 20% to 5% on all hospitality food and non-alcohol drinks was announced by Chancellor Rishi Sunak earlier this month and applies to all hot food and non-alcoholic drink to go sold in convenience stores from 15 July until 12 January.

While it is up to operators to decide whether to pass the reduction on to customers, Costa Express sets prices centrally and a confidential letter sent to stores by the coffee machine firm confirmed the reduction would be passed on to consumers through new retail prices on its products.

“We can confirm that this will be applicable to all sizes of hot drinks only in Costa Express machines from this date,” the letter read.

A new price card also seen by Better Retailing showed the price of most lines fell by around 12.5% with a regular black americano coffee falling from £2.40 to £2.10. While the changes were applied automatically, stores were advised to update their tills to ensure they did not overcharge shoppers.

Discussing the impact of the cut to VAT on local shops, the ACS said it: “received clarification that any vendor providing food and drink for consumption on the premises, or hot takeaway food or drinks are eligible for the reduced rate, including local shops.”

Data from the trade group’s 2019 Local Shop Report suggests the measure is likely to benefit the 23% of convenience stores with a hot food offering and 34% of convenience locations serving hot drinks.

The Government said the VAT cut, along with other measures announced in the Summer statement, were designed to support restaurants, pubs and cafes severely impacted by forced closures during lockdown.

Find out more on our coronavirus information hub for retailers