The total UK coffee shop market is estimated at 16,501 outlets and continues to show strong sales growth of 6.4 percent on last year, with a £6.2 billion total turnover, according to Allegra Strategies’ definitive report. Coffee has become a global commodity. As one of the world’s most traded products, second in value only to oil, the coffee industry employs millions of people around the world for its growing, processing and trading.
Project Café13 UK, the branded coffee chain segment, recorded a £2.6 billion turnover across 5,531 outlets, delivering impressive sales growth of 9.3 percent and outlet growth of 5.9 percent, adding 306 stores in 2013. After 15 years of considerable growth, the coffee shop sector continues to be one of the most successful in the UK economy. Costa Coffee has 1,670 outlets, Starbucks Coffee Company has 790 and Caffè Nero has 560. They all remain the UK’s leading brands, with 54 percent branded chain market outlet share. The physical expansion of leading chains remains the core driver of market growth. In particular, Costa added 118 UK outlets and 18 percent sales growth in 2013.
The UK coffee shop market is robust, with established and predictable coffee consumption patterns. 1 in 5 coffee shop customers visit coffee shops every day, compared with 1 in 9 in 2009, drinking an estimated 1.7 billion cups of coffee per year. Coffee venues increasingly play an important social and community hub function, as well as being a large contributor to UK employment and the economy. The report reveals how successful branded chains constantly refresh their image, while retaining brand values, in order to engage increasingly progressive consumers.
A greater commitment to coffee credentials from the non-specialist sector, such as pubs, fast food chains and supermarkets, has generated wider consumer participation and adds to competitive pressures. Furthermore, third wave/artisan coffee has profoundly influenced operator and consumer expectations about coffee quality and store design. The significant growth of new, corporate-backed chains, such as Harris + Hoole (Tesco), signals a new era of competition. The expansion of the premium vending segments is further increasing the availability of specialty coffee.
Allegra forecasts that the total UK coffee shop market will exceed 20,500 outlets and a turnover of £8.7 billion by 2018; with 4.5 percent annual outlet growth over the 5-year period. The branded coffee shop segment is forecast to exceed £4.1 billion across 7,000 outlets by 2018; with outlets predicted to grow at 5.2 percent compound and revenue at 10 percent compound over the next 5 years. It is estimated that the UK has the long-term potential to comfortably host more than 9,500 branded coffee shops.
The future coffee shop marketplace aims to be shaped by further increasing consumer participation and the amount of savvy consumers with the desire for premium quality coffee anywhere and anytime; driving improved coffee offers across a broader set of channels.
Allegra Strategies’ Managing Director, Jeffrey Young, commented: “The UK coffee shop industry is showing consistent strong growth in both sales and outlets. Britain is now a nation of great coffee drinkers. The UK consumer increasingly appreciates a quality cup of coffee and operators must continue to deliver innovation and fantastic quality, while genuinely engaging with customers in order to stay ahead of the curve. UK consumers should become even more knowledgeable on the subtleties of coffee preparation and delivery from bean to cup, in particular origin and roast, as well as the importance of milk foaming and water quality. There is an expection to see growing consumer interest evolving beyond simple commoditisation of coffee as a drink, with artisan cafés and branded chains increasingly educating them about the craft of coffee.”
What are the best features of coffee shops within the UK?