‘New nation of coffee drinkers' fuelling growth of the UK coffee shop market

21/12/2012 - 10:21
After more than a decade of rapid growth, the UK branded coffee shop market is defying all previous expectations with a current growth rate almost eight times that of the British economy.

The latest annual report by management consultants Allegra Strategies, which includes a national survey of 25,000 consumers, reveals that the total UK coffee shop market grew by 7.5% in 2012 to reach £5.8 billion in turnover.

The market which includes branded coffee chains, independent coffee shops and non-specialist operators, grew to 15,723 outlets. The total number of coffee shop outlets grew by 4% over the past year alone.

In particular, branded coffee chains such as Costa Coffee, Starbucks Coffee Company, Caffè Nero, Pret A Manger and EAT, have shown strong resilience in the face of a very challenging UK economy.

Consumers are gravitating to brands they enjoy and trust and this has added pressure on weak mid-sized chains and low quality independent shops who are slowly fading out of the market. Good artisan independents, however, are thriving also.

The UK branded coffee chain segment now stands at 5,225 outlets. Sales were very robust in 2012, growing by 10% to an estimated turnover of £2.3 billion. The market has doubled in the past six years and is now 10 times the size it was 15 years ago, at a time many thought it was already saturated.

The three leading chains in the UK are Costa Coffee (1,552 outlets), Starbucks Coffee Company (757) and Caffè Nero (530). These three now command a 54% combined share of the branded coffee chain market.

The branded coffee shop segment still has room to grow. Allegra analysts believe that successful brands of the future have to tune into consumer lives to stay relevant as increasingly savvy and choosy consumers seek authentic and original experiences.

Jeffrey Young, managing director, Allegra Strategies said: "The UK coffee shop market continues to astound even the most optimistic of forecasters, by growing significantly in value, in outlet numbers and also in the social psyche of the nation. As consumers gain more opportunity to consume quality coffee through more outlets, they are making it part of their lifestyle. Britain has become a ‘new nation of coffee drinkers'. Long live the cup of tea, but more and more consumers seek and enjoy quality coffee.

"High quality ‘artisan' independent coffee shops are also fuelling consumer demand and driving the branded coffee shop sector to increase focus on authentic interiors, barista technique and to introduce a wider range of crafted coffees such as flat white and cortado.

"This focus on quality in all areas can only continue to drive a thriving industry over the next 3-5 years and beyond. The entry of Tesco into the market this year with its Harris + Hoole joint venture signals a new era of competition is about to emerge, with quite possibly further M&A activity."

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