The Allegra World Coffee Portal report, Project Café 2015 UK, outlines the state of the coffee shop market, which currently stands at 18,832 outlets and £7.2bn in turnover. The sector outperformed retail this year, with sales growth of 10.7 per cent.
On the branded side, coffee chains recorded £2.9bn turnover across 5,781 outlets, with sales growth of 11.9 per cent and outlet growth of 4.9 per cent (271 new stores) during 2014.
Costa Coffee (1,821 shops), Starbucks Coffee Company (824) and Caffè Nero (590) represent a combined 56 per cent of the branded chain market by outlet numbers. Costa alone added 151 UK outlets and achieved 15 per cent sales growth in 2014, the report added.
The branded coffee shop segment is forecast to exceed £5bn and 7,870 outlets by 2020, with venues predicted to grow at 5.3 per cent compound and revenue at 10 per cent compound over the next five years.
The non-specialist sector which includes pubs, fast food operators, supermarkets and retail stores – have also increased their coffee offering to appeal to coffee-savvy consumers, leading to more competition for coffee-focused operators.
The sector outpaced branded chains with outlet growth of 14.5 per cent to reach 7,017 venues with a strong coffee offer, not including branded chain partnerships.
Meanwhile, pub groups grew by 648 establishments – up 19 per cent, and retail and department stores (including garden centres, bookshops, homeware and supermarkets) added a total 189 stores – 10 per cent growth.
Overall, the non-specialist sector grabbed a further 2 per cent share of the total coffee shop market in terms of outlets, reaching 37 per cent, compared to 31 per cent for branded chains and 32 per cent for independents.
Focus on quality
UK consumers are becoming more and more knowledgeable when it comes to coffee, moving away from instant coffee at home and choosing venues according to their own habits as well as the brand of coffee on offer.
According to the report, coffee shop visitors drink an estimated 2bn cups of coffee per year in these outlets. Costa leads the market with an estimated 149mn cups sold, followed by McDonald’s selling approximately 126mn.
Mid-sized artisan chains including Harris + Hoole and Coffee#1 have experienced strong growth, putting competitive pressure on branded chains and influencing the whole market’s offering.
Additionally, a number of artisan independents are transforming into small chains – such as Taylor St Baristas and Timberyard.
Allegra Group managing director Jeffrey Young said: “The UK coffee shop industry is showing consistent strong growth in both sales and outlets. Britain is fast becoming a nation of coffee connoisseurs. The UK consumer increasingly appreciates a quality cup of coffee and operators must continue to deliver innovation, fantastic quality while genuinely engaging with customers in order to stay ahead of the curve.
“Quality is a given as UK consumers are even more knowledgeable on the subtleties of coffee preparation and delivery from bean to cup, in particular origin, roast, as well as the importance of milk foaming and water quality. With increasingly intense competition, consumers can have great quality coffee at home, at work and from a vast selection of non-specialists. As a result they now have far more criteria driving destination choice than ever before. Branded chains are having to work hard to maintain consumer share.”