Project Café9 UK - Key Findings | Flagship Allegra Report
London, 19 December 2009 – Allegra Strategies has now released its ninth definitive study on the UK branded coffee shop market. The report is considered by the industry as ‘the bible’ of the coffee sector.
Main Messages
UK Coffee shop market shows remarkable resilience during recent recession to reach £1.63 billion in sales in 2009, with sales growth of 6.2% on 2008.
Branded coffee chains are expected to outperform the retail sector as café culture becomes more engrained through the UK.
New artisan independent coffee houses, drawing on Antipodean coffee culture, are helping to rapidly create an exciting new ‘Third Wave’ of coffee culture.
Key findings
- The total UK coffee shop market, including branded chains, independents and non-specialist operators, is estimated at more than 11,000 outlets at the end of 2009
- The UK branded coffee shop market is estimated at 4,158 outlets and turnover of £1.63 billion in 2009
- Growth of 258 stores in the branded coffee chain segment halved in 2009 compared to 2008, from 12.6% to 6.6%
- Sales growth has slowed significantly from 15.0% in 2008 to 6.2% in 2009
- Regional UK was the major driver of growth highlighting how widespread coffee culture has become
- A number of weaker operators (BB’s Coffee & Muffins, Coffee Republic, O’Briens and Tchibo) failed during 2009, highlighting the importance of strong brands and operational excellence
- The current UK economic downturn impacted on trading performance overall in 2009, with operators noticing reduced consumer frequency of visits and decline in like for like sales and selectively lowering prices
- Trading has been challenging for most UK coffee shop players but the best brands achieved positive comparable store sales growth during 2009
- Consumers did not cease to spend, preferring to trade down to lower ticket options rather than give up their coffee treat
Store Numbers of Key Players
| Coffee-Focused Operators |
London |
Regional |
Total |
Share of Segment Total Dec-09 |
| Costa Coffee |
230 |
770 |
1,000 |
32.4% |
| Starbucks Coffee Company |
314 |
403 |
717 |
23.2% |
| Caffè Nero |
160 |
250 |
410 |
13.3% |
| Caffè Ritazza |
19 |
164 |
183 |
5.9% |
| BB’s Coffee & Muffins |
10 |
123 |
133 |
4.3% |
| Total Segment |
908 |
2,183 |
3,091 |
|
| Growth in 2009: 7.6% |
|
|
|
|
| Food-Focused Operators |
London |
Regional |
Total |
Share of Segment Total Dec-09 |
| Pret A Manger |
145 |
50 |
195 |
18.3% |
| Pumpkin |
10 |
116 |
126 |
11.8% |
| O'Brien's |
0 |
109 |
109 |
10.2% |
| Greggs (Bakers Oven) |
0 |
118 |
118 |
11.1% |
| EAT |
82 |
18 |
100 |
9.4% |
| Total Segment |
441 |
626 |
1,067 |
|
| Growth in 2009: 4.0% |
|
|
|
|
Selected Findings from Consumer Research
Pattern of Visits
- Consumers continue to visit coffee shops, despite the recession
- 64% of consumers interviewed visit at least once a week compared to 67% in 2008
- 53% of consumers state that they visit coffee shops the same frequency as last year
- It is evident that coffee shops are more than just a location to drink coffee and eat as they are important hubs for socialising, a place to relax & read and a place for business meetings
- Convenient location is still the prime reason for choosing a coffee shop, followed by coffee quality
Impact of Economic Climate
- The recession has not affected visiting frequency for 51% of consumers. However, it has influenced a modest 19% of consumers
- Consumers continue to be price conscious with 42% stating that the price of coffee affects their visiting frequency compared to 40% in 2008
- Average spend is down to £3.50 from £3.59 in 2008
Patterns of Consumption
- Latte remains the most popular espresso-based beverage, followed by cappuccino
- Consumers are purchasing food less frequently from coffee shops in 2009. Coffee shops are perceived as destinations for coffee and although 21% of consumers will purchase food with their beverage, 32% prefer not to
- 53% of consumers interviewed by Allegra purchase takeaway coffee about the same as they did in 2008
Branded chains continue to be favoured by UK consumers
- 72% of consumers interviewed mainly visit their favourite coffee shop
- Brand awareness has increased by 8% in 2009
- Starbucks is the most recognised coffee shop brand (93% of the sample), followed by Costa Coffee (92%) and Caffè Nero (84%)
- Within the top 3 branded chains Caffè Nero is ranked highest overall by Key Performance Indicators with first place in 7 out of 10 KPIs (coffee quality, atmosphere, value for money, speed of service, friendly service, food quality and cleanliness), Starbucks was ranked first for 3 of 10 KPIs (ethical practices, convenient location and food choice)
Market Outlook
- 2010 is expected to show further growth, as green shoots of recovery are already evident and stronger brands react to consumer demand for quality coffee and an authentic experience
- Consumers are still looking for value for money however, in 2010 this will continue regardless of an economic recovery
- The total coffee shop market is forecast to grow by 4.4% per annum to exceed 12,500 outlets by December 2012
- Branded coffee outlets (coffee and food-focused) are expected to grow at 7.0% compound annual in the 3 year period to December 2012 and grow sales to more than £2 billion by 2012
- A changing dynamic is in force, with polarised competitive influences around coffee quality and low prices having a significant impact on the branded coffee chain segment
- The rise of a new wave of quality artisanal independents are driving consumers increased coffee knowledge and expectation for high quality coffee
- Coffee focus is increasing outside of traditional branded coffee shops and food-focused operators, non-specialists and quick service restaurants such as McDonald’s are all improving their coffee offer at highly competitive price points
- Allegra expects general business conditions to remain challenging for the foreseeable future, as consumer disposable income and employment levels remain under pressure
Future Trends
- High quality niche independent coffee shops are exerting a growing influence on the branded chains
- A new ‘Third Wave’ of coffee culture will soon be mainstream as major operators introduce antipodean Flat White to the menu, the first major beverage innovation in nearly a decade
- Branded chains must continue to proactively respond to consumer demands in order to retain leadership in the coffee shop market
- Those stronger brands who have continued to invest and re-establish key values within their business practices will show renewed growth
- Reacting to consumer demand for value for money and authentic, artisanal, high quality coffee will retain loyalty and increase sales
- Ethical credentials are becoming more mainstream, operators will be challenged to show they are doing more than just signing up to accreditation schemes
- High quality ethical coffee and products will be expected, consumers will no longer accept low quality at a higher premium just because it is ethically sourced
Jeffrey Young, Managing Director of Allegra Strategies comments:
“
The UK coffee shop industry is on the threshold of some very exciting times. After demonstrating resilience in the recent recession, branded coffee chains are poised for continued growth as coffee culture becomes fully entrenched in modern UK lifestyle.
Allegra Strategies have analysed this market closely for more than a decade. I have never seen such an exciting environment looking forward. The rise of artisanal independents and the new ‘Third Wave’ of coffee culture is having a significant impact on what the major branded chains are doing in their businesses to create the necessary authenticity required by today’s more sophisticated and savvy consumers.
We will see much better ’crafted’ coffee emerging as a result and also much better environments, this is great news for British consumers and will help to sustain the long term vibrancy of the sector. ”
Editor’s Notes:
Allegra Strategies is a London-based management consultancy and has accurately predicted trends in the UK branded coffee shop market since 1999. Allegra is recognised as one of the global leaders in coffee sector and foodservice research.
Sources
- 4,996 in-depth interviews with UK coffee consumers. Conducted in a wide variety of branded coffee shops and locations throughout the UK and online
- 148 interviews with CEOs, managing directors, senior managers and store managers of major industry players, including:
- leading UK coffee and food-focused chains
- major coffee roasters and key equipment suppliers
- non-specialist players including department stores, supermarkets, bookstores
- leading property companies, letting agents and landlords
- local authorities
For further information on this event or to find out more about The Allegra Food Strategy Forum please call Yvette Mackenzie on 020 7691 8842 or email
yvmackenzie@allegra.co.uk