The UK coffee shop culture endures

Just as the 2024 London Coffee Festival is about to begin, two recent studies highlight the strength of the UK coffee shop market despite sustained cost-of-living pressures and amid intensifying competition.

Total sales are above pre-pandemic levels, however, weakened consumer confidence, high inflation and lower foot traffic at traditional prime locations have contributed to slowed growth and increased uncertainty, and yet the appeal of the coffee shop culture endures. Allegra World Coffee Portal’s Project Café UK 2024 shows the UK branded coffee shop market achieved 9.2% sales growth to reach £5.3 billion over the last 12 months. The total market grew 3.6% by outlets to reach 10,199 stores.

Project Café UK also revealed that outlet growth has slowed as operators exercise caution, noting that operators are increasingly assessing underperforming sites — 25% of branded coffee businesses saw net reductions in their outlet portfolios over the last 12 months, with 29% not opening any net new outlets amid heightened industry caution. Costa Coffee remains the UK’s largest branded coffee chain, holding a 26% share of the market with 2,677 stores, after closing a net 17 sites over the last 12 months. Overall outlet growth was led by Greggs and Starbucks, which opened 73% of the 353 net new stores added to the market during the period.

Coffee shops may be weathering the difficulties but challenges remain as the cost-of-living crisis (which is affecting economies globally) continues to squeeze UK consumer disposable incomes. Project Café UK identified a negative impact on regular coffee shop visitation over the last 12 months. Amid sustained high product, labour, energy and property costs, branded coffee chains have increased coffee prices by an average of around 9% over the last 12 months (the average price of a 12oz latte rose 8.7% to reach £3.51), resulting in average spend falling 4% year-on-year, with consumers either more likely to only purchase a beverage or spend less overall on food items.

The research finds that many operators are diversifying retail and product strategies to broaden their market appeal. For example, in a bid to attract the ever-important Gen Z consumer, Costa Coffee became the first major UK branded coffee chain in the UK to offer bubble tea in 2023 and has also launched a new hot milkshake range.

Project Café UK further reported that Costa, Starbucks and Tim Hortons all grew their drive-thru presence over the last 12 months to collectively hold a 93% share of the 801-site UK drive-thru coffee market. In the food-focused segment, Greggs met its target to open circa 150 stores per year with a significant coffee offering and the chain is now trialling iced coffee at selected locations. Pret A Manger has doubled down on its in-store subscription with a 20% food discount to subscribers and has sought to cater to families by introducing a new children’s menu.

Although an improving economic outlook for 2024 is predicted, subdued growth is expected. UK inflation has more than halved over the last 12 months and high street trading conditions are likely to improve further following the Bank of England’s anticipated base rate decrease — its first since March 2020. However, World Coffee Portal reports that fierce competition in an increasingly crowded market is likely to constrain operator growth, forecasts the UK total branded coffee shop market will exceed 10,500 outlets by January 2025.

Commenting on the report, Allegra World Coffee Portal founder and CEO, Jeffrey Young said, “Despite some very strong economic headwinds, squeezed consumer spend and trading uncertainty, the UK coffee shop market – and especially branded coffee chain segment – has remained very resilient. Having achieved two decades of consistent growth only interrupted by the Covid era, we’re now looking at trading patterns well above pre-pandemic levels.” He added that “a very bright future awaits for the UK coffee shop market as operators invest in innovation through technology, capture the hearts and minds of the next generation with new product categories, including iced beverages, and focus on delivering high-quality, value-for-money experiences.”

Meanwhile, a new report from SumUp, the leading global fintech company, revealed the best cities in the UK for independent coffee shop businesses to thrive. It’s no surprise that in recent years, there has been a bigger spotlight placed on independent businesses, as consumers become more conscious of supporting their local communities.

SumUp’s research explains that the cities on its list have “buzzing independent shopping scenes, and each one boasts a range of unique boutiques, bookshops, and homeware stores. These cities are among some of the best to establish yourself as an independent business owner, and they provide the perfect environment in which you can thrive and grow.”

The research named Bristol as the top city in the UK for independent coffee shop businesses, followed by Sheffield and London. The study ranked 80 cities across the UK, taking into consideration the number of independent coffee shops in each location and their average review score.

According to SumUp, “it’s no surprise that Bristol tops the list as the best city for fostering and thriving as an independent coffee shop business. The city boasts an impressively high score of 1.26 for the number of independent coffee shop businesses the city hosts, home to 79 independent coffee shops.” Additionally, Bristol records the highest rated coffee shops on average within the coffee sector, with an average coffee shop rating of 4.64 stars.

While having less coffee shops than London, likely due to scale and population, SumUp stated that Bristol’s coffee shops perform better than those in the capital, on average, as London’s independent cafés hold an average review score of 4.43.

Sheffield, is another strong contender for independent coffee shops, per SumUp, ranking it as the second best UK city for independent coffee spots. The northern city has slightly more independent roasters than Bristol, and just ranks by just 0.01 points when it comes to average reviews.

Rounding out the top ten cities in the UK for independent coffee shop businesses, according to SumUp are: York, Glasglow, Dublin, Edinburgh, Salford, Gloucester and Newry.

For the full Project Café UK, click here. For more information on The best UK cities for independent businesses study, click here.

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