Coffee shop market grows amid economic challenges

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Allegra’s most extensive analysis of the European branded coffee shop market yet reveals the European branded coffee shop segment remains in growth despite a challenging economic climate across the region. The segment added 1,235 stores during the last 12 months to reach 37,598 stores, representing 3.4% growth in outlets.

Eastern Europe embraces café culture but growth in largest markets slows

26 out of Europe’s 30 largest coffee shop markets (markets with over 100 branded coffee shop outlets) added net new stores over the last 12 months, with five enjoying growth of 5% of more.

Eastern European nations continue to embrace branded coffee shop culture, with 84% of industry leaders surveyed in the region reporting positive sales growth over the last 12 months. Romania remains Europe’s fastest growing coffee shop market, recording 28.3% outlet growth. Kazakhstan saw 26.5% growth while Ukraine saw a 16% increase in outlets.

Turkey experienced the largest loss of branded coffee shops at -2.9%. The Belgian, Hungarian and Swedish markets contracted by 1.9%, 1.8%, and 1.3% respectively.

In the UK, Europe’s largest and most developed branded coffee shop market, outlet growth slowed significantly from 6.1% in 2018 to 0.9% amid sustained Brexit uncertainty, dampened consumer confidence and a highly challenging retail environment. The German branded coffee shop market added just 2.5% more stores while French growth more than halved to 3.2%.

International coffee chains grow European market share

Major international coffee chains continue to grow their European presence, with 20 of the continent’s largest coffee chains now comprising 45% of the total branded coffee shop market. Costa Coffee, Starbucks, McCafé, Paul, Illy Caffè and Segafredo Zanetti are now present across 15 or more European markets. Starbucks, McCafé, and Costa Coffee responsible for nearly a third of new net new outlets over the last 12 months, collectively comprising 23% of the European branded coffee shop segment. 

Property costs eat into margins, but premium and ethical products can boost sales

Almost half (48%) of European leaders say securing prime locations is critical to coffee shop success – a 7% increase on 2018. However, high rents and property costs were cited as the primary challenges facing coffee shops.

Industry leaders identified specialty coffee as the primary consumer trend currently influencing the industry. Cold brew remains the fastest growing beverage but still represents a relatively small proportion of overall sales.

Reflecting increased media coverage of climate change and the importance of sustainability, industry leaders identified ethical consumerism as the second most important consumer trend currently affecting the coffee shop segment. Over 70% agree ethical coffee has become much more important to consumers over the last 12 months.

Diverse cultural preferences shape European coffee shop propositions

For the first time World Coffee Portal surveyed consumers across four major national markets – France, Germany, Ireland and the Netherlands – to better understand coffee consumption patterns. French consumers were the most likely to have used a premium vending or self-service machine to purchase coffee. Irish consumers are most likely to have downloaded a coffee shop app, predominantly for the functionality of loyalty points integration.

The research also found marked difference in the popularity of Starbucks; in the Netherlands it is considered the most popular coffee operator, while in Germany consumers are much more divided.

European market expected to surpass 45,000 outlets over next five years

Allegra forecasts the European branded coffee shop market will reach 45,400 outlets by 2025, representing five-year growth of 3.9% CAGR. The coffee-focused branded chain sub-segment is predicted to grow at 4.6% CAGR over the next five years to exceed 27,900 outlets, while the food-focused branded chain sub-segment is predicted to grow at 2.8% CAGR, exceeding 17,400 outlets. Growth will be driven by the continued expansion of Eastern European markets as branded concepts gain traction, while for the rest of Europe, specialty coffee represents an opportunity for premiumisation.

Commenting on the research findings, Allegra CEO and founder, Jeffrey Young, said: “Despite a challenging economic climate and deep consumer uncertainty branded coffee shops remain in growth across most European markets. Chain concepts are an increasingly popular option for previously traditionally minded consumers. Lifestyle and consistency factors further underpin this trend.”

 

– About Allegra World Coffee Portal

Allegra World Coffee Portal (WCP) is the global information platform delivering unparalleled insight on the global coffee, café and related food-to-go sectors. World Coffee Portal provides data, reports, research and consultancy to help businesses make informed decisions and is the only specialist information platform for senior decision makers in the coffee industry. World Coffee Portal builds upon Allegra Strategies’ nearly two decades of experience in global coffee market analysis. Find out more at www.worldcoffeeportal.com

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