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Coffee Shops - UK - December 2015

OVERVIEW
What you need to know
Products covered in this report
EXECUTIVE SUMMARY
The market
The coffee shop market is estimated to see 6% value growth in 2015
Forecast
Figure 1: UK coffee shops market size and forecast, 2010-20
Growth in real wages should prompt greater frequency of consumption
National Living Wage is likely to prompt price rises for consumers
Stalled growth in the core 16-34 user group
Companies and brands
Costa aims for 2,500 stores by 2020
Starbucks starts serving alcohol
Caffè Nero and Starbucks expand hot food
Investment pours into SMEs
Second Cup enters the UK market
Starbucks and Costa launch new formats
The consumer
Three quarters of Brits buy hot drinks out-of-home
Figure 2: Outlets used to buy hot drinks out-of-home, July 2013, September 2014 and September 2015
Specialist coffee shops are used more widely for sitting in than for a takeaway
Figure 3: Frequency of using coffee shops, July 2013, September 2014 and September 2015
Coffee is the most popular drink bought at specialist coffee shops
Figure 4: Types of hot drinks purchased at specialist coffee shops, September 2015
Location and high quality coffee are seen as important by over half of buyers
Figure 5: Factors influencing where hot drinks are purchased out-of-home, September 2015
Limited edition coffee appeals to 29% of consumers
Figure 6: Interest in coffee shop product concepts
47% of hot drinks buyers prefer venues offering customisation
Figure 7: Coffee shop buying behaviours and preferences, September 2015
Traditional British baked goods are popular with half of out-of-home hot drink buyers
Figure 8: Interest in complementary products/services at coffee shops, September 2015
What we think
ISSUES AND INSIGHTS
Reducing waiting times should win customer favour
The facts
The implications
Coffee subscriptions: a threat and an opportunity for UK coffee shops
The facts
The implications
Operators experiment with late night and alcohol trials in a competitive landscape
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Growth in real wages should benefit coffee shops
The National Living Wage will increase operators’ costs
Stalled growth in the core 16-34 user group
The coffee shops market is estimated to grow by 6% in 2015
Market growth of 26% is expected in 2015-20
MARKET SIZE AND FORECAST
UK coffee shops value growth estimated at 6% in 2015
Figure 9: UK coffee shops market size and forecast, at current and 2015 prices, 2010-20
Forecast
Figure 10: UK coffee shops market size and forecast, 2010-20
MARKET DRIVERS
Growth in real wages should prompt greater frequency of consumption
Figure 11: Trends in how respondents would describe their financial situation, February 2009-September 2015
The introduction of the National Living Wage is likely to prompt price rises for consumers
Concern over future coffee bean supplies
Stalled growth in the core 16-34 user group may affect market growth going forward
Figure 12: Trends in the age structure of the UK population, 2010-15 and 2015-20
KEY PLAYERS – WHAT YOU NEED TO KNOW
Costa aims for 2,500 stores by 2020
Investment pours into SMEs
Second Cup enters the UK market
Starbucks trials serving alcohol
Caffè Nero and Starbucks extend their hot food ranges
Starbucks and Costa launch new store formats
Apps help to cut queueing time
MARKET SHARE
The UK specialist coffee shops market: background
Starbucks, Costa Coffee And Caffè Nero explore new directions
Caffè Nero expands its hot food options
Costa launches new Costa Fresco format
Starbucks launches new Starbucks Reserve and Starbucks Evenings in the UK
Starbucks Reserve
Figure 13: Photographs showing coffee-making methods at the Starbucks Reserve store in Covent Garden, London
Starbucks Evenings
Coffee shop specialists lay out expansion plans
Costa aims for 2,500 stores by 2020
Figure 14: Outlet numbers of selected UK coffee shops, 2011 and 2013-15
Small and medium-sized enterprises attract investment
Canada’s Second Cup opens in the UK
BRAND COMMUNICATION AND PROMOTION
Starbucks is the biggest spender on advertising
Figure 15: Recorded above-the-line, online display and direct mail advertising expenditure on selected coffee shops, 2011-15
Operators foster greater engagement through social media
Big brands seek to portray ‘handcrafted’ coffee
Caffè Nero uses lifestyle branding
Costa looks to lenticular technology to grab attention of passers-by …
… and partners with BuzzFeed
First official International Coffee Day established
Free coffee
BRAND RESEARCH
What you need to know
Brand map
Figure 16: Attitudes towards and usage of selected coffee shop brands, November 2015
Key brand metrics
Figure 17: Key metrics for selected coffee shop brands, November 2015
Starbucks and Costa have well rounded images influenced by their wide availability
Figure 18: Attitudes, by coffee shop brand, November 2015
Coffee Republic has closest association with negative connotations
Figure 19: Brand personality – Macro image, November 2015
Harris+Hoole is seen as special, whilst BB’s is associated with family
Figure 20: Brand personality – micro image, November 2015
Brand analysis
Costa Coffee enjoys advantageous position over its competitors
Figure 21: User profile of Costa Coffee, November 2015
Figure 22: User profile of Caffè Nero, November 2015
Starbucks’ overall positive image limits impact of unethical associations
Figure 23: User profile of Starbucks, November 2015
BB’s Coffee & Muffins is noted for value and family
Figure 24: User profile of BB’s Coffee & Muffins, November 2015
Harris+Hoole enjoys a special image but low exposure limits usage
Figure 25: User profile of Harris+Hoole, November 2015
Coffee Republic struggles to create a positive brand image
Figure 26: User profile of Coffee Republic, November 2015
LAUNCH ACTIVITY AND INNOVATION
Apps
Pre-ordering apps help customers cut down on queuing time
Operators move into coffee subscription services
Operators look to expand their roasting capability
In-store roasting
Figure 27: The coffee roaster in Coffee@33’s store, Brighton
Cold brew gains traction in the UK
Draught cold brew/nitro coffee
Coffee shop industry increases its focus on waste
THE CONSUMER – WHAT YOU NEED TO KNOW
Three quarters of Brits buy hot drinks out-of-home
Specialist coffee shops used more widely for sitting in than for takeaway
Almost three quarters buy coffee at specialist coffee shops
Location and high quality are the most important outlet choice factors
Limited edition coffee appeals to 29% of consumers
47% of hot drinks buyers prefer venues offering customisation
Traditional British baked goods would be popular with half of out-of-home hot drink buyers
OUTLETS USED TO BUY HOT DRINKS OUT-OF-HOME
Three quarters of Brits buy hot drinks out-of-home
Figure 28: Outlets used to buy hot drinks out-of-home, July 2013, September 2014 and September 2015
Costa Coffee is the most widely used coffee shop chain
Non-specialists make up a significant part of the market
One in seven Brits buy hot drinks from restaurants/pubs/hotels
A quarter of Brits use independent coffee shops
Half of consumers use two or more outlets to buy hot drinks
Figure 29: Repertoire of coffee shops used, September 2015
FREQUENCY OF USING COFFEE SHOPS
Coffee shops are more popular for sitting in than taking away
Usage remains unchanged since 2013
Figure 30: Frequency of using coffee shops, July 2013, September 2014 and September 2015
HOT DRINKS PURCHASES MADE AT COFFEE SHOPS
Coffee is the most popular drink bought at specialist coffee shops
Boosting interest in tea out-of-home
Figure 31: Types of hot drinks purchased at specialist coffee shops, September 2015
Making coffee shops more appealing to women and the young
FACTORS INFLUENCING WHERE HOT DRINKS ARE PURCHASED OUT-OF-HOME
A convenient location and high quality coffee are key
Convenient location
High quality coffee
Figure 32: Factors influencing where hot drinks are purchased out-of-home, September 2015
Friendly staff influences choice of venue for one in three buyers
Short waiting time influences the venue choice of 29% of users
High quality food is important for one in five hot drinks buyers
INTEREST IN COFFEE SHOP PRODUCT CONCEPTS
Limited edition coffee appeals to 29% of consumers
Figure 33: Interest in coffee shop product concepts, September 2015
One in five interested in coffee made with non-dairy ‘milk’
Brits are more interested in nitro/draught coffee than in cold-brew
COFFEE SHOP BUYING BEHAVIOURS AND PREFERENCES
Half of hot drinks buyers prefer venues offering customisation
Figure 34: Coffee shop buying behaviours and preferences, September 2015
Hot drinks buyers favour production provenance information over roasting provenance
One in four would drink more decaffeinated coffee out-of-home if available
INTEREST IN COMPLEMENTARY PRODUCTS/SERVICES AT COFFEE SHOPS
The role of food in coffee shops is on the rise
Figure 35: Interest in complementary products/services at coffee shops, September 2015
Traditional British baked goods garner widest interest amongst out-of-home hot drinks buyers
14% of out-of-home hot drinks buyers would be interested in ethnic food at their favourite coffee shop
Blurring boundaries between coffee and alcoholic drink venues
There is scope for coffee shops to branch out into ice cream/gelato
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Data sources
Abbreviations
APPENDIX – MARKET SIZE AND FORECAST
Forecast methodology
Figure 36: Best- and worst-case forecasts for UK coffee shops market, 2015-20

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