What you need to know
Sales value growth in the coffee shops sector has moderated from 8.9% in 2015 to 3.2% in 2019 as the market faces tough competition from non-specialists that are playing on price and convenience.
Instead of adding more coffee shop sites to compete with the raft of food-led shops that are now serving coffee, operators will have to explore launching new concepts, including vending machines aimed at consumers who are spending more time in transit and in need for strong coffee on-the-go.
However, with consumers pledging to live more sustainably, operators are pressured to innovate around practical recycling solutions. Although 56% of customers agree that more coffee shops should charge people a fee for using disposable coffee cups, reusable coffee cups are the preferred solution, as 82% of customers agree that more people should use them.
Meanwhile, with consumers spanning across the price spectrum (from low to high spend), it is important for more coffee shops to adopt a tiered pricing strategy. For example, operators should keep base items at an everyday low price (eg Pret A Manger’s 99p filter coffee) and promote value items (eg JD Wetherspoon’s £1.35 refillable coffee from its self-service machine), while also keeping the door open for upselling (eg Costa Coffee’s Irish Velvet Cappuccino, from £3.30).
Products covered in this Report
This Report covers branded chains and independents serving coffee beverages as core products. They are based on the European and North American coffee shop models, typified by Starbucks, Costa Coffee, Caffè Nero and Coffee Republic, offering a wide variety of coffee drinks. Other items are usually on sale, such as pastries, tea and coffee beans. Some venues may also serve breakfast and lunch as well, such as sandwiches and hot boxes.
Coffee shops include venues such as individual stores, kiosks and concessions. These may operate in a number of locations – MSAs (motorway service areas), health clubs and hospitals, for example, as well as standalone outlets. However, they must be independent of the facility they are located in.
Third-wave coffee refers to independently owned coffee specialists that put the focus on artisanal coffee and experience, which entails serving smaller amounts, using premium ingredients and high-quality equipment and staff training. Meanwhile, Antipodean-style coffee bars, which relates to the coffee culture as seen in Australia and New Zealand, continue to expand in urban locations like London.
This Report does not include other establishments that sell coffee, such as restaurants, tea shops or traditional cafés, except as a means of comparison. Nor does it include sandwich shops, such as Pret a Manger or Greggs, although these are mentioned in the consumer research for comparative purposes.
