Coffee Shops - UK - December 2018

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Coffee shops market is resilient…
…and will continue to thrive
Figure 1: UK coffee shops market, value sales and forecast, 2013-23
Companies and brands
Overall store count continues to grow
Third-wave coffee shops expanding fast
Figure 2: Selected UK coffee shops’ market share, by outlet numbers, 2015-18
The consumer
Non-specialists are challenging coffee shops
Figure 3: Participation in types of venues visited, October 2018
Costa most visited
Figure 4: Venues visited, October 2018
Coffee is particularly popular amongst over-45s
Figure 5: Types of hot drinks bought out of home, October 2018
Four in five coffee drinkers want a personalised coffee drink
Figure 6: Interest in customisation, October 2018
Caffeine-free complements health-boosting hot drinks
Figure 7: Drinks trends, October 2018
Room for improvement when it comes to food options
Figure 8: Attitudes towards coffee shops, October 2018
Most have a negative view of the coffee served at a fast food café
Figure 9: Correspondence analysis of coffee shops, October 2018
What we think
ISSUES AND INSIGHTS
Can an own-brand coffee shop model work in the grocery channel?
The facts
The implications
Tailored offerings will be key to survival in challenging retail conditions
The facts
The implications
Opportunities for coffee shops to premiumise tea
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Coffee shops market continues to thrive
Sugar reduction work well underway
Public supports legislation to tackle single-use cups
MARKET SIZE AND FORECAST
Value of coffee shops market expected to hit £3.75 billion this year
Figure 10: UK coffee shops market, value sales and forecast, 2013-23
Market faces tough competition from non-specialists
Figure 11: UK coffee shops market, value sales and forecast, 2013-23
Forecast methodology
MARKET DRIVERS
PHE publishes category-specific targets for sugar reduction
Coffee prices fall amid oversupply
Public supports legislation to tackle single-use cups
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Overall store count continues to grow
Third-wave coffee shops growing fast
Grab-and-go and deli food-focused formats
Standout sustainable schemes
McCafé now the biggest ad spender for out-of-home coffee
Costa Coffee is a brand with staying power
MARKET SHARE
Overall store count expected to grow by 9.3% in 2018
Figure 12: Selected UK coffee shops’ market share, by outlet numbers, 2015-18
Third-wave coffee shops growing fast
Figure 13: Department of Coffee, Rathbone Place (London)
Ones to watch
KEY PLAYERS
Branded chains
Costa Coffee
Figure 14: Key financial data for Costa Limited, 2015-18
Caffè Nero
Figure 15: Key financial data for Caffè Nero Group Ltd, 2015-17
Starbucks
Figure 16: Key financial data for Starbucks Coffee Company (UK) Ltd, 2015-17
Coffee#1
Figure 17: Key financial data for Coffee#1 Limited, 2015-17
Third-wave coffee shops
SOHO Coffee Co.
Figure 18: Key financial data for SOHO Coffee Shops Limited, 2015-17
Joe & The Juice
Figure 19: Key financial data for Joe & The Juice UK Limited, 2016 and 2017
Taylor St Baristas
LAUNCH ACTIVITY AND INNOVATION
Food-focused formats
Grab-and-go
Delicatessen
Standout menu options
Vegan
Alcoholic coffee
Figure 20: Sandows cold-brew concentrate for coffee cocktails
Mini portion
Figure 21: Nutrition information of a hot chocolate drink by Costa Coffee
Standout sustainable schemes
Ban on cups
Eco-conscious Costa
Cup Club
Paper cup charge
ADVERTISING AND MARKETING ACTIVITY
McCafé continues to win big with humour
Caffè Nero drives recruitment and brand metrics
Figure 22: Advertising expenditure, by selected coffee shops, 2014-18
McDonald’s goes bigger on digital
Figure 23: Advertising expenditure, by selected coffee shops, by media type, 2014-18
Costa drives awareness of its recycling efforts
Nielsen Ad Intel coverage
BRAND RESEARCH
Brand map
Figure 24: Attitudes towards and usage of selected brands, September 2018
Key brand metrics
Figure 25: Key metrics for selected brands, September 2018
Brand attitudes: McCafé offers the best value but lacks consumer trust
Figure 26: Attitudes, by brand, September 2018
Brand personality: McCafé outranks the other brands as the most accessible
Figure 27: Brand personality – Macro image, September 2018
Caffè Nero and Starbucks need to stand out more as they are too samey
Figure 28: Brand personality – Micro image, September 2018
Brand analysis
Costa Coffee is a brand with staying power
Figure 29: User profile of Costa Coffee, September 2018
McCafé still can’t shake off McDonald’s unhealthy image
Figure 30: User profile of McDonald’s McCafé, September 2018
Pret a Manger outranks the other brands as the most healthy
Figure 31: User profile of Pret a Manger, September 2018
Caffè Nero needs to improve its value proposition
Figure 32: User profile of Caffè Nero, September 2018
Starbucks has to increase brand transparency
Figure 33: User profile of Starbucks, September 2018
THE CONSUMER – WHAT YOU NEED TO KNOW
Buying hot drinks out of home: specialists vs non-specialists
Costa most visited
Coffee is particularly popular amongst over-45s
Four in five coffee drinkers want a personalised coffee drink
Caffeine-free complements health-boosting hot drinks
Consumers are lukewarm about the savoury food served at coffee shops
Most have a negative view of the coffee served at a fast food café
BUYING HOT DRINKS OUT OF HOME
Three in four bought hot drinks out of home
Figure 34: Overall participation in buying a hot drink out of home, October 2018
Usage of specialists versus non-specialists on a par
Figure 35: Participation in types of venues visited, October 2018
VENUES VISITED
One in three bought from Costa Coffee
Figure 36: Venues visited, October 2018
One in four visited independents
Figure 37: Type of independent venues visited, October 2018
One in four bought hot drinks from fast food chains
Figure 38: Outlets used, by outlets used, October 2018
One in three Younger Millennials visited Starbucks
Figure 39: Venues visited, by age, October 2018
Caffè Nero customers are connoisseurs
TYPES OF DRINKS
Older consumers more likely to order coffee
Figure 40: Types of hot drinks bought out of home, October 2018
Tea has mass appeal
Half of Millennials bought hot chocolate
INTEREST IN CUSTOMISATION
Four in five coffee drinkers want a personalised coffee drink
Figure 41: Interest in customisation, October 2018
Men most interested in coffee variety and roast level
Figure 42: Interest in customisation, by outlets used, October 2018
Women most interested in added flavourings, milk type and toppings
DRINKS TRENDS
Premium decaf coffee appeals to all
Figure 43: Drinks trends, October 2018
Millennials and women demand healthier syrups
Figure 44: Zero-calorie zero-sugar syrups, by TRKG
Costa reformulates its recipes to reduce sugar
Figure 45: Drinks trends, by types of hot drinks bought out of home, October 2018
Figure 46: Drinks trends, by gender, October 2018
Caffeine-free versus functional hot drinks
Figure 47: Caffeine-free hot drinks, by Local Hero Fulham (London)
Figure 48: Drinks trends, by generation, October 2018
London fuels demand for plant-based milk
Figure 49: Interest in hot drinks made with plant-based milk, by region, October 2018
ATTITUDES TOWARDS COFFEE SHOPS
Digital kiosks give people more time to customise their orders…
Figure 50: Attitudes towards coffee shops, October 2018
…yet, three in four look for human connection
Room for improvement when it comes to food options
Figure 51: Any outlets used, by attitudes towards coffee shops, October 2018
Happy Hour boosts footfall
Figure 52: Attitudes towards coffee shops, by outlets used, October 2018
Co-working spaces help increase dwell time
Figure 53: Attitudes towards coffee shops, by outlets used, October 2018
Figure 54: Example of a coffee shop with dedicated working space
Scope for coffee shops to stay open later – CHAID Analysis
Figure 55: Coffee shops – CHAID – Tree output, October 2018
Scope to boost wet-led sales
Figure 56: Examples of late-night coffee shops in London
PERCEPTIONS OF DIFFERENT VENUES 
Most have a positive view of the coffee served at Costa
Figure 57: Correspondence analysis of coffee shops, October 2018
Most have a negative view of the coffee served at a fast food café
Figure 58: Correspondence analysis of coffee shops, October 2018
Gender difference in perceptions
Figure 59: Costa Coffee in-store branding, November 2018
Figure 60: Examples of nitro cold-brew coffee
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
CHAID methodology
Figure 61: Coffee shops – CHAID – Table output, October 2018
Correspondence analysis methodology
APPENDIX – MARKET SIZE AND FORECAST
Forecast methodology
Figure 62: Best- and worst-case forecasts for UK coffee shops market, 2018-23