The 5th Wave: The Business of Coffee was unveiled to an audience of top industry leaders at The European Coffee Symposium in Budapest.
Allegra Group CEO Jeffrey Young stated that the next wave in the evolution of the coffee industry will be a compelling combination of all previous four waves – Tradition, Branded Chains, Artisan and The Science of Coffee. Young identified it as being a major force for the industry over the next decade.
The Business of Coffee
will see a greater influence from high quality boutique chains, adopting a more advanced set of business practices, and delivering authentic artisan concepts at scale. The industry will put more emphasis on hyper-professionalism, investing in people development programmes and supporting long term career paths for ‘hospitality professionals’.
There will be a continued investment in technology to further increase consumer satisfaction. Brands will be unashamedly business focused but will need to live and breathe genuine and principled concepts in order to really connect with the savvy millennial audience.
“We are entering an exiting new era for the global coffee industry. One that will endure and ultimately see the leading brands compete on excellence in an environment where winning is everything”
Current market environment
During the opening presentation, Young commented on the current market environment and shared some of the latest insights from Allegra’s Project Café17 Europe report.
The European branded coffee shop market (25 countries) is estimated at 21,143 outlets and is forecast to reach 28,000 branded outlets by 2021. 2016 saw a growth of 6.3% with the addition of 1,257 new stores. The UK is the most developed market and remains the model for the branded coffee shop industry, estimated at 6,850 outlets and adding 421 in 2016.
Brexit’s effects on the coffee market
Another important topic debated at the conference was the impact of Brexit on the coffee industry. Professor Paul Whiteley from Essex University gave an informative presentation on the possible consequences for the UK coffee market, concluding that ultimately, Brexit is unlikely to have a significant impact on the demand for coffee.
However, big questions were raised at the conference and in the halls in regards to other challenges that may arise. Delegates voiced concerns over supply-side inflation, as both the price of coffee and the cost of importing equipment has already increased since the vote to leave.
Concerns were also raised in regards to staffing implications, pointing to the fact that over half of coffee shop workers in the UK are European and that on a whole, native Brits simply don’t want the lower paid jobs.
The long-term effects of Brexit remain to be seen but both sides acknowledged that the market would remain uncertain until Britain officially negotiates trade deals independent from the European Union.
This year, four market leading companies each gave a candid look into their business’ future strategies and innovations.
Adam Mularuk, Brand President of Starbucks at AmRest
focused his presentation on how Starbucks is segmenting the consumer experience. He showed these segments as a pyramid with the base being the core Starbucks stores. Elements of the Starbucks reserve stores were introduced at each level, culminating with the premium Starbucks Reserve Roastery at the top of the pyramid.
Andrzej Jackiewicz, Managing Director of Costa Europe
gave an overview of Costa’s new store formats, which see the chain putting more emphasis on compelling food offers. With an intention to increase their presence in the lucrative lunchtime market, Costa Fresco launched in the UK in December 2015 as a food-focussed concept. The café highlight’s its high quality, handcrafted food options alongside its trademark coffee. This store will also act as a test site to trail their latest food innovations, the most successful of which will then be introduced into the main stores.
This June, Costa launched Costa Finer – an artisan concept trialling specialty brewing techniques and single origin roast. The store also serves craft beers with a goal of attracting more customers in the evening, and further enhancing the eating experience.
Hans Tietema, owner of Kaldi
in The Netherlands spoke of the importance of in store storytelling and transforming the market while staying true to your company’s identity.
Konstantinos Konstantinopoulos, CEO of Coffee Island
in Greece highlighted the power of the individual people within the organisation and warned of the dangers of unused employee creativity.
The audience left with valuable ideas of how businesses can evolve in the current dynamic market landscape.
Allegra European Coffee Symposium will be celebrating its 10th anniversary in Warsaw in November 2017. Click here for more information.