Despite current adversity due to coronavirus, the long-term outlook for UK coffee shops remains bright. Coronavirus currently presents an unprecedented challenge to all sectors of world economy, with coffee shop and hospitality businesses deeply affected. The coffee shop segment will undergo profound change due to coronavirus but remains one of the UK economy’s most resilient. With forging human connections firmly at its core, the hospitality industry will endure this crisis and thrive.
The next era of UK coffee shop development will be defined by higher quality products and service, smarter technology and human hospitality
Over the last two decades the UK coffee shop segment has grown from high street phenomenon to an ingrained part of daily lifestyles. The Future of Coffee UK 2020 report outlines current forward-thinking insight, market dynamics, new technology, product innovation and consumer trends shaping the next era of UK coffee shops.
Coronavirus presents major short-term concerns, but the future for UK coffee shops remains bright
Coronavirus has adversely impacted most sectors of the UK economy, with coffee shops hit particularly hard. The vast majority have been forced to close, with a small minority pivoting to takeaway service or grocery propositions to stay open.
Government grants, business loans and employee furloughing have offered temporary relief for many coffee shop owners and staff. However, with rent relief at landlords’ discretion, individual circumstances vary wildly and a significant number of businesses will be adversely affected in the long-term. Nevertheless, Allegra anticipates most businesses will be operational again by summer 2020.
Increasingly savvy consumers know the value of quality
Coffee shops have responded to growing consumer sophistication with a widening array of premium products, such as single origin coffee, cold brew and artisan food. With 57% of consumers surveyed by Allegra indicating their coffee quality expectations have risen in the last year, meeting and exceeding those expectations matters more than ever.
Coffee shops are introducing more diverse food ranges than ever before. However, with 39% of UK consumers surveyed viewing coffee shop lunch options unfavourably, operators should heed the collapse of the UK’s mid-range restaurant segment over the last 18 months. Future prosperity will rely on a relentless, transparent and bona fide approach to delivering quality, innovation and consistency.
Technology offers radical change but hospitality must remain human
Technology is radically reshaping the UK coffee shop segment. A growing number of card payment-only cafés signals the imminent transition to a cashless society. 5G will increase the scope for data capture, customisation and Internet of Things (IoT) integration.
In harnessing these technological opportunities, successful coffee shops will maintain hospitality’s fundamentally human focus. Understanding customer preferences will remain crucial – 40% of industry leaders surveyed by Allegra indicate consumer data capture is the greatest benefit of coffee shop loyalty apps. With 41% of consumers surveyed deterred by in-store queues of five or more, pre-ordering is another important facet of seamless in-store transactions.
Delivery brings the café experience home
The emergence of third-party delivery services, such as Deliveroo, Uber Eats and Just Eat has led to rapid growth in UK food and beverage delivery, especially among food-focused cafés. Industry leaders surveyed cite keeping beverages hot, high delivery costs, and lack of consumer demand as the primary operational challenges for delivery.
Many hospitality businesses have introduced contingency delivery services in response to coronavirus, with Allegra forecasting a substantial number of these temporary services will become permanent after the crisis and provide valuable additional revenue.
According to industry leaders, drone delivery will remain science fiction in the near-term. Just 12% of consumers surveyed believe the technology will widely available in the UK within five years.
Sustainability takes centre-stage
As consumer focus on the global climate emergency and single-use plastic waste intensifies, UK coffee shops must redouble efforts to reduce their impact. Just 19% of industry leaders surveyed believe UK cafés have done enough to reduce their carbon footprints, with only 16% agreeing enough has been done to tackle food packaging waste. Consumers have a more favourable view of the industry, with 42% surveyed believing coffee shops can be proud of their overall sustainability efforts.
Allegra forecasts re-usable cup usage will increase significantly as part of a wider reshaping of cultural behaviours. Industry leaders cite banning single-use cups as the most effective way to tackle takeaway waste. Over two-thirds of consumers surveyed would be deterred from single-use cup usage if a 25p government ‘latte levy’ were introduced.
Heightened public awareness of coffee farmer poverty is reflected in the nearly three-quarters of consumers surveyed who believe coffee shops should be transparent in their coffee sourcing practices.
Healthy products promote healthy coffee shop sales
The global health and wellness megatrend shows no signs of slowing and continues to be driven by under-35s consumers. Harnessing the preferences of this demographic as it matures will be vital to the future prosperity of UK cafés.
Kombucha, nitro coffee and CBD-infused coffee hold the most sales potential for coffee shops according to industry leaders surveyed by Allegra. Inherently low in sugar and calories, these products also complement growing emphasis on heath & wellness – 57% of UK consumers surveyed have actively sought to reduce their sugar intake within the last 12 months.
Nurturing a new generation of coffee shop talent
Finding and retaining quality staff will remain a key challenge for coffee shops in the coming decade. Emphasising the value of quality staff, 65% of consumers surveyed perceive baristas as skilled professionals. Just one fifth foresee automation replacing coffee made my humans.
The curtailment of European casual workers due to Brexit will exacerbate the hospitality skills shortage – 82% of industry leaders surveyed believe migrant labour is essential for UK coffee shops. Operators must therefore create attractive career pathways by investing in skills, paying living wages and ensuring employee welfare.
5th Wave businesses will continue to spearhead UK coffee shop development. Driven by a new generation of commercially-minded entrepreneurs, these scaled, hyper-professional boutique hospitality concepts will continue to raise the benchmarks for quality and innovation.
Commenting on The Future of Coffee UK 2020 findings, Allegra Group Founder & CEO, Jeffrey Young said:
“UK hospitality businesses are grappling with unprecedented challenges presented by coronavirus. Short-term concerns, such as loss of revenue, paying staff and property rent, are creating very real hardship for businesses up and down the country.
“Nevertheless, the long-term future for coffee shops remains bright, as consumer demand for quality coffee and café experiences shows no signs of disappearing. Digital technology will play a deepening role in the coming decade as coffee shops devise new, innovative ways to serve customers and forge lasting human connectivity.”
The Future of Coffee UK 2020 features over 100 consultations with leading industry personnel and 2,000 online surveys with UK coffee shop visitors conducted in February 2020.