In the UK, Europe’s largest and most advanced coffee shop market, technology is increasingly enabling coffee shops to broaden their customer base, increase efficiency and launch new sales channels, reports Fiona Keating
A Deliveroo rider in London | Photo credit: Paolo Feser
The Covid-19 pandemic has dramatically changed the UK coffee shop market, and its far-reaching effects are still being felt. While lockdowns and hybrid working proved detrimental to city centre locations, neighbourhood stores have benefited from customers staying local.
Today’s consumers are also demanding efficiency and consistency as never before, with the adoption of digital sales tools already well under way before Covid-19 accelerated the transition.
The UK’s largest coffee chain, Costa Coffee, is no exception, with digital interactions increasingly prominent across its 2,700-store portfolio.
Jonathan Fisher, Head of Digital, UK & Ireland, at Costa Coffee says that social distancing and strict hygiene and safety measures meant services such as home delivery and Click & Collect became much more important to customers during the pandemic – and this appears to have continued even as restrictions have been wound down.
According to Fisher, the pandemic had the effect of “driving the adoption of the digital channels and the use of apps to order and pay. Costa Coffee not only had to scale its digital services quickly but also adapt its current offering for customers.”
The roll-out of Click & Collect across all Costa stores allows customers to order in advance ahead of picking up directly at their local store. A mobile contactless ordering system has also been introduced across more than 11,000 Costa Express machines.
“The easy-to-use contactless ordering feature launched on the app and encouraged customers to order through their mobile phones. Further to this, we relaunched our loyalty programme last year aimed at giving members even more rewards when purchasing their favourite cup of Costa Coffee,” Fisher explains.
“Digital is a fast-moving space so predicting ten years ahead is almost impossible”
E-commerce has changed the way the UK market leader reaches consumers. Costa’s delivery service was already accelerating in popularity because of a loyal customer base using their three partners – Uber Eats, Just Eat and Deliveroo. By working with them, Costa Coffee was able to tap into these loyal delivery fans who may not normally visit a Costa café.
Fisher says the app has become more important for those using the loyalty programme. “We’ve seen a huge switch from people using plastic cards for our loyalty scheme to our Costa Club app. This shows that customers’ habits have shifted by recognising that our Costa Club app is the best place to get the most value from Costa Coffee, with various great features, special offers included and market leading loyalty rewards.”
The technological shift has evolved rapidly in the last 18 months and Fisher reveals that he has seen a huge increase in demand for drive-thru stores, click & collect and delivery.
“Digital is a fast-moving space so predicting ten years ahead is almost impossible. For Costa Coffee it is about adopting and being at the forefront of innovation in this space, offering a more personalised and rewarding proposition whether that is across our stores, Costa Express machines or online.”
Drive-thru stores have been growing in popularity, thanks to offering reduced physical contact and fast delivery. It’s a safe environment and a convenient one to pick up coffee. Highlighting the commercial potential of the format, 57% of UK consumers surveyed by World Coffee Portal in 2021 said they would purchase beverages from a drive-thru if the facility were more readily available.
Food-to-go and coffee chain LEON has more than 70 restaurants across the UK as well as locations in Amsterdam, Dublin and Gran Canaria. The chain was acquired for a reported £100m ($130m) in April 2021 by EG Group, a global group of petrol filling stations and convenience stores that operates in Europe, the US and Australia.
The brand is now expanding into new formats such as drive-thru, LEON To Go takeaway coffee outlets and smaller restaurants on petrol forecourts. There will also be investment in technology such as digital kiosks and menu screens in LEON’s sites, which let customers to order remotely without the need to queue.
“We have recently launched the LEON Club App which allows guests to order digitally. This makes personalisation, such as specifying size and milk alternatives, easy and accessible. The app also allows for quick and seamless click & collect. Guests can shortcut to their go-to coffee order by using the ‘order again’ functionality,” says Glenn Edwards, LEON’s Managing Director.
Online sales channels have no limit to capacity and they make it easier to scale a business. The coffee business needs to adopt numerous tools to automate their online sales. Nowadays consumers can order from third-party delivery platforms, such as Uber Eats, Deliveroo or on the coffee chain’s website.
Starbucks Coffee, Baker Street, London | Photo credit: Suzi Kim
A growing number of UK operators have invested in beverage delivery, including Costa Coffee, which in February 2021 partnered with Deliveroo to launch a trial at 500 of its UK stores. Meanwhile, Greggs has significantly expanded its third-party delivery partnership with Just Eat to 1,000 stores. Boutique bakery chain, Gail’s, has also introduced delivery in London, a proposition it credited with boosting its full-year profits.
Sixty-one percent of 50,000+ UK consumers surveyed by World Coffee Portal in 2021 indicated they had downloaded a coffee shop app, with 36% purchasing a beverage to collect from a coffee shop over the last 12 months.
Coffee chains should also consider their brand at an omnichannel level in order to expand their sales, says Zhong Xu, co-founder and CEO of Deliverect, a Belgian SaaS company that simplifies online food delivery management for prominent food & beverage brands, including Pret A Manger, Le Pain Quotidien, KFC and Chipotle, and has also been adopted by dark kitchens.
“Think about the rise of cloud kitchens or virtual restaurants where food is prepared exclusively for delivery – and sometimes, takeaway. The dark kitchen model allows you to build a brand, but without the physical address,” Zhong Xu says.
“We have provided these businesses with the tools to sell on a lot of channels. A lot of these chains are doing 30-40% of their total revenue from digital platforms. For them, it’s a lifeline.
As a multi-location, multi-channel management software, we remove all the operational work for our clients,” he adds.
“Technology has helped businesses not only to survive – but to triumph”
This allows coffee chains to concentrate on essential work such as making coffee, making sandwiches and to chat with customers, providing that essential human interaction.
Deliverect’s business has transformed stratospherically, says Zhong Xu. “Our business is three years old and last year we processed over 100 million orders for restaurants. That works out as £3bn in sales that we have helped the restaurants to generate. The year before, in 2020, it was only 10 million orders.”
The CEO says that in the UK “almost 80% said they ordered at least once a week on takeaway delivery. More than 60% said they were not changing their behaviour after the pandemic. They are used to ordering stuff on an app.”
This allows a chain to generate more sales, says Zhong Xu. “With a bricks and mortar store, you are limited to your foot traffic. Online, it allows way more eyeballs.”
Apps can also help to create loyalty. If a customer hasn’t ordered coffee for a few days, they can be sent a personal notification with the offer of a free promotion the next time they order their favourite beverage. Sixty one percent of 50,000+ UK consumers surveyed in 2021 indicated they had downloaded a coffee shop app.
Automation is also going to be key, says Zhong Xu. “Looking to the future, in 2030 – in any environment you can say, ‘I need a coffee’ and it will get delivered. That could be with a drone or automated car. Even the packaging of the coffee will be automated.”
The implementation of technology in the UK coffee industry is set to grow as it offers innovative ways to increase efficiency and productivity as well as reduce costs in an increasingly challenging trading environment.
“The technology has helped businesses not only to survive – but to triumph,” Zhong adds.
This article was first published in Issue 10 of 5THWAVE magazine.
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World Coffee Portal research.