How will global coffee chains harness new opportunities in 2023? Exclusive data from World Coffee Portal’s Global Research Overview report reveals the consumer trends and market dynamics shaping the US, European and Middle Eastern coffee shop markets in the year ahead
Sustainability has again risen to prominence for coffee shops after many initiatives were paused during the pandemic | Photo credit: Nathan Dumlao
Industry leaders broadly optimistic on 2023 trading – but inflation and the cost of living crisis pose fresh challenges
Despite the lingering effects of the pandemic, ongoing labour shortages
and renewed supply chain challenges exacerbated by the war in Ukraine, most industry leaders surveyed by World Coffee Portal were upbeat about trading prospects for 2023.
Major international coffee chains, including Starbucks
, Tim Hortons
and Caffè Nero
, all saw sales exceed pre-pandemic revenues in 2022 – although most branded coffee shop markets overall have yet to fully recover in terms of sales.
Meanwhile, travel focused operators saw leisure travel regain momentum and improving commuter footfall. UK-based SSP Group
is targeting 33% sales growth in 2023 and a full revenues recovery in 2024, with Italy’s Autogrill
also reporting positive trading globally – albeit down by around a fifth on 2019 levels.
Industry leaders surveyed in the Middle East
were most optimistic, with 78% surveyed anticipating trading conditions will improve over the next 12 months. Their confidence reflects the flurry of investment by international coffee chains in the region over the last 18 months, particularly in the two largest markets – Saudi Arabia
and the UAE.
In the UK, where hospitality businesses have been hit hard by soaring energy costs
, labour shortages and supply challenges and relating to the pandemic, Brexit and the war in Ukraine, a remarkable 75% of industry leaders surveyed in 2022 believed trading conditions would improve in the year ahead.
Their confidence could be a result of supportive UK coffee consumers, 84% of whom indicated they endeavoured to support local hospitality businesses during the pandemic – the highest rate across Europe, the US and the Middle East. However, indicating the UK market is not yet out of the woods, a recent 2023 survey
of industry leaders showed an equal proportion reporting positive and negative trading, with most indicating they feel more pessimistic about the impact of Brexit than 12 months ago.
US industry leaders were more pessimistic in 2022, with just 38% anticipating trading conditions would improve over the next 12 months. However, despite a crowded and highly competitive market 66% indicated there is still plenty of growth potential for branded coffee chains in the country.
European coffee businesses were the most upbeat about future growth potential, with 80% indicating there still plenty of room for more outlets – ahead even the Middle East, which grew 10.5% over the last 12 months, with 12 out of 20 markets adding net new outlets, where 73% agreed.
Nevertheless, optimism must be tempered with caution in 2023, with inflation, the rising cost of living and forecast recessions posing significant challenges for operators in the year ahead. With value focused propositions becoming increasingly attractive to drive sales, coffee shops will need to tread carefully to ensure quality remains high in what is likely to become and increasingly competitive trading landscape,
Will 2023 be the year of coffee convenience?
Coffee chains around the world responded to the challenges of pandemic trading restrictions by introducing app-enabled transactions, including delivery and click & collect. In 2022, these sales channels continued to prove fruitful for operators, with many coffee chains also opting for smaller format and drive-thru stores to counter higher costs and staff shortages.
The UK’s drive-thru coffee market is nascent but growing, with Starbucks, Costa Coffee
and Greggs all opening more stores with the format. Meanwhile, Canada’s Tim Hortons doubled its drive-thru estate
in 2022 and now operates more than 50 in the UK.
Highlighting the growing appeal of drive-thru coffee in the UK, 70% of UK consumers under the age of 30 indicated they would utilise the format if it was more readily available, compared to just 40% of those aged over 50.
Photo credit: Tim Hortons
Drive-thru has long been a popular hospitality format in the US, and 2022 saw drive-thru coffee chains thrive in the post pandemic market. Fifty-four percent of US consumers surveyed by World Coffee Portal August 2022 indicated a preference for drive-thru over physically entering a coffee shop.
Oregon-based Dutch Bros has set a target to reach 800 outlets
by the end of 2023 following strong 2022 revenues. Meanwhile, Orlando-based drive-thru competitor Scooters Coffee finished 2022 with 500 stores
and is targeting 1,000 by the end of 2024.
In Saudi Arabia, the Middle East’s largest branded coffee shop market, drive-thru is gaining significant traction among consumers due to its car-centric cities, growing desire for convenience and sustained year-round high temperatures.
Beverage delivery, however, received a lukewarm reception from consumers in Europe and the US following the pandemic. In the UK, just 24% of consumers surveyed indicated they would order coffee for delivery if the service was more available – with just 16% doing so within the previous 12 months – although that figure rises to 31% for under 35s.
Across the UK, Belgium, France, Germany, the Netherlands, 24% of consumers surveyed have ordered beverage delivery in the last year and rising to 29% in the US.
Nevertheless, coffee chains in these markers continue to invest in delivery, particularly via third-party providers. In the UK, Costa Coffee utilises the services of Uber Eats, Just Eat and Deliveroo to facilitate delivery, while Caffè Nero now delivers from 400 stores via Deliveroo, achieving 10% sales growth across its delivery channels
between June-September 2022.
In the US, Peet’s Coffee offers delivery
at around half of its 400 stores in partnership with DoorDash. Meanwhile, Starbucks
has partnered with UberEats to deliver beverages and foods across 16 US cities.
In the Middle East, Kuwait-based coffee delivery app COFE App
connects consumers to more than 700 branded coffee shops across Kuwait, Saudi Arabia, Egypt, the UAE and Egypt. The success of the platform underlines strong demand for delivery in major Middle East coffee shop markets – 63% and 56% of Saudi Arabian and UAE consumers respectively indicate they ordered beverage delivery over the last 12 months.
Packaging waste tops the coffee shop sustainability agenda
Sustainability has again risen to prominence for coffee shops after many initiatives were paused during the pandemic. With Covid making disposable cups, utensils and packaging an operational necessity for hygiene and social distancing, reducing waste generated from these items became a top priority for operators in 2022.
In the US, UK and across 40 European coffee shop markets, packaging waste, notably single-use coffee cups, was cited by industry leaders surveyed as the most important sustainability issue for the industry to solve.
2022 saw operators around the world have step up efforts to tackle disposable coffee cup waste, mainly by introducing recycling collection points or encouraging reusables.
In March 2022, Starbucks said it wanted to create a ‘cultural movement’
towards reusable coffee cup usage at its 35,000+ stores around the world and has introduced cup share schemes across stores in North America, Europe
, the Middle East and Asia
Photo credit: Starbucks
Europe’s largest coffee chain, Costa Coffee, provides paper cup recycling points at most of its 2,800 UK stores. In July 2022 the coffee chain partnered with McDonald’s to introduce recycling bins at 30 Roadchef motorway service stations.
In Europe, travel hub operator SSP and McDonald’s have signed up to Cup Collective
, a cup recycling initiative launched by Finnish paper and packaging manufacturers Stora Enso and Huhtamaki in the Benelux region. Meanwhile, proposed legislation in the Republic of Ireland would make it the first nation in the world to introduce a mandatory €0.20 levy on all disposable cups served out-of-home.
However, industry leaders across the 20 largest markets in the Middle East, including Saudi Arabia, the UAE, Egypt and Israel, cited food waste as the biggest sustainability concern facing the industry.
Oat milk continues to froth
Industry leaders across the UK, Europe, USA and Middle East branded coffee shop markets are unanimous in their assessment that oatmilk is the best dairy alternative to pair with coffee. Almond was the second most favoured plant-based milk in these markets, except across Europe, where soya milk took second place among coffee professionals.
However, indicating oat milk still has some way to go in gaining widespread favour among coffee consumers globally, only those surveyed in the UK
cited oat as their go-to dairy alternative. Almond is the favourite among consumers in the US, Saudi Arabia, the UAE, France and Belgium, with Dutch consumers preferencing soya.
Nevertheless, major branded coffee chains continue to boost oat’s ascent into the mainstream. The UK’s largest coffee chain, Costa Coffee
, has introduced an oatmilk range across its menu. In the US, boutique café chain Blue Bottle Coffee now serves oatmilk as the default pairing
with all coffee beverages across its 100+ US stores. Across Asia, fast-growing convenience-focused Flash Coffee
also offers an extensive oatmilk-based beverage menu.
In the US, half of industry leaders surveyed believe dairy-free to be the health-based trend with the most longevity, consistent with the promotion of milk alternatives by leading coffee chains across the country.
However, despite the popularity of milk alternatives, dairy remains the leading beverage accompaniment in coffee shops. Semi-skinned milk is the most popular pairing in the UK, Belgium, France and the Netherlands, with whole milk preferred in the USA, Germany, Saudi Arabia and the UAE.
Huge opportunities for iced coffee in the US, UAE and Saudi Arabia
Aside from the US, where iced coffee is increasingly consumed all-year round, seasonality has been a sticking point
in most European markets, with sales generally tapering off in September. Just 55% and 57% of UK and French consumers respectively indicate they consumed iced or cold coffee over the last 12 months, compared to 82% in the US.
However, in Saudi Arabia and the UAE, where temperatures regularly exceed 35o
C, iced coffee is gaining significant traction. Ninety-two percent and 90% of Saudi and UAE consumers surveyed respectively indicate they have purchased an iced beverage in the last year. With both coffee shop markets heating up an influx of international coffee chains and burgeoning domestic segments, these markets look to be a land of plenty for iced beverages in the future.
Get the global perspective on the business of coffee. Only the Global Research Overview provides a holistic view of branded coffee shop markets around the world and compares the findings from an entire year of individual market research to compare and contrast the development of global trends.
Contact Ruth Thompson firstname.lastname@example.org for more details of how The Global Research Overview can supercharge your coffee business in 2023. Download the brochure here.