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UK cafés maintain positive sales in 2019 – but outlet growth stalls

  • Total UK coffee shop market comprises 25,892 sites across the branded, independent and non-specialist segments, representing 1.6% annual growth
  • Branded coffee shop segment grows 0.9% to 8,222 outlets, adding just 70 net new stores over the last 12 months
  • Total branded coffee chain sales reach £4.5bn in 2019, representing 4.2% growth, down 7% on 2018

The £10.5bn UK coffee shop market achieved 4.2% sales growth in 2019, but outlet growth slowed significantlly amid challenging market conditions

Project Café UK 2020, Allegra World Coffee Portal’s market-leading report on the UK café industry, reveals the £10.5bn market comprises 25,892 sites across branded, independent and non-specialist operators. The UK branded coffee shop segment now comprises 8,222 outlets, with significantly reduced outlet growth of 0.9% indicative of restrained investment in the context of Brexit uncertainty and tough high street trading.

Operators optimistic despite UK market challenges

Despite market turbulence and a more cautious approach to outlet growth among the UK’s branded coffee chains, trading at existing sites remains positive. Forty percent of industry leaders surveyed reported a 5%-plus trading uplift in 2019, up 9% on 2018.

The cost of property, labour and the impact of Brexit were cited as the top three challenges facing coffee shops, with 56% believing there remains plenty of growth potential for branded café chains in the UK. One third anticipate improved trading conditions over the next 12 months – up 5% on 2018.

UK cafés broadening propositions

High operations costs and reduced footfall are compelling many branded coffee chains to raise quality, diversify menus and focus on customer retention over outlet expansion. World Coffee Portal forecasts the UK coffee shop landscape will undergo further transformation in 2020, with major brands launching new formats, including travel kiosks, drive thrus, and specialised sub-brands.

Prominent examples include Costa Coffee’s brand refresh at some existing sites, Pret A Manger’s expansion of its ‘Veggie Pret’ concept via the acquisition of high street rival, EAT, and Grind’s travel hub partnership with SSP. 5th Wave operators continue to blur the boundaries between cafés, casual dining, bars, and retail, with Caravan launching its Vardo restaurant concept and opening a café at London’s prestigious The Savoy hotel.

Sustainability and plant-based menus gain ground

Environmental concerns rose significantly in 2019 and were cited by industry leaders as the most important consumer trend affecting the UK coffee shop market – rising from third place in 2018. Reducing reliance on plastic packaging, ensuring proper recycling is conducted and greater supply chain transparency were cited as the top three initiatives UK coffee shops should widely adopt.

Major UK coffee chains are introducing a growing number of vegan menu items. Nearly one fifth of UK consumers surveyed frequently request a dairy-alternative milk with their coffee shop beverage. This trend is reflected in Costa Coffee’s and Pret A Manger’s removal of plant-based milk surcharges. Both chains significantly expanded their vegan food menus in 2020, while food-focused market leader, Gregg’s, is hoping to build on the success of the vegan sausage roll with the launch of its vegan steak bake.

World Coffee Portal observes the growing popularity of oat milk in coffee shops, which is now available across the UK’s branded chain segment, including market leaders Costa Coffee, Starbucks, and Caffè Nero.

Outlet growth to regain momentum in 2020

Greater clarity on the UK’s future relationship with the European Union alongside the consummation of major M&A activity, including Coca-Cola’s purchase of Costa Coffee, and Causeway Capital’s rebuilding of the troubled Patisserie Valerie brand, will contribute to increased investment and outlet growth in 2020, albeit at a disciplined pace. Growth is also expected across new channels, including drive thru, ready-to-drink (RTD) and non-specialist locations.

World Coffee Portal forecasts the UK branded coffee shop segment will exceed 9,400 outlets by the end of 2024, displaying five-year growth of 2.7% CAGR. The coffee-focused sub-segment, which includes market leaders Costa Coffee, Starbucks and Caffè Nero, is predicted to exceed 6,000 outlets by the end of 2024, displaying growth of 2.4% CAGR. The food-focused sub-segment, which is led by Greggs, Pret A Manger, and Krispy Kreme, is anticipated to exceed 3,300 outlets, growing at 3.4% CAGR.

Commenting on the research, Allegra Group CEO and Founder, Jeffrey Young, said:

“Following two years of tough trading the UK coffee shop market has held up well against significant headwinds. We expect outlet growth to regain momentum during the next 2-3 years and forecast better times ahead for those operators that can readily capitalise on the opportunities and adapt to the challenges in what will remain a highly competitive market.”


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