“Coffee shops are part of the fabric of our society now,” according to one analyst. Jeffrey Young, managing director of Allegra Strategies, which produces detailed research on the coffee market, has said that changing expectations regarding the quality of coffee on offer is driving this trend. Young also predicts that this explosion of coffee shops is set to continue: “There are still thousands and thousands of places in the UK that don‘t yet have a decent coffee experience”.
These comments come as Costa Coffee announced its sales had increased by 7.3 per cent across its “burgeoning” UK coffee empire, a sign that Britain‘s “love affair” with Costa is showing no signs of stopping. Sales at 1,650 Costa outlets across the UK were flattered by a particularly warm July in 2013, which discouraged customers from visiting coffee shops that have traditionally sold hot beverages (although nearly all coffee shops have long since developed a range of cold drinks).
Costa has since opened more than 100 new stores, as it nears its ambitious target of 2,200 UK stores and £2 billion in global sales by 2018 thanks to continued growth in Costa‘s UK market share. The overall market in the UK recorded a 6.4 per cent increase in sales in 2013, and there were 16,501 coffee shops across the country by the end of last year.
The British coffee chain market is becoming increasingly competitive, however, intensified by the added competition from independent coffee shops presents both a “threat and a big opportunity” for big nationwide chains, such as Starbucks. In such an environment, there are inevitably some losers. After a phase of rapid expansion, family-owned chain Harris + Hoole (now owned by Tesco) have recently closed six stores, although they maintain that this is strategic rather than forced. In response, big chains such as Starbucks have had to raise their game, providing their staff with better training and introducing more ‘single-origin‘ beans to replace their range of blended coffee.
This rapid growth comes despite research showing that coffee consumption has not actually increased dramatically, and indeed consumption levels are now lower than they were in 2006. Britons consume only 2.8kg of coffee per head annually, compared to over 7kg in Sweden and Germany. Vicki Stern, a leisure analyst at Barclays, suggests that “the way in which coffee is being consumed has changed” rather than the quantity consumed. Rather than drink at home, Britons now treat coffee as a social activity, a trend driven by the increase in spending power and independence afforded to women.
Andy Harrison, CEO of Whitbread (the parent group of Costa Coffee), believes that coffee shops are replacing pubs as a focal point for society. Rather than the male-dominated pub culture of yesteryear, coffee shops offer a family-friendly environment throughout the day for women and children. Coffee shops should be viewed as “social venues” according to Harrison, replacing the pub culture that is experiencing a rapid decline, closing at a rate of over 30 a week. Although the coffee shop market is sure to become saturated eventually, it is showing no signs of doing so yet.
