Branded coffee shops will hit 10,000 outlets by 2023

Branded coffee shops will hit 10,000 outlets by 2023

The UK branded coffee shop market will exceed 10,000 outlets by 2023, the Allegra World Coffee Portal’s Project Café UK 2019 has reported.

Allegra said this represents a five-year compound annual growth rate of 5%.

The report also revealed that the £10.1bn UK coffee shop market with 25,483 outlets grew by 7.9% in turnover during 2018, representing 20 consecutive years of sales and outlet growth.

Branded coffee shops secured robust 8.7% outlet growth in 2018 to reach 8,149 stores.

Costa Coffee, Starbucks and Caffè Nero remain the three largest coffee-focused branded chains in the UK, with 2,655 outlets, 992 and 683 stores respectively.

The report also said that the UK coffee shop market experienced significant consolidation in the last 18 months. Major deals such as Coca-Cola’s £3.9bn acquisition of Costa Coffee, and JAB Holding’s £1.5bn acquisition of Pret A Manger have introduced unprecedented foreign investment into the UK branded coffee chain market.

It said that in the specialty segment, which it described as "a burgeoning 5th Wave" of scaled artisan concepts continues to grow and promote market-wide premiumisation. For example, the Department of Coffee and Social Affairs acquired several independent café businesses to increase its portfolio to 22 stores in 2018.

However, the report said that most industry leaders indicate Brexit is negatively impacting trade.

The so-called "political impasse" over the last 18 months has contributed to growing anxiety on labour shortages, rising prices, investment and eroded consumer confidence.

Just under half (49%) of industry leaders surveyed by Allegra indicated Brexit was negatively affecting their business, with 46% remaining neutral and 5% reporting a positive impact. Of those surveyed, 69% agreed it was negatively impacting consumer confidence, while 87% of industry leaders surveyed believe Brexit has damaged the UK economy.

Reduced consumer confidence, it said, contributed to the success of value-focused chains in 2018. Allegra consumer data revealed that Greggs and McDonald’s were perceived to offer the best value-for-money, with both brands introducing coffee-focused strategies in 2018.

The Allegra consumer panel also revealed that Latte was the favourite coffee of UK consumers, followed by Cappuccino and then Americano. The average price of a 12oz latte was £2.66. 

Allegra ceo, Jeffrey Young, said: “20 years of consecutive growth, in terms of outlets, turnover and like-for-like performance is an impressive feat by this robust segment that has become intrinsic to UK lifestyles.

“More growth will continue, albeit at a slower pace, as the economy is subjected to myriad pressures, including structural retail change, technological development, changing consumer habits and deep uncertainty on the numerous potential outcomes of Brexit.”

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