The UK is now home to almost 21,000 coffee shops, with chain businesses such as Costa and Starbucks currently outpacing average market growth.
Total sales through coffee shops rose 10% last year to £7.9 billion, but branded coffee chains, which typically account for around a third of the number of stores, grew 15%. Between them, the leading chains have opened an extra 700 stores this year.
The figures, compiled as part of the Allegra World Coffee Portal’s Project Cafe 2016 UK report, reveals that Costa Coffee (1,992 outlets), Starbucks (849) and Caffè Nero (620) remain the UK’s largest brands with 53% share of the branded chain market.
Physical expansion by leading chains is a strong driver of growth, particularly market leader Costa which added 171 UK outlets and had sales growth of 14% in calendar year 2015.
Coffee quality is now expected and is being constantly improved across the sector due to the influence from both artisan chains and independents.
In Allegra’s survey of over 16,000 consumers, artisan chain Harris + Hoole was ranked number one for coffee quality.
A greater commitment to coffee credentials by the non-specialist sector, such as pubs, fast food outlets, supermarkets and retail stores, has also generated wider consumer interest while adding to competitive pressures. This sector has experienced outlet growth of 10.5%, reaching 7,976 establishments with a strong coffee offering (excluding branded chain partnerships).
Supermarkets also fuelled growth, adding a further 322 outlets, driven mainly by Morrison’s commitment to a competitive coffee experience, adding a further 270 cafés to reach 398, second to Tesco with 481 coffee shops and cafés.
The non-specialist sector took a further 2% share of the market and now represents 39% of the total coffee shop market, compared to the branded chains with 31% share and the independents with 30% share.
The leading chains face some stiff competition from around the UK, however. Allegra says that the significant growth of medium-sized artisan chains such as Coffee#1 signals a new era of competition for the brands, while the artisan independent segment has gained ground in places such as Bath, Edinburgh, Manchester and York.
Allegra predicts the total UK coffee shop market will comfortably exceed 30,000 outlets and £15 billion turnover by 2025, driven by branded coffee chain expansion and non-specialist operator growth.
The branded coffee shop segment is forecast to exceed £5.7 billion with more than 8,500 outlets by 2020, with outlets predicted to grow at 6% compound and revenue at 12% compound over the next 5 years.
Jeffrey Young, managing director of the Allegra Group, said: “The strong market growth of the past 12 months has exceeded our own estimates. This provides further evidence of the growing importance of coffee shops to the British economy and more importantly their impact on the daily lives of everyday consumers. With a market now valued at £7.9 billion, no-one can ignore the fact that coffee is big business.”