Independents crank up pressure on chains, but profitability a challenge

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It’s full steam ahead for the UK’s thriving independent coffee shop sector with owners confident of continued growth, according to the latest research.

Three quarters (74%) of independent coffee shops surveyed by the Caffè Culture Show saw like-for-like turnover increase in 2015 compared to 2014, with nearly a third (31%) reporting an improvement of 20% or more.

Nine in ten (92%) expect growth to continue in 2016 vs. 2015, with a quarter (25%) confident that their business will perform at least 20% better than in 2015. Almost a quarter (25%) report an average turnover of £200,000+ per outlet in 2015.

Owner ambitions for the next two years are clear and the focus is growth, according to Caffe Culture.  Three quarters plan to increase their customer numbers, 72% to improve their profit margins and over a third (36%) to open more outlets.

Three in 10 (31%) plan to invest over £10,000 in their business this year, with equipment (64%), interior design and furnishings (50%), marketing and staff and training (both 45%) the top priorities.

Coffee sales have been the biggest growth area for indie coffee shop owners in the last 12 months (50%), followed by lunch (42%) and breakfast (27%). One in three sells over 500 cups of coffee a week with one in eight (13%) selling twice that.

Asked to predict the big consumer trends for the coming 12 months, owners overwhelmingly cited rising demand for healthier options like low sugar and ‘Free From’ food and drink products.  Advanced coffee preparations like slow water extraction, cold brew and other chilled coffee drinks were also highlighted.

Providing great customer service (29%) and the best quality cup of coffee possible (14%) matter deeply to café owners, but understandably it’s profitability that matters most (30%). Some are doing better than others in this respect. 38% say making a profit was the biggest challenge facing their business when starting out, and more than half (52%) say making a healthy profit is still a major challenge now.

Despite their ambitious investment plans and confident outlook for growth, over a third of owners (35%) admit they have no formal business plan in place for the current stage of their business and less than four in ten (38%) have a solid weekly or monthly profit and loss reporting system in place. Two thirds (68%) have no clear exit strategy for their business.

Caffè Culture Show event director, Cheryl Carroll, said: “These findings paint a positive picture of the UK’s buoyant independent coffee shop sector, with no sign of consumer appetite waning. Growing demand for healthy food and drink options is a trend we’re definitely seeing reflected at the Caffè Culture Show with an increasing number of low fat, low sugar, gluten and allergen-free ranges on offer.”

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