Spend on catering and beverage equipment from coffee chains is set to grow at a rapid clip as the sector heads towards a new phase of expansion.
In 2014, the UK coffee shop market turned over an impressive £7.2 billion, and after 16 successive years of considerable growth, the sector is well-positioned as one of the most successful in the UK economy.
Equipment buyers from the coffee shop chains and groups can count themselves among the most buoyant in the entire retail sector — the 11% growth in the sector’s turnover last year far outstripped the performance of the rest of the retail sector.
The branded chain segment continues to perform well, with a £2.9 billion turnover across some 5,781 outlets, according to the Allegra World Coffee Portal report, Project Café 2015 UK. More than 270 new stores were equipped and fitted out last year as the branded chains delivered sales growth of almost 12%.
Costa Coffee remains the market leader, with Starbucks and Caffè Nero hot on its heels; they achieved a combined market share of 56% of the branded chain market by outlet numbers. Costa Coffee added 151 UK outlets last year and achieved a 15% sales growth.
Aside from the high street, pubs restaurants and fast food operators have opted to capitalise on this trend in a bid to increase their coffee credentials, presenting strong competition for coffee-focused operators. Pub groups have witnessed a growth of 19% by adding a further 648 establishments, while retail and department stores have seen an increase of 10%.
The report showed that coffee shop visitors drink an estimated 2 billion cups of coffee per year in specific coffee shops. Costa is the number one seller of specialty coffee with approximately 149 million cups sold annually, surprisingly followed by McDonald’s, which sells an estimated 126 million cups per year.
The trend for artisan coffee continues to boom, with mid-sized chains such as Harris + Hoole and Coffee#1 signifying a new era of competition. This growth has influenced both operator and consumer expectations about coffee quality and store design.
The artisan sector is also becoming more regionalized, with cities such as Bath, Edinburgh, Manchester and York boasting strong independents. These brands are also becoming small chains, following the success as Taylor St Baristas and Timberyard.
Allegra Group managing director, Jeffrey Young commented: “The UK coffee shop industry is showing consistent strong growth in both sales and outlets. Britain is fast becoming a nation of coffee connoisseurs.
“With increasingly intense competition, consumers can have great quality coffee at home, at work and from a vast selection of non-specialists. As a result they now have far more criteria driving destination choice than ever before. Branded chains are having to work hard to maintain consumer share.”
The Allegra report predicts that by 2020, the total UK coffee shop market will exceed 27,000 outlets and have a turnover of £16.5bn, driven by both branded coffee chain expansion and non-specialist operator growth.
Specifically, the branded coffee shop segment is set to exceed £5bn across 7,870 outlets over the next 5 years, with the potential to host more than 9,500 shops in the UK.
Chain gang: The coffee shop branded segment
£2.9 billion Combined turnover of branded coffee chains
12% Sales growth of branded chains
5,781 Total number of chain outlets
270 Number of new store openings in 2014
5% Growth in branded store openings in 2014