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Coffee shop sector showing first signs of overcapacity, warns leading analyst

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Foodservice consultant Peter Backman has delivered his latest quarterly verdict on the industry – and warned that while the food-to-go sector is in a good place, the coffee shop is groaning under the weight of too much competition.

Results from Mr Backman’s QBR Q4 2019 survey shows the market is in “real decline”, particularly in the institutional sector, which continues to suffer from reduced expenditure in school meals and hospitals.

Lunchtime feeding at work is under pressure from newer forms of working, such as home working and co working spaces, he said.

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“The expansion of online delivery via sites such as City Pantry and Seamless, which aggregate workplace orders for staff, internal events and meetings are putting pressure on B&I caterers. The overall effect of these activities are restricted to specific geographies (notably London), but they’re likely to grow and change the nature of workplace feeding in the longer term.

“The hotel and leisure sectors have seen falling demand in the last few months. Despite high visitor numbers, expenditure per visitor is lower than in the recent past and is most likely a sign of consumer unease.”

On a positive note, pubs have continued to perform well for the last 18 months and increased demand has focused on alcohol sales. Food sales were up in the last quarter but have not risen as rapidly as wet sales.

“This continued strong performance suggests that the big shake-out in the pub sector, which has lasted for two decades, may be coming to an end. The pub operators who remain standing are in tune with what their core market demands.”

Mr Backman said the torrid time the restaurant industry has suffered over the last few years has continued over the last few months driven by lack of consumer confidence, lack of clearly defined offers, falling standards of food and service, poor reputation caused by issues such as allergens and of course, rising costs for property, food and labour.

“A bright spot in the market has been the food to go sector, but the coffee shop sector is now beginning to show signs of overcapacity,” he observed.

Mr Backman added that delivery was seeing a boost from the emergence of delivery kitchens, which are likely to expand and transform the sector and will probably impact the grocery retail market too.

He concluded: “While uncertainty relating to Brexit has, for now, been resolved, the economy is slowing and as long as global economic conditions remain in a state of confrontation and trade wars, there will be little or no change to the outlook for UK PLC in and general and the foodservice sector specifically.”

One in every two branded coffee shops is a Costa, Starbucks or Caffe Nero

Tags : analystCoffee shopsPeter Backman
Andrew Seymour

The author Andrew Seymour

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