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Fast food chains and supermarkets corner 50% of the coffee market

McDonald’s order kiosks

Spending in coffee shops is poised to reach an all-time high of £4 billion this year, but nearly half of consumers are getting their caffeine hit from fast food outlets and supermarkets.

While coffee shop sales continue to thrive, research from Mintel shows that annual growth has slowed from an impressive 9% in 2015, when the market was worth £3 billion, to a modest 3% in 2019 when it was valued at £3.9 billion.

Mintel said coffee shops such as Costa and Starbucks now face competition “at every turn”, with a quarter (26%) of Brits buying hot drinks from fast food chains such as McDonald’s, and one in five (22%) buying from a supermarket or store cafe such as Tesco or Ikea.

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One in six (16%), meanwhile, buy their hot drinks from traditional cafes. Overall, 19% of Brits have not bought a hot drink outside of the home in the last three months.

Trish Caddy, senior foodservice analyst at Mintel, said: “Coffee shops have enjoyed robust growth in the past five years, benefitting from brands’ ability to meet consumer demands for the convenience of takeaway coffee and emergence of specialty coffee.

“Continued growth is being boosted by more high street coffee shop brands expanding in the retail, travel, and leisure sectors. However, the market continues to face tough competition from non-specialists such as fast food outlets and supermarkets; a situation which is not likely to ease as non-specialists continue focusing on price and convenience. With more food outlets selling low-cost coffee, coffee shops without strong food offerings will fall behind.”

More than half (57%) of consumers agree that more coffee shops should charge customers a fee for using disposable coffee cups.

Meanwhile, as many as 82% of customers agree that more people should use reusable coffee cups. Some 67% of consumers agree that it’s worth paying more for coffee from coffee shops that pay fair wages to coffee farmers.

Added Ms Caddy: “There is no doubt that disposable coffee cups have been an essential component to the convenience of takeaway coffee. In April 2019, the independent chain, Boston Tea Party, saw its sales fall by £250,000 across its 22 shops following its ban on single-use coffee cups last summer.

“This suggests that a total ban on the use of disposable cups will alienate some coffee shop consumers who are motivated by the convenience of takeaway coffee in the first place. Conversely, our research shows that Brits respond to rewards, and operators can look to offer rewards to help change behaviour. The sandwich chain Pret A Manger, for example, introduced a 50p discount for customers who bring reusable coffee cups. Both cost savings and a positive impact on the environment give consumers even more reason to visit.”

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Andrew Seymour

The author Andrew Seymour

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