The Rapid Rise of the UK Coffee Market

You would be for­giv­en for think­ing of the British as a nation fueled by Eng­lish break­fast tea, amber ale and a bacon buttie but with con­sumers more like­ly to be found sip­ping a flat white on an over­sized sofa, than gulp­ing a pint of builder’s tea in a greasy-spoon, the cof­fee indus­try is boom­ing and now is the per­fect time to capitalise. 

 

Cof­fee and the UK

With an explo­sion of cof­fee shops onto UK high streets, the cof­fee indus­try has seen unprece­dent­ed growth in the last ten years. There are more than 22,000 cof­fee shops, mean­ing that you rarely have to ven­ture far for a caf­feine fix and peo­ple are doing so, on aver­age, twice a day. Accord­ing to the British Cof­fee Asso­ci­a­tion, 95 mil­lion cups of cof­fee were con­sumed per day in the UK in 2017. Com­pare that with 70 mil­lion in 2008 and you can see why the cof­fee indus­try is one of the UK’s fastest grow­ing sec­tors but why?

 

The UK’s Cof­fee Obsession

Life is busy and cof­fee is being used to fuel, facil­i­tate and free away from that busy lifestyle. The British Cof­fee Asso­ci­a­tion found that 16 per­cent of cof­fee shop users vis­it dai­ly, using it as a work­place, meet­ing room and lunch spot, whilst 90 per­cent vis­it week­ly, using it for net­work­ing, catch­ing up and tim­ing out. 

 

But that is not all. Cof­fee is viewed as part of a bal­anced diet and is reg­u­lar­ly asso­ci­at­ed with a num­ber of health ben­e­fits. Com­bine that, with our increased ‘food­ie’ cul­ture and you can see why vis­it­ing a cof­fee shop for a lat­te and almond crois­sant has become a UK ritual. 

 

A Brief His­to­ry of Cof­fee in the UK

Although many would attribute the nation’s cof­fee obses­sion to the arrival of Amer­i­can cul­ture in the nineties, it actu­al­ly start­ed much fur­ther back, with the UK’s first cof­fee shop open­ing in 1652. A social hub for Lon­don­ers to meet, drink, gos­sip and write, the taste was sec­ondary to the con­ver­sa­tion, with many com­par­ing the cof­fee to mud, damp and soot. 

 

In the 1960s, palat­able cof­fee became more wide­ly acces­si­ble and the UK’s con­sump­tion grew. The avail­abil­i­ty and ease of mass-mar­ket­ed and instant freeze-dried cof­fee, such as Nescafe and Maxwell House, brought the drink into our homes and hearts, begin­ning what experts call, the first wave of coffee. 

 

As our taste for caf­feine devel­oped, so did our inter­est in drink­ing the bev­er­age out­side of the home. Between 1993 and 1997, the num­ber of UK cof­fee shop out­lets increase 847 per­cent, mark­ing the begin­ning of the sec­ond wave of cof­fee. This wave was more impressed by venue and choice than home comforts.

 

Star­bucks opened its first Lon­don store in 1998 and we began to dis­tance our­selves from sub­stan­dard freeze-dried cof­fee and became famil­iar with grandes, lattes and shots. The num­ber of cof­fee shops increased and so did our addic­tion and taste for ital­ian-style, barista-made espres­sos. Cof­fee was now seen as a lux­u­ry and, accord­ing­ly, peo­ple were will­ing to pay a premium.

 

Soon, the nation’s cof­fee drinkers sought to under­stand more. The third wave of cof­fee entered with an increased focus on qual­i­ty, cus­tomer ser­vice and ethics. Every step of the cof­fee process became impor­tant, from bean to cup to table.

 

Where Are We Now?

Some experts believe that we are still rid­ing the third wave, with a focus and appre­ci­a­tion on the whole expe­ri­ence, whilst oth­ers believe that we have jumped into the fifth wave of coffee. 

 

What­ev­er the num­ber, the UK has a vibrant cul­ture of cof­fee drinkers who have a culi­nary appre­ci­a­tion for a bev­er­age that tastes great, is respon­si­bly sourced and envi­ron­men­tal­ly friendly. 

 

Cof­fee mak­ing is con­sid­ered an art in itself: select­ing the right beans, match­ing the cor­rect grind, per­fect­ing the brew­ing time and achiev­ing the opti­mum milk tex­ture to pro­duce a cup of Insta­gram-wor­thy art. Con­sumers under­stand the dif­fer­ence between great and sub­stan­dard cof­fee and want to pay for it. In sim­ple terms, cof­fee is the new wine and it’s everywhere. 

 

The Cur­rent UK Cof­fee Retail Market

UK high street shops and pubs have been replaced with cof­fee chains and out­lets. Con­sumers are drink­ing cof­fee in bars, cin­e­mas, McDonald’s, race­cours­es and pubs: Brew­er and pub oper­a­tor Brak­s­pear expe­ri­enced a 44 per­cent increase in cof­fee sales, fol­low­ing an invest­ment in hot drinks last year. Cafes are work, social and com­mu­ni­ty hubs

 

Ten years ago, there were few­er than 10,000 cof­fee shops in the UK; now there are more than 24,000. It is one of the UK’s strongest per­form­ing sec­tors and, accord­ing to the Alle­gra World Cof­fee Por­tal, is worth a sig­nif­i­cant £9.3 bil­lion. Last year alone, the mar­ket grew by 7.3 per­cent and saw 1,215 new cof­fee out­lets — a 5.3 per­cent increase. 

 

Year	No. cof­fee shops	Mar­ket
2009	11,000	£1.63bn
2010	14,022	£5bn
2011	15,084	£5.4bn
2012	15,723	£5.8bn
2013	16,501	£6.2
2014	19,035	£7.2bn
2015	20,728	7.9bn
2016	22,845	£8.9bn
2017	24,061	£9.3bn
2022 (fore­cast)	31,400
2025 (fore­cast)	32,000

 

Inde­pen­dent cafes are pop­u­lar but not as pop­u­lar as the chains. Con­sumers still pre­fer a con­sis­tent cof­fee expe­ri­ence and drink from a brand that they know and trust. Last year, brand­ed out­lets achieved a record £4 bil­lion worth of sales — a 10.5 per­cent growth from the pre­vi­ous year. The big play­ers (Star­bucks, Cos­ta and Caf­fè Nero) dom­i­nate the mar­ket with a 52.9 per­cent share and have 2121, 898 and 640 sites respectively. 

 

And whilst cheap­er com­peti­tors such as McDon­alds, easy­Cof­fee and Wether­spoon present new com­pe­ti­tion, their emer­gence is also an oppor­tu­ni­ty for the big brands to set them­selves apart as cof­fee bars who have world­wide supe­ri­or knowl­edge and spe­cial­ist skills; knowl­edge and skills worth pay­ing a pre­mi­um for.

 

The Future UK Cof­fee Market

Research from the British Cof­fee Asso­ci­a­tion and indus­try expert Alle­gra pre­dict strong and con­tin­ued growth with­in the indus­try, mak­ing now the per­fect time to cap­i­talise on the new oppor­tu­ni­ties with­in the cof­fee retail mar­ket, specifically:

 

Spe­cial­i­ty Coffee

Con­sumers are will­ing to pay for vari­ety. Whether that’s tra­di­tion­al cof­fee pro­duced with high-tech equip­ment and sophis­ti­cat­ed ingre­di­ents, spe­cial­i­ty cof­fees such as cold-brew or spark­ing cof­fee, or cof­fee that caters for dietary require­ments. The selec­tion of prod­ucts and the knowl­edge of baris­tas is key and this is where glob­al cof­fee chains, such as Star­bucks, will have the edge — with their world­wide cof­fee exper­tise and knowledge.

 

Expe­ri­ence

Con­ve­nience or com­fort, dri­ve-throughs or sofas; chains who spend time research­ing pref­er­ences and adapt­ing their cof­fee house expe­ri­ence accord­ing­ly, will see an increase in new cus­tomers and in loy­al cus­tomers. For exam­ple, the grab-and-go gen­er­a­tion pro­vides an oppor­tu­ni­ty to cap­i­talise on 24-hour dri­ve-throughs and to-go bev­er­ages and food, whilst the increase in free­lance work­ers pro­vides an oppor­tu­ni­ty to cap­i­talise on cof­fee shop hot-desk­ing and networking.

 

Sug­ar Tax

With the sug­ar tax set to hit the drinks indus­try hard, the alter­na­tive option of a low-calo­rie, low-fat cof­fee will become increas­ing­ly impor­tant. Star­bucks is already lead­ing the way in reduc­ing the sug­ar in their drinks and pas­tries, as con­sumers become more con­cerned about the nutri­tion­al con­tent of their drinks order. 

 

Recy­cling

Cof­fee shops with a focus on sus­tain­abil­i­ty and recy­cling are set to do well in the com­ing years. Star­bucks has recent­ly tri­alled a paper cup charge and are work­ing hard on (and invest­ing £7 mil­lion in) cre­at­ing a ful­ly dis­pos­able and com­postable cup. Con­sumers are will­ing to pay more for envi­ron­men­tal­ly friend­ly prod­ucts and will pick retail­ers who offer sus­tain­able options. 

 

Mar­ket Towns

The week­day city cof­fee obses­sion is set to spill into the week­end, mark­ing an oppor­tu­ni­ty for big brands, such as Star­bucks, to expand into mar­ket towns. 

 

Ethics

Con­sumers are also will­ing to pay more for brands that eth­i­cal­ly source their cof­fee and pos­i­tive­ly impact the lives and busi­ness­es of cof­fee farm­ers from around the world and their local com­mu­ni­ties. All of the big brands spend sig­nif­i­cant time and mon­ey in ensur­ing their cof­fee is respon­si­bly sourced. 

 

New Gen­er­a­tions

Those over 53-years old drink the most cof­fee, aver­ag­ing 2.2 cups per day. 20–37 year olds drink 1.3 cups and under 20s drink 0.5 cups. There are new gen­er­a­tions of cof­fee drinkers (and poten­tial cof­fee drinkers) to tar­get. Gen­er­a­tions who have dif­fer­ent moti­va­tions, spend­ing habits and tastes. 

 

Invest­ment

With these oppor­tu­ni­ties avail­able, the UK cof­fee mar­ket is pre­dict­ed to increase by six per­cent over the com­ing years and reach a stag­ger­ing £13bn turnover and 1,400 out­lets by 2022. Going beyond this, it is pre­dict­ed that cof­fee out­lets will out­num­ber pubs by 2030 and reach 32,000 by 2050. Impres­sive num­bers, yet at a nation, we still do not make it into the world’s top 20 cof­fee con­sumers; out­ranked by coun­tries includ­ing the US, Croa­t­ia, Fin­land and Ger­many. There is cer­tain­ly room for improve­ment and sig­nif­i­cant poten­tial in the UK cof­fee mar­ket for brands, fran­chisees and investors to explore. 

 

About Elite Coffee

Estab­lished in 2015, Elite cof­fee is a Star­bucks fran­chise that has tak­en the UK cof­fee world by storm. With a bustling store at the Excel exhi­bi­tion cen­tre and Roy­al Wharf, they have been award­ed the pre­vi­ous­ly unclaimed Star­buck ter­ri­to­ry of East Lon­don and Essex; cap­i­tal­is­ing on the mar­ket-town oppor­tu­ni­ties. They plan to open a fur­ther 19 stores by 2020 and fore­cast a £6  mil­lion turnover by 2021.