The UK coffee shop market will exceed 20,500 outlets by 2018, according to latest reports.

Published by Allegra Strategies in its Project Café13 UK report, turnover is expected to reach £8.7bn, with 4.5% annual outlet growth over the five-year period.

The branded coffee shop segment is forecast to exceed £4.1bn across 7,000 outlets by 2018, with outlets predicted to grow at 5.2% compound and revenue at 10% compound over the next five years. 

The report states that the current UK coffee shop market is estimated at 16,501 outlets and continues to show strong sales growth of 6.4% on last year, with £6.2bn total turnover.

The branded coffee chain segment recorded a £2.6bn turnover across 5,531 outlets. Sales growth was shown as 9.3% and outlet growth was 5.9%. Costa Coffee currently has 1,670 outlets having added 118 UK outlets and 18% sales growth during 2013. Starbucks Coffee Company has 790 outlets, while Caffè Nero has 560, with all three holding 54% branded chain market outlet share.

An estimated 1.7 billion cups of coffee are consumed per year in UK coffee shops, according to the report, with one in five coffee shop consumers purchasing coffee every day.

The report also stated that, with pubs, fast food and supermarkets providing coffee offers, competitive pressures have increased. It highlighted the significant growth of new, corporate-backed chains, such as Harris+Hoole with Tesco, signalling “a new era of competition” for the industry.

Jeffrey Young, Allegra Strategies’ managing director, said: The UK coffee shop industry is showing consistent strong growth in both sales and outlets. The UK consumer increasingly appreciates a quality cup of coffee and operators must continue to deliver innovation, fantastic quality, while genuinely engaging with customers in order to stay ahead of the curve.

“We expect to see growing consumer interest evolving beyond simple commoditisation of coffee as a drink, with artisan cafés and branded chains increasingly educating them about the craft of coffee.”