UK coffee shops set to grow despite recent casualties

18 December, 2009

The UK coffee shop sector has remained resilient in recession despite a number of key players having gone into administration, but slower growth is forecast for 2010, according to a new report.

Coffee chain Puccino's was the latest to enter into administration this week, with the announcement of 29 immediate store closures, leaving 43 outlets still operating. This follows high-profile casualties including Coffee Republic and BB's Coffee & Muffins.

The Allegra Strategies Project Cafe9 UK report forecasted that 2010 would show further growth with the total market estimated to grow by 4.4% per annum and to exceed 12,500 outlets by December 2012.

However, the report also stated that coffee shop operators noticed a decrease in the frequency of visits from consumers as well as a decline in like-for-like sales. Average spend was down from £3.59 to £3.50. Despite this, brands such as Costa and Caffè Nero have managed to achieve positive comparable store sales growth over the course of the year.

“The study’s conclusion is that the UK coffee market is still experiencing strong growth driven by consumer choice, which reflects our experience in the market place,” commented Gerry Ford, chairman and chief executive of Caffè Nero.

"Strongly differentiated brands, like Caffè Nero, will continue to grow coffee culture in the UK."

Looking to the future, Allegra said that “branded coffee chains are expected to outperform the retail sector” as cafe culture becomes further engrained in our society. The market, made up of more than 11,000 outlets, saw growth of 6.2% in 2009, with sales totalling £1.63 billion. However this growth is half the 15% sales increase seen in 2008.

Among the top three branded outlets, Caffè Nero, third-placed behind rivals Costa and Starbucks on store numbers, was ranked overall number one by consumers. With over 400 stores, the chain ranked highest overall on key performance indicators including food quality, atmosphere, value for money and coffee quality.

The report also noted the addition of a ‘Third Wave’ of coffee shops, with an increasing number of artisan independent coffee houses, based on an Antipodean coffee culture, springing up across the country.





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