Rumours of the death of the high street punter’s spending power have been grossly exaggerated. Or they have if your barometer is the public’s unwillingness to part with those modern icons of disposable income: the daily latte and muffin.

Sales in the coffee shop sector are predicted to grow by nearly 9% over the next three years. "Over 50% of the population don’t use coffee shops," stated Jim Slater, marketing director of Costa Coffee, the UK’s largest chain. "The main reason is that there isn’t a coffee shop near them to meet this blatant need." Food accounts for roughly 60-70% of Costa’s business, but there are still huge areas to exploit.

Growth is not just being driven by more shops, but a renewed focus on under-performing trading times during the day. This is the view following Allegra Strategies’ consumer research, which highlights gaps in the coffee shops’ day-part focus. "The evening opportunity is absolutely phenomenal, as the coffee shops become more and more part of the fabric of society and the chains develop their evening trade," said MD Jeffrey Young. "But before that, there is an amazing opportunity for breakfast."

So how best to target those consumers? "People who consume coffee and eat food at different times of the day can be the same person with a different need state," said Costa’s Slater. "We relaunched our breakfast offer this year and developed new bread carriers with our suppliers, retailers and the motorway network to understand the best products to deliver sales and profits. It resulted in a 20% like-for-like sales increase at breakfast-time across food."

While the sector is still witnessing incredible growth (see panel), the challenges ahead are significant. Starbucks’ UK CEO Darcy Willson-Rymer noted that out-of-town retail space has overtaken that of the high street. And with bakery food inflation hitting over 8% in February, how is the margin squeeze affecting the chains’ relationship with bakery suppliers?

"In the UK we’ve created the most competitive coffee market in the world," Willson-Rymer told BB. "Given the headwind in the economy and customers’ desire for ever-higher quality, I don’t see that we have any room left for pushing some of those prices up, certainly in our business.

"For us that means being more efficient. For example, we’ve reconfigured how we do waste management; 95% of anything that gets thrown away in our stores gets recycled. By doing that, we’ve saved up to £700,000 a year."

While the branded chains’ growth is predicted to outstrip the independents, Australian-influenced artisanal coffee shops are booming, teaching the big boys a thing or two about quality food and coffee. "Word of mouth drives business a lot more than branding," noted Shelagh Ryan, owner of indie business Lantana. "We focus on simple but interesting, best-quality food in a casual and welcoming environment."

There are now 100 artisan venues in London; around 70% of those weren’t there three years ago, said Allegra’s Young. "The rise of the independents has been phenomenal to see," added Willson-Rymer. "Last year, there were about 50 coffee shops in this country where you could get a flat white; now you can get them up and down the country."