Although more and more people in the UK are visiting coffee shops regularly, and further growth is expected in that market, British consumers are likely to have to pay more for their coffee post-Brexit.
Research published in 2017 by Mintel said the UK coffee shop market had enjoyed significant growth since 2008, when the market was valued at £2.2 billion. Over the last five years, however, the value of the market has risen significantly, by a whopping 37 per cent, and was worth £3.4 billion in 2016. What is more, between 2015 and 2016 sales increased by a spectacular 10.4 per cent – this being the largest year-on-year boost in sales witnessed in the last five years.
Despite the fast pace of growth in the last decade, Mintel believes that the market hasn’t peaked, and that in the next five years coffee shop sales will continue to rise, by a further 29 per cent, reaching a level of £4.3 billion.
British consumers’ growing appetite for coffee is highlighted by the fact that two thirds (65 per cent) of them have visited a coffee shop in the past three months. Coffee shop use peaks among consumers aged 16-24 (73 per cent). However, in a space traditionally dominated by specialist coffee retailers, it is notable that 44 per cent of Brits buy their hot drinks from non-specialists. Only one fifth of British people (19 per cent) don’t drink coffee, tea or other hot drinks out of the home, said the market research firm.
Continued growth, but competition increasing
Trish Caddy, a Foodservice Analyst at Mintel, said “Britain’s appetite for coffee shops continues. Much of the growth we’ve seen in recent years is driven by habitual coffee drinkers and the continually increasing number of coffee retailers that are now ubiquitous on British high streets.
“A raft of non-specialist venues that feature barista-style coffee on their menus with takeaway functions are grabbing a slice of the coffee shop market. In the future, the top end of the market will continue to face intense competition from big pub chains, fast food chains and bakery shops that have now encroached on the coffee shop market, competing in terms of price, convenience and even geographical reach.”
Interestingly, given the ongoing debate in the UK and elsewhere about single-use disposable coffee cups, Mintel’s research also revealed that 87 per cent of coffee drinkers say they try to dispose of their packaging waste in recycling bins.
Some 58 per cent of coffee drinkers would like coffee shops to offer a discount to customers using their own travel mugs. Furthermore, 40 per cent of coffee drinkers say they do not mind being charged extra for hot drinks served in 100 per cent recyclable coffee cups, and 30 per cent would prefer to pay for filtered water instead of buying bottled water.
Recreating the coffee shop experience at home
Despite UK consumers’ love of coffee shops, for some, the draw of the kitchen remains too tempting. Just over half of coffee drinkers prefer to drink hot drinks at home rather than out-of-home, including 55 per cent of men and 47 per cent of women.
“The fact that half of coffee drinkers prefer to drink hot drinks at home could suggest that the range of beverages for at-home consumption may, in fact, be so well-established in the retail channel that more consumers can recreate the coffee shop experience without having to leave the comforts of home,” Mintel’s analyst said.
One factor that could adversely affect demand for coffee, whether for out-ofhome consumption or coffee consumed at coffee ships is the fact that the average unit price of coffee has increased and is expected to increase further.
According to global market research company Euromonitor, the average retail selling price of coffee in the UK increased significantly in 2017. This was not only due to the continuous premiumisation of coffee in the UK as coffee culture expands but was in part due to currency fluctuations because brought about by the Brexit vote.
“As Brexit negotiations between the UK and the EU continue and uncertainty remains about how the UK will leave, it is expected that currency fluctuations will continue, Euromonitor said. “Weaker Sterling means that prices will increase as coffee is traded in US dollars. Manufacturers can be expected to continue to pass on additional costs to consumers.”■ C&CI Read more
This article first appeared in the May ’18 issue of C&CI, click on subscribe now if you wish to read the full story and other informative articles in the May and future issues of C&CI or log in here if you are already a subscriber.