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HARD BREXIT COULD BLOW BRITISH COFFEE SHOPS OFF COURSE

HARD BREXIT COULD BLOW BRITISH COFFEE SHOPS OFF COURSE



Turnover in the UK coffee shop market grew by 7.9% in 2018 but industry leaders say Brexit is adversely affecting trade and creating uncertainty.

Project Café UK 2019, Allegra World Coffee Portal’s report on the UK café industry, reveals that the total UK coffee shop market is valued at £10.1 billion across 25,483 outlets. A 7.9% annual sales increase cemented two decades of UK coffee shop growth, but economic turbulence caused by Brexit uncertainty continues to impede the sector.

Branded coffee shops secured robust 8.7% outlet growth in 2018 to reach 8,149 stores. The fragility of the UK economy is, however, a key industry concern for 2019. Coffee shops are a vital piece of the UK high street fabric, with widespread retail closures exacerbating reduced footfall for all businesses.

Allegra research shows coffee shops are well placed to catalyse growing consumer preference for experience-led and digitally-enhanced retail concepts – 45% of industry leaders surveyed consider social media to be the most effective form of marketing. However, coffee quality remains the biggest factor behind café success according to industry leaders surveyed by Allegra.

Reduced consumer confidence contributed to the success of value-focused chains in 2018. Allegra consumer data shows Greggs and McDonald’s are perceived to offer the best value-for-money, with both brands introducing coffee-focused strategies in 2018.

Sustained uncertainty on the UK’s future relationship with the EU continued to frustrate the coffee shop industry in 2018. The political impasse over the last 18 months has contributed to growing anxiety on labour shortages, rising prices, investment and eroded consumer confidence.

49% of industry leaders surveyed by Allegra indicated Brexit was negatively affecting their business, with 46% remaining neutral and 5% reporting a positive impact. 69% agreed it was negatively impacting consumer confidence, while 87% of industry leaders surveyed believe Brexit has damaged the UK economy.

The UK coffee shop market experienced significant consolidation in the last 18 months. Major deals such as Coca-Cola’s £3.9 billion acquisition of UK market leader, Costa Coffee, and JAB Holding’s £1.5 billion acquisition of Pret A Manger have introduced unprecedented foreign investment into the UK branded coffee chain market.

Commenting on the research, Allegra CEO, Jeffrey Young said,”20 years of consecutive growth, in terms of outlets, turnover and like-for-like performance is an impressive feat by this robust segment that has become intrinsic to UK lifestyles.

More growth will continue, albeit at a slower pace, as the economy is subjected to myriad pressures, including structural retail change, technological development, changing consumer habits and deep uncertainty on the numerous potential outcomes of Brexit.”

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