UK coffee shop numbers shrink by 0.9%

The UK coffee shop market has shrunk by 0.9% in terms of outlet numbers, following restrained investment in the context of Brexit uncertainty and tough high street trading, Allegra World Coffee Portal reveals.

Project Café UK 2020 reveals the £10.5bn market comprises 25,892 sites across branded, independent and non-specialist operators, with UK branded coffee shop segment now standing at 8,222 outlets.

Despite market turbulence and a more cautious approach to outlet growth among the UK’s branded coffee chains, trading at existing sites remains positive. Forty percent of industry leaders surveyed reported a 5%-plus trading uplift in 2019, up 9% on 2018.

The cost of property, labour and the impact of Brexit were cited as the top three challenges facing coffee shops, with 56% believing there remains plenty of growth potential for branded café chains in the UK. One third anticipate improved trading conditions over the next 12 months – up 5% on 2018.

High operations costs and reduced footfall are compelling many branded coffee chains to raise quality, diversify menus and focus on customer retention over outlet expansion.

Allegra predicts the UK coffee shop landscape will undergo further transformation in 2020, with major brands launching new formats, including travel kiosks, drive thrus, and specialised sub-brands.

Environmental concerns rose significantly in 2019 and were cited by industry leaders as the most important consumer trend affecting the UK coffee shop market – rising from third place in 2018. Reducing reliance on plastic packaging, ensuring proper recycling is conducted and greater supply chain transparency were cited as the top three initiatives UK coffee shops should widely adopt.

Major UK coffee chains are introducing a growing number of vegan menu items. Nearly one fifth of UK consumers surveyed frequently request a dairy-alternative milk with their coffee shop beverage. This trend is reflected in Costa Coffee’s and Pret A Manger’s removal of plant-based milk surcharges. Both chains significantly expanded their vegan food menus in 2020, while food-focused market leader, Gregg’s, is hoping to build on the success of the vegan sausage roll with the launch of its vegan steak bake.

World Coffee Portal forecasts the UK branded coffee shop segment will exceed 9,400 outlets by the end of 2024, displaying five-year growth of 2.7% CAGR.

The coffee-focused sub-segment, which includes market leaders Costa Coffee, Starbucks and Caffè Nero, is predicted to exceed 6,000 outlets by the end of 2024, displaying growth of 2.4% CAGR.

The food-focused sub-segment, which is led by Greggs, Pret A Manger, and Krispy Kreme, is anticipated to exceed 3,300 outlets, growing at 3.4% CAGR.

Allegra Group CEO and Founder, Jeffrey Young, said: “Following two years of tough trading the UK coffee shop market has held up well against significant headwinds. We expect outlet growth to regain momentum during the next 2-3 years and forecast better times ahead for those operators that can readily capitalise on the opportunities and adapt to the challenges in what will remain a highly competitive market.”