£1.3bn Rebound for the Café and Coffee shop market
Problems faced by the Cafe and Coffee market have forced innovation in the UK branded coffee chain market with drive-thrus, smaller format coffee shops, neighbourhood locations and delivery has helped the sector weather the Covid-19 storm.
And there is positive news for the sector as the number of sites have grown by 3.5% to 9,540 stores and there was a better than expected £1.3bn sales rebound in 2021, representing 43% growth over the last 12 months, according to the latest report Project Café UK 2022.
It revealed that the UK’s £4.4bn branded coffee shop market has regained 87% of pre-pandemic market value and also predicts it will exceed 10,500 outlets by 2026.
And this confidence in the coffee shop and cafe market is continuing, with new openings in the pipeline. Greggs is opening its largest new café in Primark, Birmingham, while Boston Tea Party is set to open its latest site in Torquay.
In December, Leon, which was purchased by forecourt operator EG Group last year, unveiled plans to more than double the pace of its store rollout programme, with more than 50 restaurants to be opened in the next year. This followed the success of its first Drive-Thru in West Yorkshire.
This week, Pret revealed positive sales in the City financial districts, with the latest Bloomberg Pret Index, showing its transactions are now at 78% of pre-Covid-19 levels, as banks have called staff back into the office.
While the trends remains positive operators are still finding new channels of distribution to appeal to customers.
Esquires Coffee, the growing UK franchise coffee chain, says it expects to see a sustained interest in ‘click and collect’ services to ensure customers can enjoy professional barista-grade coffee without the worry of crowded areas.
A number of operators invested in beverage delivery due to the pandemic. Costa Coffee now works in partnership with delivery operators including Deliveroo, Just Eat and Uber, while Greggs offers click and collect or delivery through Just Eat.
And there is also the drive-thru market, which is seeing growth. According to the Project Café UK 2022 the UK drive-thru market now comprises 578 stores, with market leader Costa Coffee adding 75 locations since 2020 for a total of 275 and Starbucks operating 270 sites.
And Mintel’s latest Coffee Shops UK – 2021 report says that the penetration of coffee shop drive-throughs grew by six percentage points to reach 25% of customers in 2021.
This shows that consumers are changing their buying methods. Mintel says that the proportion of coffee shop consumers purchasing drinks in-store fell by four percentage points year-on-year as consumers continue to have a greater range of takeaway options than they did before the pandemic.
Empowered by digital devices and a deeper awareness of consumer choice, 33% of consumers were most likely to visit a coffee shop that allows them to customise an order, Mintel says.
Carlo Platia, CEO of Feed It Back says: “As the country continues to get back to some level of normality with people returning to work and offices the outlook is positive for café and coffee shop operators. But there are challenges ahead for all operators with VAT expected to increase to 20% in April 2022. There is also the impact of Brexit, labour shortages, the rise in the cost of living and the chances of more outbreaks of Covid-19.
“With competition in the market being so strong it is important for operators to know what their customers want and react to the changing situation. It will become ever more important moving forward for café and coffee outlets to respond to feedback and changing consumer demands.”
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