The rise of the coffee shop: here’s what you need to know

30 April 2018, 11:23 AM
  • John Bensalhia investigates the rise in the popularity of the coffee shop, and looks at some of the today's notable trends
The rise of the coffee shop: here’s what you need to know

Throughout history, the coffee shop has grown in stature. From the first coffee house in Damascus in 1530, coffee’s first appearances outside of the Ottoman Empire led to the burgeoning growth in Europe in the 17th century. By the mid-1600s, coffee houses had debuted in locations such as Venice and in Oxford, England.
Today, the coffee shop’s popularity has risen for both major branded chains and independents. Allegra World Coffee Portal’s Project Cafe 2017 UK report estimates that there are some 22,845 outlets in the country today.

Statistics from Mintel Research found a notable boost for the coffee shop market, which had recently enjoyed its largest period of growth since 2008. The last five years have seen a particular renaissance for the market, with a rise of 37% from 2011 (£2.4 billion) to 2016 (£3.4 billion). In particular, the 12 months between 2015 and 2016 saw the largest year-on-year boost, with an impressive 10.4% growth.

Trish Caddy, foodservice analyst at Mintel, attributes much of the recent growth to habitual coffee drinkers and the continually increasing number of coffee retailers 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.”

Mintel’s food and drink analyst, Anita Winther, adds that according to its Coffee Shops UK 2016 Report, 65% of adults are reported to have bought a hot drink from a coffee shop in the three months to October 2016. “Meanwhile, of Brits who have visited a specialist coffee shop, 29% visit once a week or more to sit in and 25% for a takeaway.”

The bigger picture
Youngsters are helping to propel the status of coffee shops, as Anita explains: “16-34-year-olds are the core users of coffee shops: an age group who lag behind older cohorts when it comes to at-home coffee. While this means that coffee shops are snatching sales from retail, young people’s usage of coffee shops is likely to help build their appetite for coffee as a whole, which should also benefit retail coffee sales in the long term.”

Allegra World Coffee Portal’s Project Cafe 2017 UK report has also reported growth in the coffee shop market, with 2016 witnessing a 6% growth in outlets and a 12% growth in turnover. While part of this is attributed to leading chains like Costa, Starbucks and Caffe Nero reporting positive like-for-like sales growth, another factor has been the gaining momentum of small and medium boutique chains such as Joe And The Juice, Taylor St Baristas and Coffee #1.

Simply Business research, meanwhile, has also reported a massive increase in independent coffee shops for the year between 2015 and 2016. The 41% growth spotlighted specific areas of the UK which had enjoyed notable rises. The area to see the biggest rise was Nottingham (69% increase year-on-year), followed by Birmingham (53%), Sheffield (48%) and Coventry (37%).

The growth in coffee shops is part of the bigger picture. A recent report from the NPD Group found that Britain was the third highest country for coffee consumption. With 2.098 billion cups of coffee consumed away from home (in the year leading up to December 2015), Britons were only behind France (2.27 billion) and Italy (4.78 billion).

A key reason for this statistic is that Britons have a whole range of speciality coffees to choose from. Options such as Cappuccino, Latte, Americano and Mocha continue to surge in popularity. The NPD Group report found that the most popular of these in 2015 was the Cappuccino (an increase of 12% since 2012 to 486 million servings), followed by Latte (467 million) and Americano (which saw notably speedier growth at 33%).

Chill out
In addition to the traditional old guard, the coffee house offers new kinds of drinks. Take the rise in iced and blended beverages. With an 18% growth in 2016, this sector has seen an estimated £338 million turnover. Allegra World Coffee Portal found that 2016’s 3.8% sales share of total coffee shop market sales had grown from the previous year’s 3.6% share. Part of this positive pattern is a result of more coffee shop operators providing a greater range of iced beverages. As a result, more consumers are taking to these whatever the weather, with the Allegra World Coffee Portal report claiming that one in five people are enjoying these all year round.

With that in mind, a new chilled drink is set to be a hit. Having appeared in a limited number of American artisanal coffee parlours and high-end chocolate shops, cold-brewed cocoa is predicted to grow in interest. While the taste is said to be less acidic than coffee, cold-brewed cocoa has been described as a nuanced and nutty taste experience that still possesses the faint aroma and flavour of chocolate. Starbucks has already introduced a ready to drink Cold Brew Cocoa & Honey into selected American stores, and has already garnered media interest as a means of using cocoa in cold drinks other than chocolate milkshakes.

Not our cup of tea?
It could be argued that the coffee shop’s rising through the ranks comes from our own changing tastes. Once upon a time, the common choice of drink for Brits was the good old cup of tea. But according to recent Mintel reports, younger generations are not such big fans of that one-time special brew. The report claims that one in five Britons aged 16 to 24 don’t drink tea so much because it tastes too bitter. It’s a bittersweet rise (at 21%) from the 10% of 55+ consumers who said the same thing. The youthful preference for sweeter drinks also accounted for the lower appreciation of tea, with one in six under 25 shunning a cuppa for something with a more sugary taste.

Anita Winther says that tea remains under pressure from a barrage of competition from other drinks. “While coffee has successfully injected connoisseur, indulgent and on-trend elements to the category, tea continues to struggle to deliver the same experience. This poses a marked threat to the category. Where tea has failed to establish itself as a menu staple for younger adults, it is likely to struggle to gain ground in their drinks repertoires later on.”

However, all may not be lost with the future of tea as specially flavoured teas such as fruit teas, herbal teas and spiced teas are regarded as a refreshing alternative to sugary drinks. Mintel noted that 56% of 25-34-year-olds considered flavoured teas as their chosen option. Anita Winther explains that this age group has the widest repertoire of tea, which reflects their more adventurous attitude towards food and drink, with a greater tendency to seek out new foods and flavours to try. “While sweet flavours have been around in the tea market for a while now, these launches will help grow tea usage among younger consumers.”

Cacao tea may also be this age group’s cup of… tea! Made from the nibs and husks of the cacao bean, this hot drink is a centuries-old beverage from South America. Online UK-based tea retail shop, Teapigs also offers a Chocolate Flake Tea, which combines black tea, cocoa beans and chocolate flakes.

Waste management
A growing concern among coffee consumers and coffee shops is how to reduce wastage. Recently, a scheme was launched in London with the aim of preventing an annual amount of five million cups from the Square Mile ending up in landfill.

The incentive was a year’s free membership for services by UK collection and recycling company, Simply Cups. The first 30 businesses that have more than 500 employees would qualify for this service, with the collected cups recycled and remade into other items. Simply Cups already works in conjunction with Costa and Pret a Manger, collecting cups from selected outlets. Costa has also taken on waste management company Veolia to collect used cups from 2000 stores for recycling. Meanwhile, Starbucks has also trialled the Frugalpac: a fully recyclable coffee cup.

“The concerted efforts of coffee shops to cut down on coffee cup waste, following the recent documentary Hugh’s War on Waste, puts them at a competitive advantage by highlighting the fact that the sector as a whole feels obliged to be more ethical,” says Trish Caddy. “Recycling companies and packaging suppliers are making inroads by innovating in systems to recover and recycle existing materials, such as placing recycling bins in branded coffee shop chains as a collection point.”

As for the general future of coffee shops, a positive picture is served up, albeit with the caveat of the problems posed by Brexit. The Allegra World Coffee Portal report says that Brexit could pose a number of issues with respect to labour and the growing pressure on costs.

But the same report also predicts a strong future. By 2025, it is said that the total coffee shop market in the country will exceed 32,000 outlets, with a turnover of £16 billion. Five years after that, the report predicts that the amount of pubs in the country will be outnumbered by the amount of coffee shops.

With more independent coffee shops and outlets set to grow by that time, this really is the perfect blend.

Consumer opinion: think eco
Mintel has conducted research into the environmental habits of coffee drinkers. 87% of those surveyed aimed to get rid of their packaging waste in recycling bins. 58% thought that a good idea for coffee shops would be to introduce a discount for customers who brought along their own mugs. Meanwhile, 40% of coffee consumers claimed that they would rather be charged extra money for being served hot drinks in 100% recyclable coffee cups.

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