After a prolonged period of consistent year-on-year growth, much of the coffee shops market is now entering a phase of consolidation, as consumers and operators alike hunker down in reaction to the current economic recession. Although the market proved particularly resilient during the last economic downturn in the early 1990s, the current trading climate is very different. For example, there is now increased competition from generalists such as pubs and fast food outlets, which, at lower price positions, offer consumers more opportunities to down trade their out-of-home coffee consumption.

After a prolonged period of consistent year-on-year growth, much of the coffee shops market is now entering a phase of consolidation, as consumers and operators alike hunker down in reaction to the current economic recession. Although the market proved particularly resilient during the last economic downturn in the early 1990s, the current trading climate is very different. For example, there is now increased competition from generalists such as pubs and fast food outlets, which, at lower price positions, offer consumers more opportunities to down trade their out-of-home coffee consumption.

More significantly, however, the strategy of rapid expansion in order to increase accessibility has, in reality, eroded the original USP of certain brands in terms of being exclusive and fashionable. As a result, it could be argued that economic factors have had less impact on the market than this fundamental concept of market positioning. Indeed, what better proof is there of this then the evident success of non-specialists entering or encroaching on the coffee shop market? In which case, earlier market predictions that consumers will still purchase coffee out-of-home as an affordable luxury continues to hold true as operators themselves adopt strategies to accommodate consumers’ changing circumstances.

That said, in the long term, operators are generally optimistic for future growth within the UK market, buoyed, for example, by growth in non-high street channels. However, past strategies such as the incredibly rapid outlet expansion and tactics of clustering stores close together to gain brand share despite cannibalisation of trade are unlikely to re-emerge, with forward strategies more likely to focus on image concerns within a consolidated outlet base.

This report looks at the factors that have been driving market growth during the past five years and those which will influence it in the future, and examines the current status of the industry. It also provides forecasts for the development of sales during the next five years and considers whether the coffee shop market is thriving or just surviving.

Main report themes

Changing consumer behaviour as a result of the impact of the economic recession.

Operators’ response to changing trading conditions.

The role of branding and the issue of coffee shops becoming less aspirational and more commoditised.

The impact of a growing cost base on the bottom line of operators.