The coffee market, that is people buying coffees outside the home, is worth £7.9 billion according to Allegra who presented this along with a few other numbers to us last week.
This £7.9 billion (000, mil) is growing at +9.7% and most of that is people opening new coffee shops. Allegra say that 2.2 billion coffee drinks consumed out of home a year.
According to Allegra’s research there are apparently only 20,728 coffee shops, but they don’t count the ‘greasy-spoon’ style outlets. However the number of coffee shops is growing. So what’s going on? Well, both the number of branded coffee focussed chains and independent coffee shops are on the rise. In addition, branded food focussed chain outlets are wanting a piece of the action. Greggs the bakers are really Greggs the coffee with anything else you might buy. Fast-food outlets are realising the importance of coffee as are the pasty shops, in fact the true number of coffee shops is probably going to be much higher perhaps 30,000 soon.
But, I hear you ask, won’t this mean everyone will sell less coffee as the customers are confronted with all this choice? Well, choice is a good point, 91% of the visits we make to coffee shops are to branded chains (Costa, Starbucks café Nero et al) and in fact Allegra reckon they were down by 1% (the visits that is). However 16% of the visits are by the same people visiting everyday – these people have got a serious habit! That coffee drinking habit is also getting more expensive. Each visit is worth, on average, about £4.07. Comparing this with the numbers Allegra produced in the last few years means we think the average cost of each visit has risen by about 5% / year. Not a bad return on capital in the current climate so perhaps one reason why high streets are filling fast with coffee shops.
Allegra asked consumers what factors encouraged them to re-visit a particular coffee shop. Perhaps not surprisingly, the number one reason was “great tasting coffee”. Good service is also important, as consumers gave “bad service” as the main reason that they didn’t go back to a coffee shop.
So the good news is our nation is getting more discerning about coffee. Visit any supermarket or fine-food retailer and the space and choice for coffee (beans and ground), pods etc. is growing. Gourmet machines (upmarket coffee vending machines to you and me) are springing up in garage forecourts, supermarkets, cinema etc. Micro roasting is increasingly popular, (a bit like micro-breweries without the driving afterwards issues). Even the pod machines at home prove fresh ground coffee tastes better than an instant powder. The point, people are spending on coffee.
There is one problem; according to Allegra the most popular bakery product sold alongside all this coffee is…… a cupcake! Probably due more to the dominance of certain large coffee chains deciding to offer these alongside coffee. Perhaps what large chains do now distorts our view of the market and we should be careful of the conclusions we draw. It might be the country has gone cupcake mad as a result of the Great British bake off or that we are all copying the big players? If you would like to see the Allegra research then follow this link. http://www.worldcoffeeportal.com/LatestReports