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Coffee Shops - UK - December 2016

“Coffee shops have countered brand fatigue by experimenting with quick-service formats and better food options. Price-led concepts rival non-specialists that are eating into the market share. Meanwhile, efforts in cutting down packaging waste and reducing added-sugar content give coffee shops an edge over competitors.”

–    Trish Caddy, Foodservice Analyst

This report will cover the following areas:

  • Low-cost coffee can win customers’ favour
  • Efforts to reduce coffee cup waste can attract customers
  • Coffee shops offer better food options in a competitive eating out market

Coffee shops are faced with competition from a raft of non-specialists, such as pubs and sandwich shops, eating into the market share.

Steps taken by branded coffee shops to give the sector an edge over its rivals include quick-service formats to meet the needs of time-poor city dwellers as well as to provide higher quality of food options to strengthen their offering in the lunch space.

In reaction to disruptors such as JD Wetherspoon that are playing on price with £1 tea and coffee in takeaway cups, a new age of price-led coffee shops have emerged, with easyCoffee as the front-runner. Across the market, coffee shops are making efforts to cut down on packaging waste as well as to reduce added sugar to appease public concerns.

This Report covers those foodservice establishments where coffee is the primary sales item. They are based on the European and North American coffee shop models, typified by Starbucks, Costa Coffee, Caffè Nero and Coffee Republic, offering a wide variety of coffee drinks, eg cappuccino, latte, mocha, etc. Other items are usually on sale, such as pastries, tea, coffee beans, etc. However, the food offer may be restricted.

Coffee shops include venues such as individual stores, kiosks and concessions. These may operate in a number of locations – motorway service areas (MSAs), health clubs and hospitals, for example, as well as standalone outlets. However, they must be independent of the facility they are located in.

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
      • Executive Summary

          • The market
            • Figure 1: UK coffee shop market, value sales, 2011-21
          • Key players
            • Costa Coffee continues to dominate the market
              • Premium pricing of specialty coffee may have peaked
                • Starbucks changes business mix
                  • The consumer
                    • Non-specialists continue to threaten branded coffee shops
                      • Men and women equally likely to buy coffee out-of-home
                        • Figure 2: Outlets used to buy hot drinks out-of-home, October 2016
                      • Young men are likely to sit-in than takeaway
                        • Figure 3: Frequency of using coffee shops, 2014-16, October 2016
                      • Afternoon teas could appeal to women
                        • Users want healthier beverages as much as guilty pleasures
                          • Figure 4: Interest in coffee shop product concepts, October 2016
                        • Efforts to cut down on packaging waste could appeal to coffee drinkers
                          • More men prefer to drink hot drinks at home
                            • Figure 5: Coffee shop buying behaviours and preferences, October 2016
                          • Young women see coffee from branded coffee shops as too expensive
                            • Young men value the convenience of takeaway drinks
                              • Women and parents demand better food options
                                • Figure 6: Attitudes towards coffee shops/hot drinks outlets, October 2016
                              • What we think
                              • Issues and Insights

                                • Low-cost coffee can win customers’ favour
                                  • The facts
                                    • The implications
                                      • Efforts to reduce coffee cup waste can attract customers
                                        • The facts
                                          • The implications
                                            • Coffee shops offer better food options in a competitive eating out market
                                              • The facts
                                                • The implications
                                                • The Market – What You Need to Know

                                                  • The coffee shop market is in growth...
                                                    • ...and looks set to continue growing
                                                      • Coffee production comes under pressure
                                                        • Sugar tax is key challenge for drinks with added sugar
                                                          • Central London rising rents and rates could temper growth
                                                          • Market Size and Forecast

                                                            • The coffee shop market is worth £3.4bn in 2016…
                                                              • Figure 7: UK coffee shop market, value sales, 2011-21
                                                            • …and forecasted to reach £4.4 bn by 2021
                                                              • Figure 8: UK coffee shops market, value sales and forecast, 2011-21
                                                            • Forecast methodology
                                                            • Market Drivers

                                                              • Savings to rival eating out as main discretional spending area
                                                                • Figure 9: Selected consumer spending priorities (after bills), October 2015-September 2016
                                                              • Britain’s ageing population
                                                                • Figure 10: Trends in the age structure of the UK population, 2011-16 and 2016-21
                                                              • Coffee production comes under pressure
                                                                • Sugar tax is key challenge for drinks with added sugar
                                                                  • Central London rents and rates continue to rise above inflation
                                                                  • Key Players – What You Need to Know

                                                                    • Costa Coffee to focus on its food options
                                                                      • Independents at risk of overpricing coffee
                                                                        • Starbucks changes business mix
                                                                          • Caffè Nero acquires Harris + Hoole
                                                                          • Market Share

                                                                            • Costa Coffee retains lead by store and usage numbers
                                                                              • Figure 11: Outlet numbers of selected UK coffee shops, 2013-16
                                                                            • Independents boost the coffee shop market
                                                                              • Figure 12: Coffee shop usage habit, 2013-16, October 2016
                                                                            • Starbucks shows preference for more licensed stores
                                                                              • Caffè Nero acquires Harris + Hoole
                                                                              • Launch Activity and Innovation

                                                                                • Reducing sugar intake
                                                                                  • Cutting coffee cup waste
                                                                                    • Boosting out-of-home tea consumption
                                                                                      • New concepts
                                                                                        • 24-hour trading can bolster sales and offer flexibility to staff
                                                                                          • Starbucks and Costa expand into Express formats
                                                                                            • A greater choice of food and drinks to increase all-day usage
                                                                                              • Serving up alcohol to increase evening visits
                                                                                                • Caffè Nero rolls out mobile wallet scheme
                                                                                                • Advertising and Marketing Activity

                                                                                                  • Overall ad spend fell in 2015
                                                                                                    • Figure 13: Recorded above-the-line, online display and direct mail advertising expenditure on selected coffee shops, 2012-16
                                                                                                  • Starbucks uses digital, outdoor and press to support Teavana
                                                                                                    • Esquires Coffee uses print ads to support franchise business
                                                                                                      • Figure 14: Advertising expenditure by selected coffee shops, by media type, 2012-16
                                                                                                    • Nielsen Ad Intel coverage
                                                                                                    • Brand Research

                                                                                                        • Brand map
                                                                                                          • Figure 15: Attitudes towards and usage of selected brands, October 2016
                                                                                                        • Key brand metrics
                                                                                                          • Figure 16: Key metrics for selected brands, October 2016
                                                                                                        • Brand attitudes: Costa and Caffé Nero lead on reputation, quality and customer service
                                                                                                          • Figure 17: Attitudes, by brand, October 2016
                                                                                                        • Brand personality – Macro: Greggs and McCafé stand on par with Costa as vibrant, accessible and fun
                                                                                                          • Figure 18: Brand personality – Macro image, October 2016
                                                                                                        • Brand personality – Micro: Starbucks takes the lead as cool, Costa is most welcoming
                                                                                                          • Figure 19: Brand personality – Micro image, October 2016
                                                                                                        • Brand analysis
                                                                                                          • Greggs rivals coffee shops as the most trusted brand of all
                                                                                                            • Figure 20: User profile of Greggs, October 2016
                                                                                                          • Costa Coffee appeals to women
                                                                                                            • Figure 21: User profile of Costa Coffee, October 2016
                                                                                                          • Only 5% of users see McCafé as a favourite brand
                                                                                                            • Figure 22: User profile of McCafé, October 2016
                                                                                                          • Caffè Nero viewed as a boring brand
                                                                                                            • Figure 23: User profile of Caffè Nero, October 2016
                                                                                                          • Starbucks is exciting but unethical
                                                                                                            • Figure 24: User profile of Starbucks, October 2016
                                                                                                        • The Consumer – What You Need to Know

                                                                                                          • Three in five Brits have bought from coffee shops
                                                                                                            • 44% of Brits have bought hot drinks from non-specialists
                                                                                                              • 70% of 45-65s find coffee from big coffee shop chains too expensive
                                                                                                                • 36% of women are interested in afternoon tea in coffee shops
                                                                                                                  • Users want healthier beverages as much as guilty pleasures
                                                                                                                    • 16% of coffee drinkers interested in different levels of caffeine
                                                                                                                      • 51% of coffee drinkers prefer to drink hot drinks at home
                                                                                                                        • 32% of coffee drinkers value the convenience of takeaway drinks
                                                                                                                          • 54% of coffee drinkers would like more food options
                                                                                                                          • Coffee Shop Usage Habits

                                                                                                                            • More than three in five Brits have bought from coffee shops
                                                                                                                              • Non-specialists continue to grab the market
                                                                                                                                • Figure 25: Coffee shop usage habit, by outlet type, October 2016
                                                                                                                              • Costa Coffee continues to dominate the market
                                                                                                                                • Figure 26: Outlets used to buy hot drinks out-of-home, October 2016
                                                                                                                              • Almost three in 10 buy hot drinks from fast food chains
                                                                                                                                • Older women are core users of independent coffee shops
                                                                                                                                  • Figure 27: Outlets used to buy hot drinks out-of-home, 2013-16, October 2016
                                                                                                                                • Scope to engage with older age groups
                                                                                                                                  • Figure 28: Usage of any coffee shop specialist to buy hot drinks out-of-home, by age groups, October 2016
                                                                                                                              • Frequency of Using Coffee Shops

                                                                                                                                  • Figure 29: Frequency of using coffee shops, October 2016
                                                                                                                                • More people sit-in than takeaway
                                                                                                                                  • Figure 30: Frequency of using coffee shops, 2014-16, October 2016
                                                                                                                              • Interest in Coffee Shop Product Concepts

                                                                                                                                • Afternoon teas could help create a new revenue stream
                                                                                                                                  • Users want healthier beverages as much as guilty pleasures
                                                                                                                                    • Offering different levels of caffeine could add interest to coffee shops
                                                                                                                                      • Figure 31: Interest in coffee shop product concepts, October 2016
                                                                                                                                  • Coffee Shop Buying Behaviours and Preferences

                                                                                                                                    • Coffee drinkers prefer to drink hot drinks at home
                                                                                                                                      • Figure 32: Examples of coffee retail brands in the UK, 2016
                                                                                                                                    • Efforts to cut down on packaging waste could help appeal to coffee drinkers
                                                                                                                                      • Figure 33: Coffee shop buying behaviours and preferences, October 2016
                                                                                                                                  • Attitudes towards Coffee Shops/Hot Drinks Outlets

                                                                                                                                    • Coffee from branded coffee shops is seen as too expensive
                                                                                                                                      • One in three users values the convenience of takeaway drinks
                                                                                                                                        • Food options are in demand by women and parents
                                                                                                                                          • Scope for targeted discounts
                                                                                                                                            • Almost two in five coffee drinkers are enthusiasts
                                                                                                                                              • Figure 34: Attitudes towards coffee shops/hot drinks outlets, October 2016
                                                                                                                                          • CHAID Analysis

                                                                                                                                            • Methodology
                                                                                                                                              • Meal deals can help branded coffee shops grab lunch market
                                                                                                                                                • Figure 35: Coffee shops – CHAID – Tree output, October 2016
                                                                                                                                                • Figure 36: Target groups based on people’s attitudes towards coffee shops – CHAID – Table output, October 2016
                                                                                                                                            • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                • Abbreviations
                                                                                                                                                  • Consumer research methodology
                                                                                                                                                  • Appendix – Market Size and Forecast

                                                                                                                                                    • Forecast Methodology
                                                                                                                                                        • Figure 37: Best- and worst-case forecasts for UK coffee shops market, 2015-20

                                                                                                                                                    Companies Covered

                                                                                                                                                    To learn more about the companies covered in this report please contact us.

                                                                                                                                                    Coffee Shops - UK - December 2016

                                                                                                                                                    US $2,583.33 (Excl.Tax)