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Coffee Shops - UK - December 2017

“Younger Millennials aged 18-27 and parents of under-16s make up the core consumers of the coffee shops market. Younger Millennials are drawn to new product lines, and parents care about ethical sourcing and premium quality experiences. As a group, they are spreading their budget across a larger number of establishments that are selling coffee, including non-specialists that have expanded into low-cost coffee alongside their food offerings, which threatens to take chunks off the coffee shops market share.”

- Trish Caddy, Foodservice Analyst

This report will look at the following areas:

  • Attracting older generations
  • New-wave loyalty
  • Meal deal potential

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Coffee shops face headwinds…
              • …but there are opportunities for growth
                • Figure 1: UK coffee shops market, value sales, 2012-22
              • Companies and brands
                • Opportunities in consumer goods
                  • Food and drink concepts
                    • Coffee shop technologies
                      • The consumer
                        • Coffee shop usage
                          • Figure 2: Outlets used to buy hot drinks out of home, October 2017
                        • Most popular drinks
                          • Figure 3: Most popular drinks bought out of home, October 2017
                        • Interest in menu features
                          • Figure 4: Menu features that drive interest, October 2017
                        • Motivations of independent users
                          • Figure 5: The factors that drive independent coffee shop users to visit, October 2017
                        • Behaviours towards coffee shops
                          • Figure 6: Behaviours towards coffee shops, October 2017
                        • What we think
                        • Issues and Insights

                          • Attracting older generations
                            • The facts
                              • The implications
                                • New-wave loyalty
                                  • The facts
                                    • The implications
                                      • Meal deal potential
                                        • The facts
                                          • The implications
                                          • The Market – What You Need to Know

                                            • Modest growth expected
                                              • The opportunities presented
                                                • The challenges faced
                                                • Market Size and Forecast

                                                  • The coffee shops market is worth £3.4 billion in 2017…
                                                    • Figure 7: UK coffee shops market, value sales, 2012-22
                                                  • …and is forecast to reach £3.7 billion by 2022
                                                    • Figure 8: UK coffee shops market, value sales and forecast, 2012-22
                                                  • Forecast methodology
                                                  • Market Drivers

                                                    • The challenges
                                                      • Soft Drinks Sugar Levy due in 2018
                                                        • Business rates
                                                          • Rising inflation
                                                            • National Living Wage and National Minimum Wage
                                                              • Coffee production comes under pressure
                                                                • The opportunities
                                                                  • Growth of the workforce
                                                                    • Growth of the ageing population
                                                                      • Figure 9: Trends in the age structure of the UK population, 2011-16 and 2016-21
                                                                      • Figure 10: Trends in food behaviours which consumers do all of the time, April 2016-November 2017
                                                                      • Figure 11: Trends in healthy food factors, April 2016-November 2017
                                                                  • Companies and Brands – What You Need to Know

                                                                    • Consumers' perceptions of selected restaurant brands
                                                                      • Why are big brands moving into the grocery sector?
                                                                        • New on the food menu
                                                                          • New on the drinks menu
                                                                            • Examples of brands that are growing
                                                                            • Market Share

                                                                              • Costa Coffee leads a congested market
                                                                                  • Figure 12: Selected UK coffee shops, market share by outlet numbers, 2015-17
                                                                                • Independent operations rival big names
                                                                                  • Figure 13: Selected independent coffee shops, by outlet numbers, 2017
                                                                              • Company Profiles

                                                                                  • Branded chains
                                                                                    • Costa Coffee
                                                                                      • Figure 14: Key financial data for Costa Limited, 2015 and 2016
                                                                                    • Starbucks
                                                                                      • Figure 15: Key financial data for Starbucks Coffee Company (UK) Ltd, 2014-16
                                                                                    • Caffè Nero
                                                                                      • Figure 16: Key financial data for Caffè Nero Group Ltd, 2015 and 2016
                                                                                    • Coffee#1
                                                                                      • Figure 17: Key financial data for Coffee#1 Limited, 2015 and 2016
                                                                                    • SOHO Coffee Co.
                                                                                      • Figure 18: Key financial data for SOHO Coffee Shops Limited, 2015 and 2016
                                                                                    • Third wave coffee
                                                                                      • Workshop Coffee
                                                                                        • Black Sheep Coffee
                                                                                          • Ones to watch
                                                                                            • Tim Hortons
                                                                                              • Second Cup
                                                                                                • Nespresso
                                                                                                  • easyCoffee
                                                                                                    • 200 Degrees Coffee
                                                                                                      • Wayne’s Coffee
                                                                                                      • Launch Activity and Innovation

                                                                                                        • New opportunity in retail
                                                                                                          • Figure 19: Examples of coffee shop-branded products, 2017
                                                                                                        • New on the drinks menu
                                                                                                          • Cold brew and nitro cold brew
                                                                                                            • Year-round frozen drinks
                                                                                                              • Cocktail-style iced drinks
                                                                                                                • New chocolate-based drinks
                                                                                                                  • Dairy-free options
                                                                                                                    • New on the food menu
                                                                                                                      • Breakfast options
                                                                                                                        • Plant-based items
                                                                                                                          • Starbucks launches lunchtime meal deal
                                                                                                                            • New in coffee shop technology
                                                                                                                              • Behind-the-scenes marketing
                                                                                                                                • Voice ordering
                                                                                                                                  • Smarter mobile apps
                                                                                                                                    • New coffee shop formats
                                                                                                                                    • Advertising and Marketing Activity

                                                                                                                                      • Mobile usage drives digital spend
                                                                                                                                        • Figure 20: Advertising expenditure, by media type, 2013-17
                                                                                                                                      • Costa Coffee uses movies to reach customers
                                                                                                                                        • Figure 21: Advertising expenditure by selected coffee shop operators, 2013-17
                                                                                                                                      • Caffè Nero explores outdoors and digital
                                                                                                                                        • Figure 22: Advertising expenditure by selected coffee shop operators, by media type, 2013-17
                                                                                                                                      • McCafé ramps up advertising activity
                                                                                                                                        • Figure 23: Advertising expenditure by McDonald's – McCafé, 2015-17
                                                                                                                                      • Nielsen Ad Intel coverage
                                                                                                                                      • Brand Research

                                                                                                                                          • Brand map
                                                                                                                                            • Figure 24: Attitudes towards and usage of selected brands, October 2017
                                                                                                                                          • Key brand metrics
                                                                                                                                            • Figure 25: Key metrics for selected brands, October 2017
                                                                                                                                          • Brand attitudes: McCafé delivers value for money
                                                                                                                                            • Figure 26: Attitudes, by brand, October 2017
                                                                                                                                          • Brand personality: McCafé stands on a par with Costa Coffee as accessible brands
                                                                                                                                            • Figure 27: Brand personality – Macro image, October 2017
                                                                                                                                          • Pret A Manger is seen as the healthiest brand of all
                                                                                                                                            • Figure 28: Brand personality – Micro image, October 2017
                                                                                                                                          • Brand analysis
                                                                                                                                            • Costa Coffee receives the most positive endorsements from its customers
                                                                                                                                              • Figure 29: User profile of Costa Coffee, October 2017
                                                                                                                                            • McDonald’s McCafé represents excellent value for money
                                                                                                                                              • Figure 30: User profile of McDonald’s McCafé, October 2017
                                                                                                                                            • Starbucks needs to do more to improve brand commitment
                                                                                                                                              • Figure 31: User profile of Starbucks, October 2017
                                                                                                                                            • Pret A Manger is the healthiest brand of all
                                                                                                                                              • Figure 32: User profile of Pret A Manger, October 2017
                                                                                                                                            • Caffè Nero fails to strongly differentiate itself in a highly competitive market
                                                                                                                                              • Figure 33: User profile of Caffè Nero, October 2017
                                                                                                                                          • The Consumer – What You Need to Know

                                                                                                                                            • Consumer usage habits
                                                                                                                                              • Most popular coffee shop drinks
                                                                                                                                                • Identifying interests in menu features
                                                                                                                                                  • Understanding the motivations of independent coffee shop users
                                                                                                                                                    • Examining the behaviours towards coffee shops
                                                                                                                                                    • Usage Habits

                                                                                                                                                      • Four in five bought hot drinks out of home
                                                                                                                                                        • Figure 34: Any outlets used to buy hot drinks out of home, by generational groups, October 2017
                                                                                                                                                      • Costa is the most widely used brand
                                                                                                                                                        • Almost one in four bought from a fast food chain
                                                                                                                                                          • Figure 35: Outlets used to buy hot drinks out of home, October 2017
                                                                                                                                                        • One in four visited an independent coffee shop
                                                                                                                                                            • Figure 36: Any outlets used, by any outlets used, October 2017
                                                                                                                                                          • Understanding the types of customers
                                                                                                                                                            • Figure 37: Repertoire of outlets used to buy hot drinks out of home, October 2017
                                                                                                                                                        • Most Popular Drinks

                                                                                                                                                          • Italian-style espresso-based drinks popular among middle age groups
                                                                                                                                                            • Middle-aged women are drawn to café latte
                                                                                                                                                              • Figure 38: Any drinks bought out of home, by any outlets used, October 2017
                                                                                                                                                            • Middle-aged men are drawn to cappuccino
                                                                                                                                                              • Figure 39: Italian-style espresso-based drinks bought out of home, by age and gender, October 2017
                                                                                                                                                            • Chocolate-based drinks attract young consumers
                                                                                                                                                              • Hot chocolate
                                                                                                                                                                • Figure 40: Chocolate-based drinks bought out of home, by age, October 2017
                                                                                                                                                              • Mocha
                                                                                                                                                                • Figure 41: English breakfast tea bought out of home, by generational groups, October 2017
                                                                                                                                                              • Older Millennials are buying English breakfast tea
                                                                                                                                                                • Figure 42: Most popular drinks bought out of home, October 2017
                                                                                                                                                              • Understanding the types of drinkers
                                                                                                                                                                • Figure 43: Repertoire of most popular drinks bought out of home, October 2017
                                                                                                                                                            • Menu Interest

                                                                                                                                                              • Cake and breakfast meals make a sweet deal
                                                                                                                                                                • Cake and coffee/tea deals for older groups
                                                                                                                                                                  • Figure 44: Interest driven by cake and coffee/tea deals, by age, October 2017
                                                                                                                                                                • Breakfast meal deals for people in work
                                                                                                                                                                  • Figure 45: Interest driven by breakfast meal deals, by working situation and location, October 2017
                                                                                                                                                                • Decaf drinks for parents
                                                                                                                                                                  • Figure 46: Interest driven by premium decaffeinated tea/coffee, by parental status, October 2017
                                                                                                                                                                • Mocktails for parents and younger audiences
                                                                                                                                                                  • Slushies for younger customers and parents
                                                                                                                                                                    • Low-calorie meals for women
                                                                                                                                                                      • Londoners fuel demand for non-dairy milk
                                                                                                                                                                        • Figure 47: Interest driven by dairy-free milk options, by region, October 2017
                                                                                                                                                                      • Younger Millennials are drawn to cold brew and loose tea
                                                                                                                                                                        • Cold brew or nitro cold brew coffee
                                                                                                                                                                          • Loose tea infusion
                                                                                                                                                                            • Figure 48: Menu features that drive interest, October 2017
                                                                                                                                                                        • Independent Coffee Shop Users

                                                                                                                                                                            • Over-45s are drawn to friendly customer service
                                                                                                                                                                              • Product knowledge important in customer service
                                                                                                                                                                                • Single-origin is akin to concept of terroir in wine
                                                                                                                                                                                  • Shop design elevates experience around coffee
                                                                                                                                                                                    • Ethical labels help independents distinguish from rivals
                                                                                                                                                                                      • What makes independent coffee shops ‘cool’
                                                                                                                                                                                        • Figure 49: The factors that drive independent coffee shop users to visit, October 2017
                                                                                                                                                                                    • Behaviours towards Coffee Shops

                                                                                                                                                                                      • Consumers would cut back if prices increased
                                                                                                                                                                                        • Mix-and-match meal deals are appealing to most
                                                                                                                                                                                          • Coffee shop proximity to where consumers live
                                                                                                                                                                                            • Understanding consumers’ interest in loyalty schemes
                                                                                                                                                                                              • Turning points into charity donations
                                                                                                                                                                                                • Passing on rewards to other people
                                                                                                                                                                                                  • Swapping for non-food rewards
                                                                                                                                                                                                    • Send offers based on purchase history
                                                                                                                                                                                                      • Using geolocation to send offers
                                                                                                                                                                                                        • Millennials and parents seek premiumisation
                                                                                                                                                                                                          • They enjoy sweet treats
                                                                                                                                                                                                            • Figure 50: Behaviours towards coffee shops, October 2017
                                                                                                                                                                                                          • They seek premium food/drink
                                                                                                                                                                                                            • Figure 51: Behaviour towards coffee shops, any “yes”, by any venues visited, October 2017
                                                                                                                                                                                                        • CHAID Analysis

                                                                                                                                                                                                          • Methodology
                                                                                                                                                                                                            • Let people pass on their loyalty rewards to others
                                                                                                                                                                                                              • Figure 52: Coffee shops – CHAID – Tree output, October 2017
                                                                                                                                                                                                              • Figure 53: Coffee shops – CHAID – Table output, October 2017
                                                                                                                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

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

                                                                                                                                                                                                                  • Forecast methodology
                                                                                                                                                                                                                      • Figure 54: Best- and worst-case forecasts for UK coffee shops market, 2017-22

                                                                                                                                                                                                                  Coffee Shops - UK - December 2017

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