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Coffee Shops - UK - February 2012

“Consumers remain committed to eating out and coffee shops additionally benefit from being seen as an ‘affordable treat’. However, with stagnant salaries and the increasing cost of living, consumers’ spending capabilities have been curtailed, meaning that 2012 is likely to be as tough on operators as 2011. ”

– Helena Spicer, Senior Foodservice Analyst

Some questions answered in this report include:

  • How can coffee shops reassert their position in the face of rising non-specialist competitors?
  • What can coffee shops learn from the rest of the eating out market?
  • What can coffee shops learn from trends in the retail environment to encourage interest in tea?
  • How much potential is there for coffee shops to tap into the healthy eating trend?

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 1: Coffee shop market size and forecast, 2006-16
            • Market factors
              • Companies, brands and innovation
                • Companies
                  • Figure 2: Outlet numbers of coffee shops, 2010 and 2011
                • Innovation
                  • The consumer
                    • Who buys coffee out of home and where do they go?
                      • Figure 3: Out-of-home hot drink purchasing behaviour, either sit-in or takeaway, December 2011
                    • How have out-of-home coffee habits changed?
                      • Figure 4: Out-of-home coffee/tea/hot drink habits, by frequency and expenditure, December 2011
                    • Attitudes towards coffee out of home
                      • Figure 5: Attitudes towards coffee/tea/hot drinks out of home, December 2011
                    • Coffee shops’ menu enticements
                      • Figure 6: Coffee shops’ menu enticements, December 2011
                    • What we think
                    • Issue in the Market

                        • How can coffee shops reassert their position in the face of rising non-specialist competitors?
                          • What can coffee shops learn from the rest of the eating out market?
                            • What can coffee shops learn from trends in the retail environment to encourage interest in tea?
                              • How much potential is there for coffee shops to tap into the healthy eating trend?
                              • Future Opportunities

                                  • Competition from non-specialists makes tackling queuing increasingly pertinent
                                    • Innovative strategies for regaining lost loyalty
                                    • Internal Market Environment

                                      • Key points
                                        • A mature marketplace
                                          • Figure 7: Frequency of using instant coffee, 2010 and 2011
                                          • Figure 8: Frequency of using tea, 2010 and 2011
                                        • Cost bases continue to increase
                                          • Figure 9: Retail price indices for coffee and other hot drinks, 2006-11
                                        • Ethical considerations and the coffee market firmly entwined
                                          • Figure 10: Attitudes towards ethical concerns, by coffee shop usage, 2011
                                        • Opportunity for coffee shops to tap into healthy eating trends more comprehensively
                                          • Figure 11: Consumer demand for display of calorie content on restaurant menus, June 2010-December 2011
                                      • Broader Market Environment

                                        • Key points
                                          • 2012: tough market conditions but opportunities too
                                            • Figure 12: GfK NOP Consumer Confidence Index, monthly, January 2007-December 2011
                                          • ‘Austerity fatigue’: pros and cons
                                            • Figure 13: Consumer spending priorities (after bills), December 2009-December 2011
                                            • Figure 14: Consumer behaviour trends, ‘I treat myself to more premium foods, instead of eating out’, January 2009-December 2011
                                          • Britain’s ageing population
                                            • Figure 15: Trends in the age structure of the UK population, 2006-16
                                            • Figure 16: Forecast adult population trends, by lifestage, 2006-16
                                        • Competitive Context – In-Home Hot Drinks

                                          • Key points
                                            • In-home coffee options used as well as, not instead of, out-of-home coffee shops
                                              • Figure 17: Ownership trends of filter coffeemakers/cafetières and espresso machines, 2007-11
                                            • Mintel Inspire trend Guiding Choice
                                            • Competitive Context – Out of Home

                                              • Key points
                                                • Blurring boundaries between categories
                                                  • Selected non-specialist competitors
                                                    • Figure 18: Selected competitors to specialist coffee shop operators, by outlet numbers, 2012
                                                  • Greggs
                                                    • McDonald’s
                                                      • Patisserie Valerie
                                                        • Krispy Kreme
                                                          • Pret A Manger
                                                          • Strengths and Weaknesses in the Market

                                                            • Strengths
                                                              • Weaknesses
                                                              • Who’s Innovating?

                                                                • Key points
                                                                  • Widening distribution channels as operators chase footfall
                                                                    • The opportunities and pitfalls of loyalty cards
                                                                      • Design wars
                                                                        • Providing additional reasons to visit
                                                                          • Product launches
                                                                          • Market Size and Forecast

                                                                            • Key points
                                                                              • Stronger performance in 2011, but it’s not all plain sailing for the coffee shop market
                                                                                • Figure 19: Market size and forecast of coffee shops, at current and 2011 prices, 2006-16
                                                                              • Forecast
                                                                                • Figure 20: Coffee shop market size and forecast, 2006-16
                                                                              • Forecast methodology
                                                                              • Market Share

                                                                                • Key points
                                                                                  • Costa Coffee dominates the market
                                                                                    • Figure 21: Outlet numbers of coffee shops, 2010 and 2011
                                                                                • Companies and Products – Coffee Shops

                                                                                  • Key points
                                                                                    • Specialist coffee shop operators
                                                                                      • Figure 22: Outlet numbers of selected specialist coffee chains, 2011
                                                                                    • Costa Coffee
                                                                                      • Financial performance
                                                                                        • Recent developments
                                                                                          • Starbucks
                                                                                            • Financial performance
                                                                                              • Figure 23: Financial performance of Starbucks Coffee Limited UK, 2009 and 2010
                                                                                            • Recent developments – stores
                                                                                              • Recent developments – food and drink
                                                                                                • Recent developments – other
                                                                                                  • Caffè Nero
                                                                                                    • Financial performance
                                                                                                      • Figure 24: Financial performance of Caffè Nero Group Limited, 2010 and 2011
                                                                                                    • Recent developments
                                                                                                      • Coffee Republic
                                                                                                        • Recent developments
                                                                                                        • Brand Communication and Promotion

                                                                                                          • Key points
                                                                                                            • Operators vie for market share from non-specialists as well as each other
                                                                                                              • Figure 25: Advertising expenditure on selected coffee shop brands, 2007-11
                                                                                                              • Figure 26: Advertising expenditure on selected coffee shop brands, by media type, 2011
                                                                                                            • Coffee shop websites are largely lacklustre
                                                                                                              • Figure 27: Average daily visitors at sites of selected coffee shop brands, January 2009-December 2011
                                                                                                          • How Often Do People Use Coffee Shops?

                                                                                                            • Key points
                                                                                                              • Specialist coffee shops: Visiting habits
                                                                                                                • Usage drops marginally in 2011
                                                                                                                  • Figure 28: Frequency of visiting coffee shops, 2007-11
                                                                                                                • Convenience-driven and time-pressed consumers push up takeaway usage
                                                                                                                  • Figure 29: Coffee shop usage, sit-in and takeaway, 2007-11
                                                                                                              • Who Buys Coffee Out of home and Where Do They Go?

                                                                                                                • Key points
                                                                                                                  • Non-specialists are competing on interiors/environments now, not just price
                                                                                                                    • Figure 30: Out-of-home hot drink purchasing behaviour, either sit-in or takeaway, December 2011
                                                                                                                  • Convenience drives out-of-home hot drinks purchasing behaviour, not brand loyalty
                                                                                                                    • Trend towards takeaways
                                                                                                                      • Figure 31: Out-of-home hot drink purchasing behaviour – sit-in vs takeaway, December 2011
                                                                                                                  • How Have Out-of-Home Coffee Habits Changed?

                                                                                                                    • Key points
                                                                                                                      • A quarter of users have been cutting back
                                                                                                                        • Figure 32: Out-of-home coffee/tea/hot drink habits, by frequency and expenditure, December 2011
                                                                                                                      • Creating a buzz to engage with younger consumers
                                                                                                                        • Balancing concepts of value
                                                                                                                        • Attitudes Towards Coffee Out of home

                                                                                                                          • Key points
                                                                                                                            • Consumer retention damaged by lack of brand differentiation
                                                                                                                              • Figure 33: Attitudes towards coffee/tea/hot drinks out of home, December 2011
                                                                                                                            • Fast pace of coffee shops deters older consumers
                                                                                                                              • Guiding choice
                                                                                                                                • Lack of loyalty in the coffee shop market
                                                                                                                                  • Figure 34: Attitudes towards coffee/tea/hot drinks out of home, by any agree and strongly agree, December 2011
                                                                                                                                • Limited demand for better serving options
                                                                                                                                • Coffee Shops’ Menu Enticements

                                                                                                                                  • Key points
                                                                                                                                    • Consumers remain value-led
                                                                                                                                      • Figure 35: Coffee shops’ menu enticements, December 2011
                                                                                                                                    • Men don’t ask for directions or read maps
                                                                                                                                      • Figure 36: Coffee shops’ menu enticements, by any interest and very interested, December 2011
                                                                                                                                    • How to provide more food whilst still being a coffee shop
                                                                                                                                      • Afternoon teas – capitalising on the ‘Britishness’ of 2012
                                                                                                                                        • Regularly changing specials – consumers looking for additional reasons to purchase
                                                                                                                                          • Appealing to yummy mummies
                                                                                                                                            • Limited appeal of tea variants
                                                                                                                                            • Coffee Shops – Targeting Opportunities

                                                                                                                                              • Key points
                                                                                                                                                • Target groups
                                                                                                                                                  • Figure 37: Coffee shop target groups, December 2011
                                                                                                                                                • Apathetic
                                                                                                                                                  • Quality-Driven
                                                                                                                                                    • Adventurous Drinkers
                                                                                                                                                      • Fuss-Free
                                                                                                                                                        • Undetermined
                                                                                                                                                        • Appendix – How Often Do People Use Coffee Shops?

                                                                                                                                                            • Figure 38: Frequency of visiting coffee shops, by detailed demographics, 2011
                                                                                                                                                            • Figure 39: Sit-in or takeaway visits to coffee shops, by detailed demographics, 2011
                                                                                                                                                        • Appendix: Who Uses Coffee Shops and Where Do They Go?

                                                                                                                                                            • Figure 40: Out-of-home hot drink purchasing behaviour, by venue, December 2011
                                                                                                                                                            • Figure 41: Most popular out-of-home hot drink purchasing behaviour (drink in), by detailed demographics, December 2011
                                                                                                                                                            • Figure 42: Next most popular out-of-home hot drink purchasing behaviour (drink in), by detailed demographics, December 2011
                                                                                                                                                            • Figure 43: Most popular out-of-home hot drink purchasing behaviour (takeaway), by detailed demographics, December 2011
                                                                                                                                                            • Figure 44: Next most popular out-of-home hot drink purchasing behaviour (takeaway), by detailed demographics, December 2011
                                                                                                                                                            • Figure 45: Out-of-home hot drink purchasing behaviour (lapsed/non-users), by detailed demographics, December 2011
                                                                                                                                                        • Appendix – How Have Out-of-home Coffee Habits Changed?

                                                                                                                                                            • Figure 46: Out-of-home coffee purchasing behaviour, December 2011
                                                                                                                                                            • Figure 47: The number of times tea/coffee/other hot drinks bought out of home, by detailed demographics, December 2011
                                                                                                                                                            • Figure 48: The amount of money I spend on buying tea/coffee/other hot drinks out of home, by detailed demographics, December 2011
                                                                                                                                                            • Figure 49: Drinking in out-of-home coffee purchasing behaviour, by most popular coffee shops visited, December 2011
                                                                                                                                                            • Figure 50: Drinking in out-of-home coffee purchasing behaviour, by next most popular coffee shops visited, December 2011
                                                                                                                                                            • Figure 51: Takeaway from out-of-home coffee purchasing behaviour, by most popular coffee shops visited, December 2011
                                                                                                                                                            • Figure 52: Takeaway from out-of-home coffee purchasing behaviour, by next most popular coffee shops visited, December 2011
                                                                                                                                                            • Figure 53: Out-of-home coffee purchasing behaviour, by financial situation, December 2011
                                                                                                                                                            • Figure 54: Out-of-home coffee purchasing behaviour, by anticipations about next year financial situation, December 2011
                                                                                                                                                            • Figure 55: Where do you choose to spend your extra money, by the number of times tea/coffee/other hot drinks bought out of home, December 2011
                                                                                                                                                            • Figure 56: Where do you choose to spend your extra money, by the amount of money spent on buying tea/coffee/other hot drinks out of home, December 2011
                                                                                                                                                        • Appendix – Attitudes towards Coffee Out of Home

                                                                                                                                                            • Figure 57: Attitudes towards coffee out of home, December 2011
                                                                                                                                                            • Figure 58: Agreement with the statements ‘I’m not very adventurous when it comes to ordering different drinks’ and ‘I don’t tend to choose anything new/different, because it’s not always clear what the other drinks are’, by detailed demographics, December 2011
                                                                                                                                                            • Figure 59: Agreement with the statements ‘I know what I like and am not interested in trying anything new’ and ‘I like to choose something different from what I tend to drink at home’, by detailed demographics, December 2011
                                                                                                                                                            • Figure 60: Agreement with the statements ‘Quality is most important to me when choosing where to buy tea/coffee, etc out of home’ and ‘I just like to order my coffee/hot drink with the minimum of fuss’, by detailed demographics, December 2011
                                                                                                                                                            • Figure 61: Agreement with the statements ‘Convenient location is more important than brand of coffee chain’ and ‘When available I will often order seasonal drinks’, by detailed demographics, December 2011
                                                                                                                                                            • Figure 62: Agreement with the statements ‘I don't like the mugs/cups etc that tea/coffee out of home are served in’ and ‘I usually choose the cheapest place for tea/coffee etc out of home’, by detailed demographics, December 2011
                                                                                                                                                            • Figure 63: Agreement with the statements ‘I tend to pick the place with the shortest queues’ and ‘I have a favourite brand which I will always use/visit where available out of home’, by detailed demographics, December 2011
                                                                                                                                                            • Figure 64: Drinking in any agreement with attitudes towards coffee out of home, by most popular coffee shops visited, December 2011
                                                                                                                                                            • Figure 65: Drinking in any agreement with attitudes towards coffee out of home, by next most popular coffee shops visited, December 2011
                                                                                                                                                            • Figure 66: Takeaway from any agreement with attitudes towards coffee out of home, by most popular coffee shops visited, December 2011
                                                                                                                                                            • Figure 67: Takeaway from any agreement with attitudes towards coffee out of home, by next most popular coffee shops visited, December 2011
                                                                                                                                                            • Figure 68: Agreement with attitudes towards coffee out of home, by most popular any agreement with attitudes towards coffee out of home, December 2011
                                                                                                                                                            • Figure 69: Agreement with attitudes towards coffee out of home, by next most popular any agreement with attitudes towards coffee out of home, December 2011
                                                                                                                                                            • Figure 70: Agreement with attitudes towards coffee out of home, by other any agreement with attitudes towards coffee out of home, December 2011
                                                                                                                                                            • Figure 71: Agreement with attitudes towards coffee out of home, by the number of times tea/coffee/other hot drinks bought out of home, December 2011
                                                                                                                                                            • Figure 72: Agreement with attitudes towards coffee out of home, by the amount of money spent on buying tea/coffee/other hot drinks out of home, December 2011
                                                                                                                                                        • Appendix – Coffee Shops’ Menu Enticements

                                                                                                                                                            • Figure 73: Coffee shops’ menu enticements, December 2011
                                                                                                                                                            • Figure 74: Lower-calorie drinks available on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 75: Lower-caffeinated drinks/decaffeinated drinks available on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 76: Herbal/fruit teas available on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 77: Speciality teas available on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 78: Better descriptions of what drinks are in coffee shops, by detailed demographics, December 2011
                                                                                                                                                            • Figure 79: Fruit juices/smoothies available on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 80: More general information on drinks on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 81: Meal deals (drink and food item for one price) available on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 82: Smaller drink/cup sizes on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 83: Range of regularly changing specials on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 84: Afternoon tea available on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 85: Wider variety of food available on coffee shops’ menus, by detailed demographics, December 2011
                                                                                                                                                            • Figure 86: Any interest in the coffee shops’ menu enticements, by most popular coffee shops visited (drink in), December 2011
                                                                                                                                                            • Figure 87: Any interest in the coffee shops’ menu enticements, by next most popular coffee shops visited (drink in), December 2011
                                                                                                                                                            • Figure 88: Any interest in the coffee shops’ menu enticements, by most popular coffee shops visited (takeaway), December 2011
                                                                                                                                                            • Figure 89: Any interest in the coffee shops’ menu enticements, by next most popular coffee shops visited (takeaway), December 2011
                                                                                                                                                            • Figure 90: Any interest in the coffee shops’ menu enticements, by change in the number of times tea/coffee/other hot drinks bought out of home, December 2011
                                                                                                                                                            • Figure 91: Any interest in the coffee shops’ menu enticements, by change in the amount of money spent on buying tea/coffee/other hot drinks out of home, December 2011
                                                                                                                                                        • Appendix – Coffee Shops – Targeting Opportunities

                                                                                                                                                            • Figure 92: Target groups, by detailed demographics, December 2011
                                                                                                                                                            • Figure 93: Attitudes towards coffee out of home, by target groups, December 2011

                                                                                                                                                        Companies Covered

                                                                                                                                                        • Caffé Nero Group Plc
                                                                                                                                                        • Cineworld
                                                                                                                                                        • Coffee Republic Plc
                                                                                                                                                        • Costa
                                                                                                                                                        • Rainforest Alliance
                                                                                                                                                        • Starbucks Coffee Company UK Ltd
                                                                                                                                                        • Welcome Break Group Ltd
                                                                                                                                                        • WH Smith PLC

                                                                                                                                                        Coffee Shops - UK - February 2012

                                                                                                                                                        £1,750.00 (Excl.Tax)