Branded coffee shop operators “remain cautious” amid the ongoing cost-of-living crisis despite the £5.3bn market achieving sales growth well above pre-pandemic levels in 2023.

World Coffee Portal’s Project Café UK 2024 report forecasts the total branded coffee shop market will exceed 10,500 outlets by January 2025, and more than 11,600 by January 2029 at five-year outlet growth of 2.7% CAGR.

Sales are expected to exceed £7.2bn over the same period, representing five-year growth of 6.2% CAGR.

While the cost-of-living crisis has eased slightly over the last 12 months, consumer spending remains constrained, with stubbornly high inflation eroding out-of-home coffee’s affordable luxury status, the report notes.

Amid high costs, branded coffee chains have increased coffee prices by an average of around 9% over the last 12 months – mirroring a 9% fall in consumer satisfaction with value-for-money.

Average spend also fell 4% year-on-year, with consumers more likely to purchase a beverage only or spend less overall on food items.

A quarter of operators saw net reductions in their outlet portfolios over the last 12 months, with 29% not opening any net new outlets.

However, the proportion of industry leaders describing trading conditions as ‘positive’ rose 12% to reach 49%. UK operators are increasingly mitigating the investment risks of outlet expansion through franchising.

For example, around 40% of Costa Coffee’s 2,670 UK stores are franchised, with the largest franchise operator, Scoffs Group, managing around 114 outlets.

The report also notes specialty coffee shops as a growing segment, “as consumer sophistication grows and demand for higher quality beverages gains mainstream appeal.”

This has enabled prominent specialty coffee operators such as WatchHouse and Grind to attract new investment while achieving unprecedented outlet, e-commerce and wholesale growth over the last 12 months.

Meanwhile, non-coffee-focused branded cafés are growing their presence in the UK.

Specialist bubble tea chains are increasingly vying for branded coffee shop trade, as brands such as Mooboo, Cupp and Chatime achieve significant growth in the last 12 months.

Premium drinking chocolate is also making headway in the UK branded café market, as Knoops is seeking to grow from 17 UK sites to 120 by 2028.