The UK coffee market is still growing despite the recession, with the industry set to see a 5% rise in branded coffee shops to reach 4,000 outlets this year, according to new research.
The latest annual report of the branded coffee chain sector by Allegra Strategies found that the industry remained on track to reach £2bn in consumer spend by 2012.
The sector, which currently has 3,721 outlets, is set to see market turnover grow by at least 3% in 2009, with stronger growth forecast for 2010 and 2011.
Nearly two-thirds of branded coffee shop operators interviewed showed flat or growing like-for-like sales in the last two quarters.
The largest operators, however, still remained under intense competition as consumers decreased their average spend and many cut the number of their visits.
While consumers were found to be trading down when they could and were becoming more demanding with their choice of outlet, few were shown to be completely forgoing their daily or weekly coffees.
The two largest operators Costa Coffee and Starbucks planned to accelerate their growth plans in the UK and were looking to take advantage of increasing property vacancies, greater availability of suitable sites, the ability to negotiate better terms and lower rents with landlords, as well as the fact that councils were taking a more favourable view of branded coffee shops in light of growing empty spaces on high streets.
A growing trend towards more authentic individual coffee shops was nevertheless set to impact on the largest chains, as consumers increasingly sought higher quality coffee experiences.
More than 80% of the 130 senior coffee executives surveyed said that they believed it would take 12 to 18 months before the trading environment recovered fully.
Jeffrey Young, managing director of Allegra Strategies, said: “While we are not predicting economic recovery in 2009, there is some evidence that green shoots are beginning to appear in some areas of the economy.
“Certainly this is the case in the branded coffee shop sector, with 50% more executives predicting recovery within 12 months than those forecasting that recovery more than 18 months away.
“This is encouraging, because economic activity is heavily dependent on the psychology of the market. Furthermore, the branded coffee chains are extremely well placed to enjoy sustained growth in sales and profitability once the economy returns to full force.”
