UK coffee shop sector 2021: recovering from COVID and meeting new shopper needs

The coffee shop market has seen significant changes over the past year, with specialists severely impacted by lockdowns and site closures. 

In 2020, 59.5% of sales were lost and coffee specialists’ share of the food-to-go market decreased by 5.1%. However, recovery has begun and by 2022 the market is set to grow to £2.8bn – a 115% increase from 2020, although this will still be 15% less than in 2019.

Source: IGD UK coffee shop sector report 2021  

In our latest report on the coffee shop sector and its shoppers, we look at the operations and shopper profiles of the three biggest players – Costa, Starbucks and Caffè Nero – and the new entrants who may disrupt the market.  

Food ranges and availability are a top priority for shoppers

Shoppers are concerned with food-to-go ranges and availability. However, the selection of hot and cold food is something that they are least satisfied with, with average satisfaction ratings for food on offer being 3.8 out of 5. This suggests that availability of food-to-go should be a priority for coffee specialists, who should ensure different ranges are available at different times of day as this could help encourage shoppers to complete more of their missions in coffee specialists. 

 

Source: IGD The Coffee Shop Shopper Report, June 2021

 

Challenges and opportunities

The sector is currently presented with several challenges because of the pandemic, including sales recovery and targeting hybrid/remote workers. With working from home likely to be long-term for many, capturing customers has become more difficult due to loss of commuters. 

However, this provides opportunities to diversify formats and offer products in new ways, such as delivery, drive-thrus, click and collect and the creation of at-home ranges to be sold online or in partnership with supermarkets. 

In trying to retain customers, technological opportunities, such as app development will help brands to re-engage customers and improve loyalty. 

Competition intensifying 

Competition is rising from independent coffee shops and larger retailers who are creating their own brands, for example Co-op’s Ever Ground and Musgrave’s Frank and Honest. With retailers creating their own coffee and developing self-service machines to replace the branded ones they may have in-store, chains may lose some of their sites in prominent on-the-go locations such as service stations and forecourts. 

Food-to-go specialists are another source of competition, with Pret and Leon creating coffee subscriptions to encourage customers into their stores daily. Coffee subscriptions build on customer loyalty and provide cross-selling opportunities for food. While none of the major coffee chains have yet created a coffee subscription, the increasing number of competitors doing so makes it likely that we will see them follow soon. 

 Source: IGD Research

Key trends shaping the market

The key trends which we see shaping coffee specialists in 2021 include:

• Sustainability 
• Diverse formats
• Menu development
• Loyalty 
• Digital
• Retail 
• Brand experience 

Where can coffee specialists look for inspiration?

The rising stars in the UK coffee specialist market which pose a threat to the major players include: Bewiched Coffee, WatchHouse, Paddy and Scott’s, and Caffe Carluccio’s. Some of these brands are new to the market and their concepts have the potential to disrupt the market – larger specialists will need to pay attention to their operations.

Internationally, Singapore’s first robot barista, Ella by Crown Coffee, provides inspiration for disruptive innovation in the coffee specialist market. 

 

Source: Crown Coffee