Coffee Shops - UK - December 2016


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Mintel

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Coffee shops have countered brand fatigue by experimenting with quick-service formats and better food options. Price-led concepts rival non-specialists that are eating into the market share. Meanwhile, efforts in cutting down packaging waste and reducing added-sugar content give coffee shops an edge over competitors.

Table of Contents

OVERVIEW
What you need to know
Covered in this Report

EXECUTIVE SUMMARY
The market
Figure 1: UK coffee shop market, value sales, 2011-21
Key players
Costa Coffee continues to dominate the market
Premium pricing of specialty coffee may have peaked
Starbucks changes business mix
The consumer
Non-specialists continue to threaten branded coffee shops
Men and women equally likely to buy coffee out-of-home
Figure 2: Outlets used to buy hot drinks out-of-home, October 2016
Young men are likely to sit-in than takeaway
Figure 3: Frequency of using coffee shops, 2014-16, October 2016
Afternoon teas could appeal to women
Users want healthier beverages as much as guilty pleasures
Figure 4: Interest in coffee shop product concepts, October 2016
Efforts to cut down on packaging waste could appeal to coffee drinkers
More men prefer to drink hot drinks at home
Figure 5: Coffee shop buying behaviours and preferences, October 2016
Young women see coffee from branded coffee shops as too expensive
Young men value the convenience of takeaway drinks
Women and parents demand better food options
Figure 6: Attitudes towards coffee shops/hot drinks outlets, October 2016
What we think

ISSUES AND INSIGHTS
Low-cost coffee can win customers’ favour
The facts
The implications
Efforts to reduce coffee cup waste can attract customers
The facts
The implications
Coffee shops offer better food options in a competitive eating out market
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
The coffee shop market is in growth...
...and looks set to continue growing
Coffee production comes under pressure
Sugar tax is key challenge for drinks with added sugar
Central London rising rents and rates could temper growth

MARKET SIZE AND FORECAST
The coffee shop market is worth £3.4bn in 2016…
Figure 7: UK coffee shop market, value sales, 2011-21
…and forecasted to reach £4.4 bn by 2021
Figure 8: UK coffee shops market, value sales and forecast, 2011-21
Forecast methodology

MARKET DRIVERS
Savings to rival eating out as main discretional spending area
Figure 9: Selected consumer spending priorities (after bills), October 2015-September 2016
Britain’s ageing population
Figure 10: Trends in the age structure of the UK population, 2011-16 and 2016-21
Coffee production comes under pressure
Sugar tax is key challenge for drinks with added sugar
Central London rents and rates continue to rise above inflation

KEY PLAYERS – WHAT YOU NEED TO KNOW
Costa Coffee to focus on its food options
Independents at risk of overpricing coffee
Starbucks changes business mix
Caffè Nero acquires Harris + Hoole

MARKET SHARE
Costa Coffee retains lead by store and usage numbers
Figure 11: Outlet numbers of selected UK coffee shops, 2013-16
Independents boost the coffee shop market
Figure 12: Coffee shop usage habit, 2013-16, October 2016
Starbucks shows preference for more licensed stores
Caffè Nero acquires Harris + Hoole

LAUNCH ACTIVITY AND INNOVATION
Reducing sugar intake
Cutting coffee cup waste
Boosting out-of-home tea consumption
New concepts
24-hour trading can bolster sales and offer flexibility to staff
Starbucks and Costa expand into Express formats
A greater choice of food and drinks to increase all-day usage
Serving up alcohol to increase evening visits
Caffè Nero rolls out mobile wallet scheme

ADVERTISING AND MARKETING ACTIVITY
Overall ad spend fell in 2015
Figure 13: Recorded above-the-line, online display and direct mail advertising expenditure on selected coffee shops, 2012-16
Starbucks uses digital, outdoor and press to support Teavana
Esquires Coffee uses print ads to support franchise business
Figure 14: Advertising expenditure by selected coffee shops, by media type, 2012-16
Nielsen Ad Intel coverage

BRAND RESEARCH
Brand map
Figure 15: Attitudes towards and usage of selected brands, October 2016
Key brand metrics
Figure 16: Key metrics for selected brands, October 2016
Brand attitudes: Costa and Caffé Nero lead on reputation, quality and customer service
Figure 17: Attitudes, by brand, October 2016
Brand personality – Macro: Greggs and McCafé stand on par with Costa as vibrant, accessible and fun
Figure 18: Brand personality – Macro image, October 2016
Brand personality – Micro: Starbucks takes the lead as cool, Costa is most welcoming
Figure 19: Brand personality – Micro image, October 2016
Brand analysis
Greggs rivals coffee shops as the most trusted brand of all
Figure 20: User profile of Greggs, October 2016
Costa Coffee appeals to women
Figure 21: User profile of Costa Coffee, October 2016
Only 5% of users see McCafé as a favourite brand
Figure 22: User profile of McCafé, October 2016
Caffè Nero viewed as a boring brand
Figure 23: User profile of Caffè Nero, October 2016
Starbucks is exciting but unethical
Figure 24: User profile of Starbucks, October 2016

THE CONSUMER – WHAT YOU NEED TO KNOW
Three in five Brits have bought from coffee shops
44% of Brits have bought hot drinks from non-specialists
70% of 45-65s find coffee from big coffee shop chains too expensive
36% of women are interested in afternoon tea in coffee shops
Users want healthier beverages as much as guilty pleasures
16% of coffee drinkers interested in different levels of caffeine
51% of coffee drinkers prefer to drink hot drinks at home
32% of coffee drinkers value the convenience of takeaway drinks
54% of coffee drinkers would like more food options

COFFEE SHOP USAGE HABITS
More than three in five Brits have bought from coffee shops
Non-specialists continue to grab the market
Figure 25: Coffee shop usage habit, by outlet type, October 2016
Costa Coffee continues to dominate the market
Figure 26: Outlets used to buy hot drinks out-of-home, October 2016
Almost three in 10 buy hot drinks from fast food chains
Older women are core users of independent coffee shops
Figure 27: Outlets used to buy hot drinks out-of-home, 2013-16, October 2016
Scope to engage with older age groups
Figure 28: Usage of any coffee shop specialist to buy hot drinks out-of-home, by age groups, October 2016

FREQUENCY OF USING COFFEE SHOPS
Figure 29: Frequency of using coffee shops, October 2016
More people sit-in than takeaway
Figure 30: Frequency of using coffee shops, 2014-16, October 2016

INTEREST IN COFFEE SHOP PRODUCT CONCEPTS
Afternoon teas could help create a new revenue stream
Users want healthier beverages as much as guilty pleasures
Offering different levels of caffeine could add interest to coffee shops
Figure 31: Interest in coffee shop product concepts, October 2016

COFFEE SHOP BUYING BEHAVIOURS AND PREFERENCES
Coffee drinkers prefer to drink hot drinks at home
Figure 32: Examples of coffee retail brands in the UK, 2016
Efforts to cut down on packaging waste could help appeal to coffee drinkers
Figure 33: Coffee shop buying behaviours and preferences, October 2016

ATTITUDES TOWARDS COFFEE SHOPS/HOT DRINKS OUTLETS
Coffee from branded coffee shops is seen as too expensive
One in three users values the convenience of takeaway drinks
Food options are in demand by women and parents
Scope for targeted discounts
Almost two in five coffee drinkers are enthusiasts
Figure 34: Attitudes towards coffee shops/hot drinks outlets, October 2016

CHAID ANALYSIS
Methodology
Meal deals can help branded coffee shops grab lunch market
Figure 35: Coffee shops – CHAID – Tree output, October 2016
Figure 36: Target groups based on people’s attitudes towards coffee shops – CHAID – Table output, October 2016

APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology

APPENDIX – MARKET SIZE AND FORECAST
Forecast Methodology
Figure 37: Best- and worst-case forecasts for UK coffee shops market, 2015-20

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