Despite dire predictions of saturation, the branded coffee bar market is still steaming ahead after seven years of consecutive growth and will generate sales of more than £1b a year by December 2005, a new study claims.
The fourth report into the coffee chain market by Allegra Strategies - which involved interviews with 125 industry leaders and more than 5,000 consumers - found that while the City and West End of London were approaching saturation point, there was still potential for growth in the capital's suburbs and secondary sites.
But the provinces, where rents are cheaper, will see the main thrust of the predicted expansion from now to December 2005. Coffee shop numbers are projected to grow by 11.6% a year in the regions, compared with just 6% in London.
In May, branded outlets accounted for 28% of the UK's 7,603 coffee shops. This sector has grown by 20% since December 2000 and is expected to increase by 9.5% from 2,146 outlets to 2,690 branches by December 2005.
Over this period, branded coffee shop chains such as Starbucks, Costa Coffee and CaffŠ Nero will increase their numbers by 30%, from 1,460 to 1,900. Their biggest challenge, suggests the report, is to boost average spend by increasing their food offer - a move evident in Coffee Republic's trial of a New York-style sandwich deli at its Baker Street branch in London.
Food-focused coffee bars such as Bakers Oven, Pret A Manger, O'Briens and Benjys are forecast to grow by 15% from 686 to 790 branches. They are facing increased competition from supermarket convenience stores.
The report found most operators enjoyed like-for-like sales growth of 3-5% in the 12 months to May. Coffee is expected to account for £384.5m of the total turnover of £904.7m forecast this year for the branded sector.
Starbucks remains the leading and fastest-growing brand, with 350 branches and a 24% market share, although Caffè Nero was voted the top coffee bar brand by consumers for the third consecutive year.
By Angela Frewin
COFFEE BITES
- 81% of consumers surveyed visit a coffee shop at least once a week, while 21% indulge daily.
- Cappuccinos and lattes are the most popular drinks.
- Only 3.6% of respondents drink flavoured coffees often, while 16.8% order them sometimes.
- Although 67.8% of consumers regularly or occasionally buy food with their coffee, nearly half think the food is expensive.