Cafe sector froths with growth in sites

The popularity of coffee shops is showing no signs of abating with more than three cafes opening per day on average across the UK, according to new research.

A branch of Costa coffee on Edinburgh's George Street. Picture: Julie Bull

The study, commissioned on behalf of The London Coffee Festival, said the industry has poured £9.6 billion into the UK economy over the last 12 months, a year-on-year increase of 7.3 per cent.

There are now an estimated 24,000 coffee shops, a blend of non-specialists, independents, and major chains such as Starbucks, Costa Coffee and Caffe Nero. In the last year alone, 1,215 stores opened, with the daily average 3.3.

The big three chains contribute about a fifth of total coffee shop sales, with more than 2.4 billion cups sold a year in total, up from 2.3 billion the previous year, and the sector employs about 160,000 baristas nationwide.

The data also found about four in ten Brits reporting increased coffee consumption over the past 12 months, and about a fifth visiting at least once a day.

Jeffrey Young, founder of The London Coffee Festival, said: “Even in the face of market uncertainty with Brexit, the UK’s love affair with coffee shows no signs of stopping.

“For the industry to be contributing almost £10bn per year to the economy is an incredible achievement and shows how coffee has come to be the go-to drink for Brits and how advanced coffee-shop culture has become.”

It has been predicted that the number of coffee shops will overtake pubs by 2030 as lager is increasingly swapped for lattes as consumers cut their spend on food and drink and move away from buying big ticket items.

Whitbread said in January that its Costa Coffee arm in the UK saw strong year-on-year third-quarter sales growth of 7.2 per cent from new stores and Costa Express expansion.

Alison Brittain, Whitbread chief executive officer, said the increase came amid its aim to grow its presence in high footfall and “convenient” sites such as drive-thru and travel locations.

She added: “As a result of our channel strategy, more customers are drinking more cups of our coffee than ever before and we have gained market share. We have also continued to invest in the overall customer proposition, including new coffee, food and digital capability.

“Our Costa high street stores in the UK are highly profitable and generate strong returns. However, the well-publicised weak retail market footfall is negatively impacting our high street stores’ like-for-like performance and we expect this to continue for some time.”

Costa also faces growing competition from artisan coffee houses with a premium offering, while the cafe sector overall has been facing increased cost pressures from the likes of business rates, inflation and increased wage costs.

Cafes join the likes of hotels, bars, restaurants, and travel firms that comprise the UK’s powerhouse services sector, which last month saw activity fall to it lowest level since 2016’s Brexit vote.

Economic uncertainties and the Beast from the East took their toll, according to the Markit/Cips services purchasing managers’ index, which showed a reading of 51.7 for March, down from 54.5 in February.