Covid-19 sets back UK branded coffee shop growth by 7 years
The Project Café UK 2021 report, a study of the UK branded coffee shop market by the World Coffee Portal has revealed that the £3bn market segment has suffered a near 40% drop in sales over the last 12 months due to Covid-19 restrictions.
Both sales and number of outlets have dropped
- The total number of UK branded coffee shop outlets decreased by 182 over the last 12 months, now a total of 9,159 outlets
- Covid-19 set back UK branded coffee shop sales down to 2013 levels, wiping almost £2bn off the market value
- Sales are down -39% and number of outlets are down -1.9%
- Growth in number of outlets is expected in 2022
Covid-19 has changed the UK coffee shop market
Ongoing Covid-19 restrictions including temporary store closures, takeaway-only, and the need for customers to stay home has added to sharp sales declines at UK branded coffee shops. While a steep reduction in commuting has slashed footfall at travel hubs and cities, many neighbourhood outlets have benefitted from increased levels of home working as more customers shop locally.
This is reflected in the first fall in the number of Greater London-based coffee shops in 20 years. London now has 2,330 branded coffee shops, down 1.9% from 2019, but still accounts for more than one quarter of all UK branded cafés.
However, Costa Coffee, Greggs and Starbucks added 56, 28 and 30 locations to operate 2,681, 2,078 and 1,025 stores respectively. Caffè Nero suffered the most and closed net 16 stores and now operates 648 UK outlets.
UK cafés margins have suffered – no surprises!
Unsurprisingly, in the midst of such drops, 59% of industry leaders surveyed by the World Coffee Portal reported a year-on-year loss exceeding 5% over the last 12-months. Those that made loss reported an average negative financial impact of £27,650 per store, per month.
Reflecting the sombre national mood, just 15% of industry leaders surveyed are positive about the current trading environment, down from 69% from 12 months ago.
Coffee shops need to adapt or die
While 85% of the 35,000 UK consumers surveyed during Autumn 2020 reported typically visiting coffee shops at least once a week, just 56% have maintained this frequency during the pandemic.
A number of stores including Costa Coffee, Greggs, Starbucks and Caffè Nero have adapted by introducing hot drink and food delivery, with 26% of UK consumers surveyed saying they would regularly use this service if the option were more readily available.
Drive-thru has also been beneficial as convenience and safety takes precedent over in-store experience. Costa Coffee, Starbucks and Tim Hortons possess the UK’s largest branded coffee chain drive-thru presence, with 200, 109 and 10 sites respectively, adding a combined total of 76 locations during 2020.
At least three years before we’re back to normal
The total market is forecasted recover to pre-Covid-19 levels by 2024 and exceed 9,600 outlets by 2025 at 1% compound annual growth rate (CAGR). The coffee-focused sub-segment is expected to exceed 5,700 outlets at 0.9% CAGR, with the food-focused sub-segment expected to exceed 3,800 stores at 1.1% CAGR.
Jeffrey Young, CEO of Allegra Group says: “While there is no doubt the UK’s branded coffee shops are here to stay, Covid-19 has had a devastating impact over the last 12 months. With the market suffering a near 40% sales decline in 2020, World Coffee Portal forecasts it will take at least three years before the segment returns to pre-pandemic levels.”
“Recovery will require significant innovation, discipline and leadership, with successful operators adapting to on-going trading challenges with smart, technology-led solutions and new store formats.”
“Unfortunately, we anticipate further casualties over the next 12-18 months and further government assistance may well be required to ensure the short-term viability of many coffee shops and the wider hospitality industry.”
All information from, and credit to Allegra World Coffee Portal
