The café scene remains as competitive as ever, with consumers demanding innovative beverages that justify the price charged for them. Bearing in mind that many of these café aficionados have all the ingredients and professional machines to make good brews at home, they have a point.
There is, however, positivity in the marketplace. Research carried out for the Caffè Culture Show revealed just over 59% of independent operators saw business improve in 2014, and many have been encouraged by the 48% that visit their businesses two or three times a week, with 43% spending more than £5 each time.
Meanwhile, Allegra World Coffee Portal’s Project Café2015 UK report reveals that branded coffee chains achieved a £2.9bn turnover across 5,781 outlets, growth of 11.9%, and outlet growth of 4.9% during 2014. Costa, Starbucks and Caffè Nero grabbed 56% of the branded market based on outlet numbers. Costa was also the number one seller of speciality coffee with an estimated 149 million cups sold annually, followed by McDonald’s selling around 126 million cups per year.
The analyst predicts that the total UK coffee shop market will exceed 27,000 outlets and £16.5bn turnover by 2020.
Lynn Little, Nescafé ingredients lead at Nestlé Professional, claims that artisan coffee houses are “jostling for premium positions” on the high street alongside branded rivals.
“We now drink a staggering 42 million cups from coffee shops each week, and this is expected to reach 68 million by 2019,” she comments. “Consumers are more knowledgeable about the coffee they drink and have come to expect barista-quality beverages wherever they go. Cappuccino and latté are the most popular purchased out of home, and, in line with this, we extended our barista-style Nescafé Azera cappuccino and latte variants to operators.
“With nearly half of coffee shop visitors choosing medium 12oz cups, the rise in popularity of espresso and flat white and a mentality of ‘trade down rather than cut out’ has meant that more consumers are ‘going small’, so be sure to offer smaller cup sizes,” she adds.
Susan Nash, trade communications manager at Mondelez International, claims that hot beverages and fresh-brew floor standing vending systems are in growth, although vending operators are under pressure to provide an experience closer to ‘coffee shop’ coffee.
Mondelez has responded by offering Kenco Millicano in 500g tins and 300g vending bags. The product is also available as part of the Kenco2Go range.
Steve Brecher, head of business excellence at Peros, recommends bringing in a guest coffee to refresh menus and appeal to customers wanting to experiment with new flavours. “Increasingly, this is the norm on the high street, so is a minimum requirement for operators who want to compete effectively,” he explains.
He says ethical credentials are important for all hot beverages, particularly Fairtrade which has strong recognition in the UK. “Statistics suggest that 78% of those familiar with the Fairtrade Mark associate it with helping farmers in poor countries tackle poverty,” he comments. “This positive association appears to drive higher spending; UK sales of Fairtrade goods grew by 14% in 2013 to £1.78bn.”
Tea has seen a revival in the UK and Allegra’s latest report on tea drinking reveals that sales in coffee shops are estimated at £300m. The analyst adds that although tea consumption in coffee shops has risen 3% in the last two years from 14% in 2012 to 17% in 2014, 15% of consumers intended to increase their consumption this year.
Premium brands such as Teapigs were considered by 62% of consumers to be the most important factor when ordering tea out of home, and 53% indicated they would spend more on them. An average spend of £1.68 on a cup of tea out of home, was thought by consumers to be good value compared to £2.31 for a latte or cappuccino. This price difference means that 38% consider tea to be good value for money in coffee shops, the report states.
Natalie Cross, out of home manager at Taylors of Harrogate, says that its research found that 57% of UK tea drinkers felt that tea out of home is too weak, while 67% stated they would never return to outlets that had served them a bad cup of tea. “We believe Yorkshire tea should form the basis of any menu as our research revealed that 63% of consumers would choose the brand over others, if it was available,” she says.
The company’s repertoire also includes fruit and herbal infusions, which it says is a market now worth £68.2m, while green tea is worth £32.6m. Its latest green tea range, produced in partnership with the Royal Botanic Gardens at Kew, includes pure Sencha, and grapefruit and lime, strawberry and vanilla, and sweet mint green tea.
Hot chocolate is another important beverage and Nash from Mondelez, which produces Cadbury Wispa hot chocolate drink, says the business has developed a range of menu ideas to help drive sales. “Cadbury offers a great opportunity to offer a more expansive, premium menu of drinking chocolate,” she comments. “For example, recipes such as ‘scrumptious strawberry surprise’, uses strawberry syrup to add a fruity mix to classic drinking chocolate.”
Carpigiani’s Chocolady machine produces high quality drinking chocolate and allows customers to see it being made, says sales director Scott Duncan. He adds that additional profit can be made with extras such as chocolate flakes or whipped cream.
Duncan says that sales have remained strong as hot chocolate appeals to children and adults: “Hot chocolate is often viewed as an indulgent treat when away from home; it is therefore crucial that consistent high quality is maintained to ensure repeat business.”