Coffee shop market still wide awake and hyper-active

A few years back there were many detractors of the rapidly expanding coffee shop market who were continually forcasting the “froth to be blown off the coffee market”.

But it never really happened and such is the acceptance of the ongoing high growth rates of this category that today nobody seems willing to risk calling the top anymore – maybe for fear of getting froth all over their faces.

The big chains Costa, Caffe Nero and Starbucks continue to grow at frenzied rates and are increasingly joined by non-specialists wanting to get in on this high-margin part of the leisure and hospitality market. Among the biggest to have joined them in recent times are McDonald’s and JD Wetherspoon.

If you are among the rare few, who are still unconvinced of the ongoing growth in the coffee market, then just take a look at the Whitbread-owned Costa chain. It is now the biggest UK coffee shop operator with 1,175 branches and has enjoyed an incredible 35 consecutive quarters of like-for-like growth.

There can’t be many other retail categories that could sustain such growth from the largest player in the market. It certainly validates the strategy of Whitbread’s management to largely jettison its long-standing pubs and brewing businesses some years back.

And the forecasts over the next few years look equally buoyant, according to the key research house in this part of the market Allegra Strategies, whose ‘Project Cafe 10’ report calculates the sector will go from a current 14,000 outlets to 16,700 by August 2013. This follows on from the 800 units that were added in 2010.


Growth rates the rest of the retail industry would probably kill for. [Source: Caterer & Hotelkeeper]


This rapid growth is set against a back drop on the high street of increasing under-performance by many retailers. Just compare the 2.5% growth seen in the broad UK retail market during 2010 with the enormous 12% enjoyed by the coffee shop market.

And the way things are going so far in 2011 it could be that the growth disparity between general retailers on the high street and their coffee shop counterparts becomes even wider. Coffee shops really are one of the very few bright spots on the increasingly troubled British high street.