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Franchises continue to dominate as growth in coffee sector is held back by Brexit

Written by Eric Johansson on Thursday, 18 January 2018. Posted in Franchise

A new report from Allegra World Coffee Portal reveals that UK coffee shops grew their turnover by 7.3% in 2017 and that Costa and Starbucks still dominate the industry

Franchises continue to dominate as growth in coffee sector is held back by Brexit

Even the most ardent tea lover must admit that coffee has become Britain’s favourite hot drink. Thanks to the disruptive power of franchises like Costa and Starbucks, the last two decades have transformed Blighty into a nation of java-quaffing espresso aficionados. However, while kicking back with a mug of morning joe seems unlikely to ever go out of style, there may be worries ahead: market uncertainty held back the coffee-shop sector’s growth in 2017, according to a new report from Allegra World Coffee Portal, the coffee-industry research firm.

In total, last year the sector’s turnover grew by 7.3% and it added 1,215 stores. And the two franchises Costa and Starbucks dominated the market, together with Caffè Nero. They each had 2,326, 956 and 675 outlets respectively, which combined made up 52.9% of the market. There are now over 24,000 outlets serving up hot lattes across the UK.

But despite these stellar figures, Allegra World Coffee Portal argues that sales could have been even better if it wasn’t for Brexit. Having interviewed more than 150 senior executives in the industry and surveyed 18,373 UK coffee shop visitors, the researchers reveal deep concerns over how the negotiations will affect things like trade and jobs. In fact, the report suggests that the climate has dampened like-for-like sales and impeded outlet growth, while the record-low value of the pound has meant higher equipment and import costs. That being said, some branches report that their sales have had a boost thanks to increased tourism. And, encouragingly, 71% of executives are still feeling bullish about the future.

And taking a glance at what might be coming down the road, Allegra Coffee Portal suggests that the market is only going to improve in the years to come: the emergence of the so-called Fifth Wave of coffee will mean the emergence of smaller and nimbler artisanal chains. For instance, the report highlights that chains such as Gail’s, Grind and Joe & The Juice all gained momentum in 2017. No doubt, this will also mean a great opportunity for new more artisanal franchises in the sector like Triple Two Coffee.

Commenting on the report, Jeffrey Young, CEO of Allegra Group said: “The UK coffee shop market continues to be robust despite current challenges, laying down modest growth in 2017 amid severe concern over the Brexit impact on jobs and investment. As the market matures and we enter the Fifth Wave, we’re seeing a new era of leading brands competing on excellence. Key players are sharpening their focus on customer experience to stay ahead of rivals. If leading coffee shops can do this successfully, the market will remain strong – it’s time for the industry to dig deep and capitalise on the opportunities ahead.”

The sector is hardly alone in being affected by the Brexit fallout: franchises in the cleaning, home-care and gym sectors have previously reported similar worries. Hopefully, the government will wake up and smell the coffee and keep the concerns of the franchising industry in mind as the negotiations proceed.

About the Author

Eric Johansson

As web editor and resident Viking, Johansson ensures Elite Franchise is filled with engaging and eclectic entrepreneurial stories. While one of our most prolific franchise writers, he has sharpened his editorial teeth by writing about entertainment and fitness. Follow him on Twitter at @EricJohanssonLJ to catch up with his stream of consciousness.

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