Research published by The NPD Group reveals intense competition for the coffee business in the British foodservice industry. It seems like there’s a coffee chain wherever you turn, and indeed Britain’s high street specialist coffee chains have increased their individual coffee servings by 21% since the year ending June 2008.
However, in the same period, other foodservice operators such as quick-service restaurant outlets, which are better known for serving burgers, chicken sandwiches or bakery products, have increased their sales of coffee three times faster, at 63%.
Pubs have also realised the importance of coffee and have increased servings by 18% since 2008.
The appeal of coffee has allowed operators to use it as a way of entering new eating opportunities or ‘dayparts’. As QSR operators have started to invest in coffee for breakfast and snacking, coffee shops have responded by trying to take a bite of their lunch business, which generates over 50% more spend than that produced by customers who just want snacks.
Although coffee shops now generate 27% of their traffic at lunchtime, they have only been able to achieve a marginal increase in their share of food servings to date as a result. And with other foodservice operators undercutting the coffee specialists by as much as £1.30 on a regular Americano, they must sell other items to maintain their profit margins.
Coffee shops are working hard to boost visits too. By the YE June 2017, Britain’s well-known coffee outlets had increased visits by 120 million since 2008 to 659 million visits a year, a 22% increase. They have increased visits faster than the wider QSR sector, which increased visits by 10% between 2008 and 2017. So far, despite the growing competition, coffee shops have maintained market share to provide some 41% of coffee servings in Britain’s QSR sector, a similar level to recent years. Britain’s high street coffee outlets now account for 6% of the visits of the entire British foodservice industry.
Cyril Lavenant, Foodservice Director UK at the NPD Group, said: “Britain’s coffee market is highly competitive, with specialist outlets not just competing against each other but also taking on the high street QSR brands. Quality coffee is now available in a huge variety of locations including fast-food restaurants, sandwich shops, bakeries, supermarkets and convenience stores, high street retailers, tourist attractions, and of course petrol stations. It’s no exaggeration to say that offering high-quality coffee is the lifeblood of the British foodservice market. It provides a route for foodservice operators to serve customers from their menu throughout the day, from coffee with breakfast to coffee after a dinner out.”
The importance of coffee to Britain’s leading foodservice operators is evident in the growing concentration of this business. In 2008, the top 10 operators together accounted for 26% of all coffee servings in Britain. By YE June 2017, this had increased to 35%, with leading players consisting of a mix of specialist coffee shops, QSR brands, supermarkets and a pub chain.