'This is no time for complacency'
Only the best independent cafes will thrive in today’s highly competitive UK coffee shop market, says Jeffrey Young, CEO and Founder of Allegra Group
Twenty years analysing the UK coffee shop market has taught me that coffee professionals are an upbeat bunch. And there’s plenty to celebrate in an industry that is one of the most resilient and best-performing in the UK economy. Through the financial crisis of a decade ago to today’s Brexit uncertainty, coffee shops have consistently proven innovative and agile in the face of adversity.
Achieving two consecutive decades of sales and outlet growth since 1999 is a remarkable achievement, but beneath the optimism for the first time in many years we detect a hint of pessimism in conversations with independent cafes. From labour shortages to rising property costs, business rates and dampened consumer confidence, even blue-sky thinkers cannot afford to ignore the clouds gathering over the industry landscape.
Back in the mid-late 2000s when 3rd Wave cafe culture was beginning to take off, independent cafe entrepreneurs with strong hospitality backgrounds, commercial acumen, creativity and a dash of tenacity catalysed an extraordinary movement toward specialty coffee in the UK. Today, the retail landscape is far less forgiving and turning a profit from coffee alone is no easy feat. Food, labour and operational costs have all risen exponentially, and with them so too has the risk of failure. Now more than ever, there is no room for complacency when high street trading is so delicately poised.
While independents cannot compete as easily as chains on convenience and price, Allegra research reveals several ways thesector can remain competitive. Nearly three-quarters of independent cafe consumers surveyed purchase coffee to drink in store compared to just half (56%) of branded chain customers and one fifth (21%) choose independent coffee shops based on service quality, compared to 15% at branded chains.
These results indicate that community and personalisation are often key reasons why consumers visit independent cafes. While convenience and coffee quality remain the primary motivations for a coffee shop visit, across the wider market higher dwell times at independents mean razor-sharp customer service and highly refined in-store environments are essential in today’s tough retail climate.
Independent cafes frequently play a crucial role in introducing new products to the public, such as cold brew and single origin coffee, which have subsequently been popularised by scaled chains. Nimbler than larger competitors, independents can capitalise on menu diversification by offering seasonal products, such as cold brew, iced tea and winter treats, such as hot chocolate, with minimal disruption to systems or branding. Burgeoning interest in health and wellness also represents a significant opportunity for independent coffee shops, with plant-based milks, vegan andhealthy food options all essential elements of a diverse and inclusive menu.
Younger consumers are also key to strong trading at independents. Over 40% of under 30s surveyed indicate they are drinking more coffee at independent coffee shops compared to a year ago, while consumption across other age groups has remained stable. In the age of frictionless transactions, smart payment systems and digital engagement can make all the difference in attracting younger, tech-savvy consumers. In fact, industry leaders surveyed by Allegra in 2018 identified social media advertising as the most effective form of marketing for coffee shops in the UK today.
There’s no doubt independent cafes face an uphill struggle compared to branded chains, particularly in today’s challenging retail environment. But with growth in independents perceived as the second most important UK consumer trend among industry leaders surveyed (behind increasingly knowledgeable consumers), the segment is opportune for resurgence.
Those independent coffee shops defined by outstanding quality, seamless, highly personalised hospitality and aspirational environments have the potential to usher in a new era of UK coffee excellence. But make no mistake; only the very best will thrive in today’s highly competitive market.