Dubia, March 1, 2024 (QW)- The UK’s branded coffee shop market, valued at £5.3bn ($6.6bn), surpassed 10,000 outlets in 2023, showcasing robust sales growth. However, the industry remains cautious due to ongoing economic challenges and reduced footfall in traditional locations. As unveiled by the Project Café UK 2024 report, conducted by World Coffee Portal and sponsored by 5THWAVE, we explore the key factors influencing Europe’s largest coffee shop market in the coming year.

1. Challenging Economy Constrains Growth

Despite achieving a remarkable 9.2% sales growth in 2023, the UK branded coffee shop market faces challenges from the cost-of-living crisis, high inflation, and decreased footfall in prime locations. The report indicates a 9% increase in coffee prices and a 4% decline in average spend, leading to operators reassessing underperforming sites.

2. UK Operators Franchise to De-risk Expansion

High costs and increased competition drive UK coffee shop operators towards franchising, with approximately 40% of Costa Coffee’s 2,670 UK stores now operating under franchise agreements. International players like Starbucks and Tim Hortons are also contributing to the growth of franchised outlets.

3. UK Boutique Operators Reach New Heights

Specialty coffee shops in the UK experience significant growth, with boutique operators like WatchHouse and Grind securing investments for expansion. The success of specialty operators outside of London emphasizes the maturity and national reach of the UK’s specialty coffee segment.

4. Oat Outperforms the Plant-Based Category – But Dairy Still Reigns

Oat milk emerges as the preferred non-dairy beverage in UK coffee shops, gaining market share at the expense of other dairy alternatives. However, dairy remains dominant, and consumer concerns about the plant-based category are noted, signaling a preference for traditional milk.

5. Growing Competition from Non-Coffee Specialists

Non-coffee-focused branded cafes, including bubble tea, hot chocolate, and chai chains, are increasingly challenging traditional coffee shops. These businesses aim to capture a wider audience, especially among younger consumers, by offering hand-prepared beverages and unique experiences.

World Coffee Portal predicts the total branded coffee shop market in the UK will exceed 10,500 outlets by January 2025, with sales expected to surpass £7.2bn over the next five years. The industry, though resilient, must navigate economic challenges and changing consumer preferences to sustain its growth trajectory.

Project Café UK 2024 is World Coffee Portal’s latest research providing comprehensive insights into the UK branded coffee shop market, including market sizing, consumer research, pricing, operator profiles, and strategic analysis of industry dynamics.