Why coffee shops are replacing pubs in Britain

Nathalie Thomas
09 Sep 2014
The Telegraph UK

The UK has among the lowest coffee consumption per person in Europe and we are now drinking less than in 2006. So why are companies such as Costa Coffee growing so fast?
Growth in the coffee shop market in Britain shows no signs of abating Photo: Bloomberg News
Costa Coffee brewed up a 7.3pc increase in like-for-like sales in the 11 weeks to August 14, rounding off yet another successful quarter for the chain, which began in 1971 when two brothers, Sergio and Bruno Costa, starting selling their special blend to local caterers.
The chain, part of the Whitbread leisure group, has posted consistently strong sales growth over the last few years, reflecting the wider trend in the UK coffee shop market.
The overall market in the UK recorded a 6.4pc increase in sales in 2013 and there were 16,501 coffee shops across the country by the end of last year.
No cooling is expected this year either. Companies such as Whitbread have continued to expand rapidly. In Costa’s case, it has added a further 76 outlets over the last few months, taking its running tally in the UK to 1,831. The company believes there is thirst for plenty more and Whitbread is eyeing 2,200 branches of Costa in the UK by 2018.
Despite 15 years of rapid expansion, analysts says Britain’s coffee shop sector remains one of the most successful in the UK economy and will continue to expand. So why has a nation of tea drinkers become so obsessed with milky lattes?
According to analysts at Barclays, the way Britons are drinking coffee has changed. They point out that, although the coffee shop market, has continued to grow, coffee consumption per head hasn’t. In fact, consumption levels are now lower than they were in 2006. Britons consume 2.8kg per head, just a fraction of the 7kg consumed in Germany, 7.1kg in Sweden and 5.5kg in France.
“This means that the growth of coffee shops has in no way increased the UK consumption of coffee,” Barclays leisure analyst, Vicki Stern, said in a recent research note. “Rather, the way in which coffee is being consumed has changed with people now visiting coffee shops where they might previously have consumed instant coffee at home or in the workplace.”
Andy Harrison, chief executive of Whitbread, believes coffee shops have now filled a hole in British society that would previously have been met by pubs. Families and women in particular use coffee shops for social gatherings, he says. He also points out that women now have greater spending power than in the past.
“Think of the coffee shop as a social venue,” he says. “What we have seen is the coffee shop market has grown at about 5pc per annum throughout the recession even in the most economically challenged parts of the UK. We think the reasons behind that are to do with things like the growth of female independence, female spending power. Over half of our customers are women.
“People talk about the pub as a meeting point but pubs were more about males and the evening, coffee shops are [open] all day, more female [orientated] and certainly more family.”
He also believes coffee shops have been boosted by people shopping more online. Instead of spending their Saturdays trawling the shops, Britons are meeting up with friends at their local cafe.
By comparison, the number of pubs in Britain has been in steep decline for a number of years. The Campaign for Real Ale (CAMRA) says British pubs are closing at the rate of 31 a week, although many are now fighting back by improved food and by serving breakfast and coffee throughout the day.
At one point, Britain’s coffee shop market will become saturated. But analysts don’t believe that time will come any time soon.
“There are still thousands and thousands of places in the UK that don’t yet have a decent coffee experience,” says Jeffrey Young, managing director of Allegra Stategies, which produces detailed research on the coffee market.
Once Britons may have been happy with an instant Nescafe at their desk or at home but they are now venturing to their local coffee shop for their caffeine hit instead. Artisan coffee shops are also driving interest – in much the same way that craft beers are helping to revive the brewing industry.
“Coffee shops are part of the fabric of our society now,” says Young
.