The UK’s branded coffee shop market has taken a substantial hit due to the impact of Covid-19, with sales plummeting by nearly 40% over the past year, according to a report released by the World Coffee Portal. The disruption caused by the pandemic has pushed sales in the sector back to levels last seen in 2013, resulting in a loss of almost £2 billion in market value. This decline marks the first time in over two decades that the UK branded café segment has experienced negative sales and outlet growth, with figures revealing a 39% drop in sales and a 1.9% decrease in outlets.
The total number of UK branded coffee shop outlets currently stands at 9,159, reflecting a net decrease of 182 over the previous 12 months. Despite this overall decline, the three largest branded café chains in the UK – Costa Coffee, Greggs, and Starbucks – have managed to expand their presence by adding a total of 114 new stores. Greater London, which houses more than a quarter of all UK branded cafés, witnessed a decline in the number of outlets for the first time in 20 years, dropping by 1.9% to 2,330.
Given the trading restrictions and reduced footfall, a significant portion of industry leaders reported substantial year-on-year losses, with an average negative financial impact of £27,650 per store, per month for those operators experiencing losses. The outlook remains bleak, with just 15% of industry leaders expressing positivity about the current trading environment, a sharp decline from the previous year’s figure of 69%.
Despite the challenges posed by the pandemic, some coffee shop operators have adapted by offering delivery services to meet customer demands. This shift has been well-received, with 26% of UK consumers expressing a willingness to use such services if more readily available. Additionally, the restrictions have led to a surge in drive-thru coffee outlets, with popular chains like Costa, Starbucks, and Tim Hortons expanding their presence in this area.
Jeffrey Young, the founder and CEO of the Allegra Group, highlighted the long road to recovery for the branded coffee shop segment, projecting that it will take at least three years to return to pre-pandemic levels. He emphasized the need for innovation, discipline, and leadership to navigate the ongoing challenges and ensure the short-term viability of coffee shops and the wider hospitality industry. Young also cautioned that further casualties are expected over the next 12 to 18 months, underscoring the potential need for additional government support.
The impact of Covid-19 on the branded coffee shop sector serves as a stark reminder of the resilience required to weather such disruptions and the imperative for industry players to embrace technology-driven solutions and adapt to evolving consumer preferences to thrive in a post-pandemic landscape.
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