Distributors looking to target new markets might do well to zero in on independent cafes, as research firm Allegra’s World Coffee Portal has revealed a 4% annual outlet growth for UK independent coffees shops over the last 12 months.
In the ‘Rise of Independents UK 2019’ report, it states there are 7,022 independent cafés operating in the UK, with an estimated value of £2.4bn.
The annual growth represents an estimated 260+ net new sites. Allegra forecasts the segment will exceed 8,000 outlets by 2024, growing at 3% CAGR.
The research company estimates UK independents serve more than 10.5m cups of coffee each week. But with branded chains often competing on location, convenience and price, independents need to ensure their proposition is pitch-perfect every time to entice premium consumer spend.
Rising labour costs and property costs are perceived as the greatest challenges facing independent coffee shops in the UK, ahead of business rates, and increasing competition. Despite the challenging retail environment, 80% of independent coffee shop leaders surveyed by Allegra earlier this year reported positive sales performance in the last 12 months, with a majority citing coffee and service quality as key success factors. Three-quarters of industry leaders surveyed believe there is still plenty of growth potential for independent coffee shops in the UK.
The research shows more than 70% of independent café consumers surveyed purchase coffee to drink in-store compared to 56% of branded chain customers. A further 21% of consumers surveyed choose independent coffee shops based on service quality, compared to 16% at branded chains. Similarly, 18% view atmosphere as the greatest impetus behind visit compared to just 8% at branded chains. This indicates independents can compete effectively with highly refined, personalised in-store experiences that foster loyalty through community-based concepts.
And with atmosphere increasingly involving front of house catering equipment, this could be an area many dealers want to enter or expand their current presence within.
Longer dwell-times also present an opportunity for menu diversification for these independent operators, giving rise to sourcing single origin coffees, non-dairy milk and vegan options, which are more likely to appeal to consumers under-30s. 40% of this group surveyed indicate they are drinking more coffee at independents compared to a year ago, making them a key marketing demographic.
Commenting on the research, Allegra CEO and founder Jeffrey Young said: “There’s no doubt independent coffee shops face an uphill struggle compared to scaled competitors, particularly in today’s highly challenging retail environment.
“But those independent cafés defined by razor-sharp menu quality and seamless, highly personalised hospitality face a very bright future indeed. I’m highly excited to see what the innovation a new generation of independent businesses bring to the market over the next few years.”