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Coffee Shops

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Convenience combined with luxury. The coffee shop industry is one where these two often very separate areas of focus come together in harmony; delivering a concept which operates a model which is both convenient and luxurious for the consumer. When you break the coffee shop industry down into its main retailers and start to identify the areas of success, it soon becomes clear how and why the top 50 companies within the industry manage to dominate more than 70% of the industry profits. Coffee shop companies which own multiple chains operate through scale – funnelling consumers through a quick style service where they are served and presented with their drinks in under 10 minutes. Tie this to the idea that most of these leading companies provide loyalty cards and returning customer benefits, constantly have new products and deals live to entice new and repeat customers through the door, and create entire brand messages around seasonal products – and you are left with a service industry which commands a dominating presence.

On the other end of the coffee shop industry scale lies the other 30% - the small independent coffee shops which focus more on delivering a personal and tailored service; often serving just as many customers who are wishing to sit in and enjoy their drink at a table, as those looking for a takeaway service. When you start to consider location in particular, the industry is largely split between the inner city chain coffee shops and the most rural independent coffee shops which serve a slower consumer base which quite literally do not move as quickly as those in the centre of the city.

Exploring the coffee shop industry and its challenges

While various food and drink outlets exist to meet consumer demand across a range of different trends and requirements, the coffee shop industry is one which heavily relies on personal finances and disposable income. Look at it like this – while meals are something that we all need, with many using restaurants and takeaway joints for ease while capping their spend at the minimum based on their budget, coffee shops operate in a very different area of the industry: their products are distinctly luxury, and this presents a challenge to retailers all across the industry in terms of consistently convincing consumers that their products are worth the additional cost. With more and more job roles becoming flexible and encouraging working from home as much as going into office spaces, the demand for coffee shops is changing – moving outside of those cities and into more local towns and communities.

What does this mean for the industry as a whole?

For one thing, it means that the coffee shop industry is up against a formidable opponent – the rise in the at-home coffee machine or coffee maker, which pledges to make fresh coffee to a barista standard from the comfort of the home. While this kind of retail product is still unable the match the on-the-go convenience of coffee shops themselves, the fact is that the quality offered means that coffee shops need to find other ways of remaining relevant; particularly with takeaway and coffee shop coffee often being available at a premium which is typically regarded as an expense which adds up.

For one thing, these challenges mean that the coffee shop chains are having to adjust their offering in order to stay relevant. New deals, promotional discounts, loyalty benefits and product launches are all popular tools in driving demand – with social media providing just one platform through which coffee shop retail names are able to consistently plug new products and even use influencers and celebrities to drive their sales of seasonal and new products.

If you head to image sharing social site Instagram, and search for the hashtag #Starbucks or even #TakeawayCoffee, you will quickly find yourself inundated with images of not just takeaway cups in various locations around the world, but also sweaters and jumpers with brand logos and takeaway cups on them; reusable takeaway cups which slot into the growing trend for environmentally friendly fast food options; accessories like keyrings and pieces of jewellery with coffee cup charms, and even coffee shop branded gifts which allow a buyer to present the gift of an at-home Starbucks coffee to their friend. The fact is these brands are making a name for themselves through the provision of products which sit well away from their target industry – but which ensure their logo and brand name is constantly at the forefront of target consumers minds. This is particularly effective in the coffee shop industry because the millennials and baby boomers who are most likely to use these social media platforms are also the target age group and demographic of the coffee shops themselves – with the most committed average coffee drinker aged between 25 and 45.

While all of this is great for specific brands and retail names with the reach and resources needed to expand into all of these different areas for the benefit of their brand name, what it does leave is a gap in the market for those coffee shops which primarily focus on the quality of the baseline product – the coffee. And this is where the industry opens its doors to new retailers, independent and small businesses, and even pop up coffee shops which operate on a very mobile level through a coffee van or delivery service.

Top retailers in the coffee shop industry

To first explore the big names which dominate that large majority of the industry, one need only look at a typical city centre or high street in order to truly take in the breadth of the industry and the high demand that it is serving. The average high street in the UK plays host to a series of coffee shops, sometimes even placing big chain brands next door to each other – with many consumers outwardly admitting that they have a favourite brand which they will always choose over another. This could be driven by the quality of the produce – it could be a result of the selection available or the ambience in the shops themselves, or it could be that they have always shopped in the same location and so they have a loyalty card and membership benefits with a specific brand. Whatever it is, this demand is obviously widespread enough to keep a number of big industry players in large profits, with the most popular names in the UK including:

  • Starbucks
  • Costa Coffee
  • Caffe Nero
  • Pret a Manger
  • Illy
  • McCafe

In the USA, Starbucks again sits at the top, atop other names including:

  • Dunkin’ Donuts
  • Tim Horton
  • Maxwell House
  • Peet’s Coffee

Once you get past these big name brands in the industry, you will find that those same high streets also play host to independent coffee shops and small businesses; with these locations often offering a much higher level of service and sometimes even much better coffee and produce – however, they simply cannot compete at the same level, and do not garner the same footfall. As a result of this, one of the biggest shifts in the small coffee shop industry has been to offer takeaway – undercutting the prices of the big retail names and using word of mouth and online review sites to drive momentum and find themselves a place in their local community.

Trends in the coffee shop industry

We have already looked at how coffee shops are constantly competing with various challenges in order to remain relevant and to convince captive audiences that buying takeaway or sit-in coffee is an integral part of their day which they should not overlook. A major part of this comes from the concept of treating yourself – with coffee shops consistently using messaging which relates coffee and accompanying cake as a treat that the consumer deserves to splurge in. This comes in all forms but one of the most obvious trends which is being observed and developed on an annual basis comes from the idea of seasonal coffees and complimentary products. Let’s look at Christmas as an example.

It shows the true power of the leading coffee shop brands, that come October the arrival of the Christmas coffee menu is an occasion marked across social media, mainstream media and of course the high street and local communities. As a global leader in the industry, Starbucks is one of the brands at the forefront of this movement, using flavours and aesthetic features to drive forward new products every season, especially at Christmas when they reintroduce the Pumpkin Spiced Latte, the Orange flavoured Hot Chocolate, and the Black Forest Gateau Cappuccino to name but a few. Not only have these drinks managed to achieve status within the coffee shop industry, but they have now become an integral part of the arrival of the Winter and festive season; dominating social platform hashtags and influencer blogs, and even changing the way that consumers shop in their local supermarkets as they look for ways to bring the coffee shop flavours and experiences home.

As touched on before, another trend in the coffee shop industry is one which is intrinsically linked with the in store experience and the way that these leading brands are able to use their global platform to drive social change. Conservation and climate change are two leading examples of movements which have been picked up by and supported by these large coffee shop chains – resulting in changes in the way that takeaway cups are provided, encouraging coffee shops big and small to steer away from plastic lids, presenting consumers with free refills if they bring their own reusable cup rather than taking a disposable one, and even providing information about how consumers can do their bit to help the planet – a great example of this being Costa Coffee. Aside from this, there are other causes and drivers of change which are supported by coffee shops, with the most successful brands branching into charity work and setting up their own foundations so that every purchase is also fulfilling part of a social responsibility. As such, while these large chain shops can appear in some respects to be ruthless moneymaking organisations, the way that they support and utilise their platforms for good is another reason why so many consumers are happy to continue to shop with them.

How can small businesses and local coffee shops compete? One of the best ways that we are seeing smaller brands push their way to the front of the consumer market is through innovation and trying new things – for example Grind which started out with one coffee shop and has now succeeded in expanding across London and beyond, delivery high quality coffee throughout the course of the day, before transitioning into a bar that delivers high quality cocktails in the evening. Offering the ultimate day-to-night experience, Grind is a brand which has noticed and acknowledged the gap in the market for a coffee shop which doesn’t merely drop off and close at 5pm – but rather stays open and entices a whole new consumer market through the door once the offices are closed.

Another example of how the trend around innovation can play such a big part in the growth of small coffee shop businesses is in the experience provided – with afternoon tea and cream tea being one of the leading concepts which puts smaller coffee shops on the map among locals and visitors to an area. The fact is that afternoon tea is a coveted experience – and if the consumer is able to find an afternoon tea provider which is unique and somewhat individual, they are likely to try it with friends and/or family. All of this becomes a part of the upsell of smaller businesses, allowing them to keep customers in store for longer, giving them more of an experience to review and enjoy, and allowing them to really relax into the ambience which is provided. In short, these are the trends which revolve around slowing down and revelling in an experience – rather than simply relying on the quick service of a chain coffee shop which may provide loyalty points and seasonal discounts, but which is essentially driven on quantity rather than quality. is operated by Get A Deal Group Limited (company number: 12942679) a company registered in England and Wales.
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