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PROJECT CAFÉ INDEPENDENT

UK Independent Coffee Shop Report

Table of Contents September 2008

In Association with:

Allegra Strategies Limited No 1 Northumberland Avenue, Trafalgar Square, London WC2N 5BW, UK Tel: +44(0)20 7691 8800 Fax: 44 (0)20 7691 8810 Email: [email protected] www.allegra.co.uk

PROJECT CAFÉ INDEPENDENT

Table of Contents Introduction and Background

Objectives and Scope Table 1.2.1 ­ Key Terms Used throughout the Report Table 1.2.2 ­ Primary Information Sources

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Section 1 ­ Executive Summary

Overview Key Success Factors

Section 2 ­ UK Coffee Shop Market

Overview UK Coffee Shop Market Market Size Figure 2.1­ Total Number of UK Coffee Shop Outlets, by Type, Dec 1997 - Dec 2020F Figure 2.2­ Coffee Shop Market Turnover Estimate, by Type, 2005 - 2008 Key Players Table 2.1 ­ Branded Coffee Chain Market, Number of Outlets April 2007 - September 2008 Market Drivers Table 2.2 ­ Key Market Drivers Market Inhibitors Table 2.3 ­ Potential Market Inhibitors Branded Coffee Chain Market Evolution Table 2.5 ­ Branded Coffee Chain Market Evolution and Future Developments

Section 3 ­ Independent Operator Survey

3.1 Sources of Information Table 3.1 ­ Sources of Information

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3.2 Profile of Independents Years of Industry Experience Figure 3.1 ­ Years of Industry Experience Number of Stores Managed Figure 3.2 ­ Number of Stores Managed Trading Period Figure 3.3 ­ Number of Years Opened Seating Capacity Figure 3.4 ­ Seating Capacity 3.3 Market Developments Market Changes Table 3.2 ­ Market Changes over past 12-18 Months Current Trading Conditions Figure 3.5 ­ Current Trading Conditions Compared to 12 Months ago Biggest Challenges at Present Figure 3.6 ­ Biggest Challenges Faced by the Coffee Shop Sector Decline in Customers Figure 3.7 ­ Decline in Customers over past 3 Months Competitive Environment Figure 3.8 ­ Competitive Environment in Local Area Main Competitors Figure 3.9 ­ Main Competitors in Local Area Impact of Coffee Chains Figure 3.10 ­ Impact of Branded Coffee Chains 3.4 Coffee Shop Operations Likes about the Coffee Shop Sector

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Table 3.3 ­ Likes about Working in the Coffee Shop Sector Biggest Challenges for Independent Operators Table 3.4 ­ Biggest Challenges when Operating an Independent Coffee Shop Key Success Factors Figure 3.11 ­ Key Success Factors of Independent Coffee Shops Consumers' Selection Criteria Figure 3.12 ­ Consumers Selection Criteria for a Coffee Shop Consumers' In-store Activity Figure 3.13 ­ Consumers' In-store Activity Sales Mix Figure 3.14 ­ Sales Mix of Beverages and Food Products Sold more than Before Table 3.5 ­ Products Sold more than ever Before Beverages Consumed Figure 3.15 ­ Most Consumed Beverages Food Products Consumed Figure 3.16 ­ Most Consumed Food Products Prices Table 3.8 ­ Prices of Key Products Turnover Figure 3.17 ­ Average Turnover per Week Cups of Coffee Sold Figure 3.18 ­ Cups of Coffee Sold per Day Number of Trading Days Figure 3.19 ­ Number of Trading Days Annual Rent

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PROJECT CAFÉ INDEPENDENT

Figure 3.20 ­ Annual Rent Ways to Promote Business Figure 3.21 ­ Most Effective Ways to Promote Business Advice to an Aspiring Coffee Shop Owner Table 3.9 ­ Advice to an Aspiring Coffee Shop Owner 3.5 Staffing Full Time Employees Figure 3.22 ­ Number of Full Time Employees Part Time Employees Figure 3.23 ­ Number of Part Time Employees Finding and Retaining Staff Figure 3.24 ­ Difficulties in Finding and Retaining Staff Staff Qualities Table 3.10 ­ Main Qualities to Look for in New Staff Staff Payment Figure 3.25 ­ Typical Hourly Rate for Serving Staff 3.6 Suppliers Finding New Suppliers Figure 3.26 ­ Finding New Suppliers Table 3.11 ­ Finding New Suppliers Choosing Food or Beverage Suppliers Figure 3.27 ­ Important Considerations when Choosing a Food or Beverage Supplier Type of Equipment Used Figure 3.28 ­ Type of Equipment Used Choosing Equipment Suppliers Figure 3.29 ­ Important Considerations when Choosing Equipment Supplier

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Ways of Obtaining News about the Industry Figure 3.30 ­ Main Ways of Obtaining News about the Coffee Industry Table 3.12 ­ Main Ways of Obtaining News about the Coffee Industry 3.7 Most Admired Coffee Shop Overview Figure 3.31 ­ Most Admired Coffee Shop or Coffee Shop Brand Caffè Nero Starbucks Costa Coffee

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Section 4 ­ Expert Articles

Site Selection ­ Chris Green Store Design ­ Richard Hamilton Coffee Equipment ­ Agostino Luggeri Selecting a Product Range ­ Gary McGann Coffee ­ James Sweeting Milk ­ Sophia N. Harris Food Development ­ Liz Earl Staff Training ­ Hugh Gilmartin the Future ­ Barry Kither

Section 5 ­ UK Consumer Research

5.1 Sources of Information & Summary Primary Information Sources Table 5.1 ­ Primary Information Sources Section Summary

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5.2 Patterns of Visits Purpose of Visiting Coffee Shops Figure 5.1 ­ Purpose of Visit [Coffee Shop Interviews] Reason for Choice of Coffee Shop Figure 5.2 ­ Reason for Choice of Coffee Shop [Coffee Shop Interviews] Convenience vs.Coffee Bar Loyalty Figure 5.3 ­ Convenience vs. Coffee Bar Loyalty [Coffee Shop Interviews] Frequency of Visits to Coffee Shops Figure 5.4 ­ Frequency of Visits [Consumer Telephone Interviews] Figure 5.5 ­ Frequency of Visits [Coffee Shop Interviews] Figure 5.6 ­ Frequency of Visits [Consumer Telephone Interviews], Analysis by Age Coffee Shop Dwell Time Figure 5.7 ­ Dwell Time [Coffee Shop Interviews] Coffee Bar Loyalty Figure 5.8 ­ Coffee Bar Loyalty [Coffee Shop Interviews] 5.3 Patterns of Consumption Types of Beverages Consumed in Coffee Shops Figure 5.9 ­ Types of Beverages Consumed [Coffee Shop Interviews] Figure 5.10 ­ Types of Beverages Consumed [Coffee Shop Interviews] Time Series 2000 - 2007 Extra Espresso Shot Consumed in Coffee Shops Figure 5.11 ­ Extra Espresso Shot Consumed [Coffee Shop Interviews] Consumer Willingness to Try New Products Figure 5.12 ­ Willingness to Try New Beverages [Coffee Shop Interviews] Flavoured Coffee Consumption Figure 5.13 ­ Flavoured Coffee Consumption [Coffee Shop Interviews]

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Importance of Fairtrade Figure 5.14 ­ Importance of Fairtrade [Coffee Shop Interviews] Frequency of Take-Away Coffee Purchases Figure 5.15 ­ Take-Away Coffee Consumption [Consumer Telephone Interviews] Figure 5.16 ­ Take-Away Coffee Consumption [Coffee Shop Interviews] Increased Consumption of Take-Away Coffee Figure 5.17 ­ Increased Take-Away Coffee Consumption [Coffee Shop Interviews] Frequency of Food Purchases in Coffee Shops Figure 5.18 ­ Frequency of Food Purchased in Coffee Shops [Coffee Shop Interviews] Willingness to Pay more for Quality Food Figure 5.19 ­ Willingness to Pay more for Quality Food [Coffee Shop Interviews] Satisfaction with Food Quality in Coffee Shops Figure 5.20 ­ Satisfaction with Food Quality in Coffee Shops [Coffee Shop Interviews] Types of Food Purchase in Coffee Shops Figure 5.21 ­ Types of Food Purchased in Coffee Shops [Coffee Shop Interviews] Attitudes to Ordering Healthy Food Options Figure 5.22 ­ Attitudes to Ordering Healthy Food Options in Coffee Shops [Coffee Shop Interviews] Interest in Organic Food Options Figure 5.23 ­ Interest in Organic Food Options [Coffee Shop Interviews] Consumption of Low Fat/Skimmed Milk in Beverages Figure 5.24 ­ Consumption of Low Fat/skimmed Milk in Beverages [Coffee Shop Interviews] 5.4 Spending Behaviour Average Spend in Coffee Shops Figure 5.25 ­ Average Spend in Coffee Shops [Coffee Shop Interviews} Figure 5.26 ­ Average Spend in Coffee Shops [Coffee Shop Interviews] Analysis by Food Buyer

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Appendix

a.1 UK Branded Coffee Shop Market Figure A1 ­ Total Number of UK Branded Coffee Shop Outlets, by Segment, Dec 1997 - Dec 2020F Figure A2 ­ Unit Growth Projections ­ UK Coffee Chains, London vs. Regions, Dec 2000 - Dec 2020F Figure A3 ­ Estimated Annual Turnover of Branded Coffee Chains, 2001 - 2020F Figure A4 ­ Average Spend at Top 10 Coffee-focused Chains, Mar 2002 - Dec 2006 Figure A5 ­ Average Spend at Top 5 Food-focused Chains, Mar 2002 - Dec 2006 Figure A6 ­ Indicative Cost Structures for Coffee Operations Independent Coffee Shop of the Year 2007 a.2 Key Branded Chain Profiles Costa Coffee Starbucks Caffè Nero Caffè Ritazza BB's Coffee & Muffins Pret a Manger Bakers Oven O'Briens EAT

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