As the UK coffee shop market continues to grow, brands are searching for ways to stand out from the competition and meet consumers’ rising expectations.
Coffee chains are struggling to encourage brand loyalty among consumers as convenience becomes an increasingly important factor, research seen by Marketing Week suggests.
Nearly half of UK coffee drinkers (43 per cent) say they tend to go to a coffee shop that is closest to them and have no particular loyalty to brand, whereas a third (32 per cent) try to go to the same coffee shop or chain where possible, according to a survey of 1,000 coffee drinkers by consultancy Pragma.
Helene Mills, associate director at Pragma, believes that as the coffee market continues to grow, brands must work harder to distinguish themselves from competitors. “Coffee is a convenience-based purchase,” she notes. “People aren’t going to walk miles to go somewhere unless there’s something that really sets it apart.”
Coffee chains are continuing to expand in order to meet this demand for quick and convenient caffeine hits. Costa Coffee, the country’s largest chain with more than 1,500 outlets, expects to open a further 150 sites this year. Taken together Costa, Starbucks and Caffè Nero account for 54 per cent of the branded coffee chain market, according to research consultancy Allegra Strategies.
These chains are exploring new retail formats aimed at providing greater convenience to customers. For example, Costa is testing a new concept called Costa Espresso: a takeaway outlet that has no seating and only a limited food range to ensure it does not slow down the service. It also has a large number of self-service Costa Express machines in service stations and convenience stores and is looking to extend its drive-through operation from 10 stores to around 80 in the coming years.
“These options offer complementary opportunities to the Costa portfolio,” says Costa’s UK marketing director Kevin Hydes. “Given the rise in the demand for quality coffee and the desire to have even more convenience, brands like Costa have to innovate and find solutions to help the customer shop.”
Express tills are considered the fourth most important ‘added extra’ among coffee drinkers looking for valuable differentiators, according to the Pragma study. Loyalty cards are top, with 46 per cent of coffee drinkers describing them as either very or extremely important. Wi-Fi is second with 41 per cent.
However, Hydes insists that despite the various tools that brands can use to set themselves apart, Costa’s biggest priority remains the quality of its coffee. “We innovate in other areas like food ranges, environment quality and service but we don’t want to lose the focus on what’s made us great,” he says.
The research shows that ‘milky’ varieties of coffee such as cappuccinos and flat whites are the most popular with 47 per cent of drinkers selecting this category as their favourite. ‘Full strength’ is second with 29 per cent while ‘cold speciality’ drinks like frappucinos are third with 6 per cent. According to the study, nearly half of those who prefer milky coffees say they find this variety ‘comforting’.
“I think this shows that [coffee drinking] is not always about the caffeine hit or energy boost,” says Mills at Pragma. “The word association here is around comforting and refreshing, which suggests it’s also a bit of an indulgence that provides a feel-good factor or helps people to take a break.”
The most common contexts in which people visit coffee shops are ‘on the go’ and socialising, which have been selected by 37 per cent and 32 per cent of coffee drinkers respectively. Meanwhile 12 per cent of respondents say they most often visit a coffee shop in order to have ‘me time’.
In addition to new chain outlets, a wide range of independent cafes and new concept stores are launching in a bid to cater for these different needs. Allegra forecasts that the total UK coffee shop market will exceed 20,000 outlets and £8bn turnover by 2017, driven by both large coffee chains and “non-specialist operator growth”.
One example in the latter category is the Monocle cafe in central London, which was opened by the current affairs and business magazine of the same name earlier this year. The site is Monocle’s first coffee shop in the UK but it has a branch in Tokyo, Japan, which opened in 2011.
These branded coffee shops aim to be in-keeping with the sophisticated tone of the Moncole media brand, featuring sleek interiors, back issues of the magazine and broadcasts from Monocle’s in-house radio channel. In addition to this high-end positioning, the London cafe sets itself apart by having an alcohol licence and a downstairs area that is equipped with a projector and sound-system to enable companies to hold presentations and board meetings.
“With most cafes, the core business is from 8am until people have their sugar dip and need to go out for a coffee,” notes Tyler Brûlé, editor-in-chief of Monocle. “Our business carries on after work, so if you want to have a meeting and a glass of wine you can do that. You see so many cafes that have become satellite offices for people or impromptu meeting rooms so we thought why not formalise that and help people hold meetings in our cafe.”
Brûlé says the London cafe is already proving popular, with the outlet drawing in both Monocle readers and coffee drinkers who are new to the brand. The enthusiasm for new coffee experiences is shown in the research, where 25 per cent of coffee drinkers say they regularly seek out new coffee shop concepts to add to their ‘repertoire’.
However, despite the emergence of such new concepts, the research shows that the major brands remain front of mind among consumers. When asked to name coffee-serving shops that sprung to mind, only 1 per cent said an independent shop compared to 80 per cent for Costa and 76 per cent for Starbucks. Other chains that serve coffee but specialise in other areas do not fare well either, with 11 per cent naming Pret A Manger and 5 per cent naming McDonald’s.
Hydes at Costa believes the research reflects the fact that UK coffee drinkers are becoming increasingly brand loyal as different brands build up insight about their customers and tailor their products and services to their needs. He says: “Brands have to respect customers and look for ways to offer them further value for money, as well engage them.”
UK marketing director
We know that convenience is ultimately key to consumers and so making sure the business is available in the locations they want is extremely important. That’s supportive of our own strategy of growing our business in the UK; for example this year we’re going to open around 150 stores. It demonstrates the fact that people are becoming more demanding of premium coffee wherever they are.
We do look at the environments we’re going into and tweak our store design where relevant. But we also want to make sure we don’t lose the values that people have come to expect from Costa. Having a healthy independent marketplace is vital to the coffee shop market: the more people that get into coffee generally is a great thing.
Given that we’re a media brand of some scale, you could not say that our London cafe is a ‘mom and pop’ operation. However, at the same time, because this is our only cafe in the country and we’ve worked really hard on the quality of what we offer, people see us more as an independent. It’s interesting that people in the local area tend to treat us like a neighbourhood cafe rather than a corporate.
We’ve made sure this isn’t a cookie cutter roll-out. If you compare our first cafe in Tokyo with the London space and consider what we might do next, each will certainly borrow design hues from one another but we always want to offer something original as well.