The UK Coffee Market: Independents vs. Incumbents

While other markets falter, coffee prospers

• In most evolving industries, at some point, the disruptive new entrant becomes the familiar incumbent.
• Langton was struck by this thought while noting the continued success of coffee operators around Spitalfields.
• The number of coffee outlets in the UK has almost trebled in the last six years to nearly 19,000 sites in 2016 and is ‘forecast to grow to over 27,000 by 2020’, according to Pragma Consulting.
• We posit that the big winners in coffee going forward will be those offering a genuine alternative to Costa, Pret et al.

Operators must evolve alongside Customers

• Consumers care more now about product quality and site experience. The type of coffee beans, the method of roasting, the lighting and music as you drink, etc.
• Coffee afficionados are being catered for by a rapidly expanding independent coffee market (1,400 speciality independent coffee shops in the UK today, set to double by 2020).
• The challenge for independents is how to scale their business without compromising their identity.

2016 – 2020: The Age of the Independents?

• Vertical integration of roasting and retailing operations appears to be a good way of consolidating a group’s business (much like brewers with pubs, but that’s another story…).
• Caravan seems to have pulled it off, while Small Batch Coffee is now backed by Luke Johnson’s Risk Capital Partners, and Grind & Co. has found an army of supporters on crowdfunding platforms.
• The sub-sector is short on publicly-listed investment opportunities.
• It is, however, worth paying attention to as a powerful trend whose influence will be felt across UK Leisure in the coming years.