Coffee trends in convenience

Wake up and smell the coffee. Why coffee trends in convenience are growing but still fall behind the growth of other independent outlets. The opportunity exists but is the channel grabbing it with both hands?

Blake Gladman, Strategy & Insight Director

It will come as no surprise to anyone that coffee is big business. I read a great article by Robin Mannering in Convenience Store Magazine. It featured Allegra World Coffee Portal’s latest report. Which revealed that the value of independent UK coffee shops has grown by 4% to £2.4bn over the last 12 months. For context, that same report shows the total value of the UK coffee shop market to be £10.1bn. Growing by 7.9% in turnover last year. This represents 20 consecutive years of both sales and outlet growth for the coffee shop market. Are we seeing these same coffee trends in convenience?

Well, according to the ACS Local Shops Report from 2018, only 12% of independent convenience stores have a barista coffee offer. With a further 30% offering some type of coffee machine in store. Excuse the rough (very rough) calculations here for a second, but…

  •      There are 33,000 independent (symbol and unaffiliated) convenience stores in the UK.
  •      12% of which have a barista coffee offer, which is 3960 stores.
  •      If we assume the average price of a coffee is £3 and a store would sell on average 350 cups per week.
  •      That would put the value of barista coffee at roughly £216m for the independent convenience channel.
  •      Which is approximately 1% of the total value of the channel (Independent convenience channel worth cc£21bn / compared to total UK convenience market value of cc£40bn).
  •      The same assumption would put coffee machine value at £450m, roughly 2% of the total value.

A quote from Allegra CEO and Founder, Jeffrey Young alludes to the underlying factor behind the ‘success’ of barista coffee. He says “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.”

Success is about service and hospitality not just coffee

Of course, he was speaking specifically about independent coffee shops here not convenience stores with a coffee offer. However, who’s to say what is what anymore? A store is defined by how it’s used and viewed by its customers and not by its layout, offer or square footage. The key point here, I believe, is that the success is as much about the service and hospitality aspects as it is the quality of the coffee. Therefore, although 30% of independent convenience stores have coffee machines. It’s the 12% with the barista style offer that is most interesting.

Even taking into account all those stores with a machine, the total value of coffee to-go in independent convenience stores still only accounts for approximately 3% of total sales. Not to forget that a significant proportion will not be of the standard of the latest Costa Coffee machines for example. They certainly wouldn’t be anywhere near the standard customers would expect from any high street coffee shop.

Leaving that point there though, we see that the total UK coffee shop market grew by close to 8% last year. Compare this against how some of the ‘traditional’ convenience store categories have performed recently. You’ll see tobacco, news, confectionery, soft drinks and bread and milk all taking hits over the last few years through various challenges. Legislation and changing consumer trends to name just two. A lot of this may feel like old news to you and to me for that matter. Yet here we are, continuing to talk about coffee as an ‘opportunity’ for the independent convenience channel. A look back at the ACS Local Shop Report from 2016 shows that, back then, 19% of stores had a coffee machine and 6% had a barista style coffee offer. 

Wake up and smell the opportunity

Clearly, then, we’re seeing more stores embrace this opportunity but there is so much more room for growth out there. Coffee trends in convenience suggest a strong growth trajectory. Let’s look at some other telling trends and statistics which would appear to back up the strong case for coffee to-go.

  •      50% of the UK workforce are predicted to be working remotely for at least a proportion of their working week by 2020 (ONS)
  •      Coffee is widely reported as being a ‘recession proof’ category. Even in tough economic times, coffee becomes that little (relatively inexpensive) treat that keeps consumers going
  •      Thanks to its high levels of antioxidants and beneficial nutrients, coffee is also well placed to tap into the growing health trends.

Increasing dwell time and creating new and frequent footfall opportunities. Cross-sale potential across breakfast, mid-morning, lunch and afternoon treat meal occasions. Good margins and (if you get it right) strong quality credentials. There’s much to love about coffee for a retailer. With increasing pressure on margins, declining traditional category sales and the need to diversify and expand the potential for space. Coffee to-go is a category that can be the stepping stone to redefining what a convenience store is to shoppers and opening up new opportunities. Taking the convenience store into the future where retail and foodservice become one entity housed under the same roof.

Some examples of a great coffee-to-go offers in convenience stores;

  •       Centra in Dublin’s Parnell Street.
  •       Ancoats General Store in Manchester.
  •       Spar Donegall Road, Belfast.
  •       Eat 17 Spar, Hammersmith, London.

Blake Gladman

Hi, I'm Blake, Strategy & Insight Director at KAM. I look after all our research products and manage the collection and delivery of insight throughout KAM. I love long runs and good food (the perfect life balance).