The European espresso machine market is the largest in the world, with about 185,000 units sold every year.
> It’s a challenge, however, to discuss Europe as a single market.
It is also a colourful and fragmented area, and when we talk about how these espresso machines reach the market, we need to describe models that are sometimes very different between countries.
The top five most populous nations – Germany, Italy, Spain, France, and United Kingdom – represent almost 70 per cent of the total European market.
An analysis of these countries uncovers both striking differences and interesting similarities.
Most professional espresso coffee machines are destined for the Horeca market, establishments that prepare and serve food and beverages.
Although the term abbreviates the words hotel/restaurant/café, within the perimeter of the Horeca market are other establishments including catering businesses, bars, canteens, bakeries, and service stations.
For the purposes of this analysis, if we take into consideration only hotels, restaurants and coffee shops, the five countries mentioned have a potential market of about 880,000 establishments.
Italy’s large number of cafés and restaurants represent 39 per cent of the total, followed by France with 21 per cent for its approximately 149,000 restaurants.
The UK has the largest number of hotel establishments at about 39,000.
Coffee is a large part of Italian culture, explaining the large number of cafés (about 148,000).
With so many possible distribution points for coffee machines, few machines are sold direct from the manufacturer to the establishment. Most manufacturers use in large part intermediaries like coffee roasters, coffee merchants or other distributors of bar equipment.
In the five countries analysed, only 10 per cent of new coffee machines are distributed directly from manufacturers, while 59 per cent pass through coffee roasters and 31 per cent through other distributors.
Each country has its own peculiarities.
In Italy and Spain, for example, coffee roasters represent about 80 per cent of distribution, while in Germany 55 per cent of machines pass through Horeca distributors and 20 per cent are supplied directly from manufacturers .
In France, coffee roasters control the distribution with 71 per cent while, in the UK roasters control around 55 per cent.
In France, distributors are generally small and local, while in the UK, they are national with capillary territorial presence.
According to a recent survey conducted by Dataresearch, customers’ main criteria when making an espresso machine purchasing decision was “price”, the “ability to provide technical assistance”, and the “front staff professionalism”.
These three items received a higher score among the 10 that were put to the vote among manufacturers.
Other main criteria listed was the “punctuality in delivering”, as well as two items linked to the product: “aesthetic qualities of machines” and “innovation”.
Among the countries analysed, a few differences can be highlighted. In Germany, for example, “punctuality in delivering” and “after sales technical assistance” received the highest scores.
In France, “front staff professionalism” and “brand fame” were important. In Italy and Spain, the “price” and the “technical assistance” were very important, while in the UK “front staff professionalism” and “innovation” were the main characteristics selected.
In all countries, the “availability of merchandising material” was not considered relevant in the choice of a supplier.
Another part of the survey sought to understand which were the main technical characteristics appreciated by customers.
According to machine manufacturers, “automatic cleaning” and “energy savings” were the two main technical characteristics most requested in these past few years.
In Germany and the UK, more customers chose machines with “display touch” and “telemetry systems”. In France, machines that included “auto-grind” were well appreciated. In Italy and Spain “automatic cleaning machines” received the highest scores.
Espresso coffee machines arrive to the Horeca market mainly through these intermediaries that assess the requests of their customers (bars, restaurants, cafés, etc.), against the costs and economic returns of the machines. These intermediaries enter agreements with manufacturers and select one or more brands of coffee machines to present to their customers.
In terms of purchasing agreements, these can vary enormously.
The intermediaries may sell the machines to the coffee shops, or they may offer the formula “coffee plus machine”. With this formula, the coffee machine is supplied “free on loan” or “paid use” against minimum quantities of coffee purchased monthly or weekly. In case of full sale, there is no obligation to purchase coffee.
These models vary from country to country. In Italy, it is commonplace to supply machines “free on loan”. This practice is also common in Spain, but less so in France where main supply conditions are “paid use”.
In Germany, most of the machines are sold directly, as well as in the UK, although many distributors adopt different formulas for sale.
According to coffee roasters interviewed, the type of machine supplied and the minimum quantity of coffee requested depends on different factors. This includes the size of the coffee shop and how much coffee it sells.
The potential economic return of a customer defines, therefore, the investment of the distributor in terms of coffee machine supplied and other main conditions (minimum quantity of coffee requested, accessories, assistance, etc).
Once the contract is signed, the set up and the technical assistance is supplied directly from the machine manufacturer via their affiliate centres in the countries. In general, the first year of assistance is included free.
The average amount of coffee sold in a coffee shop is not the same in each country.
In Italy, for example, a medium-sized bar/coffee shop sells around 25 – 30 kilograms per month, in Spain around 10 – 15 kilograms, in France and Germany 20 – 25 kilograms, while in the UK it’s around 40 – 50 kilograms.
The business model of the distribution of coffee machines represents an important indicator that could influence the future development of the coffee industry. The importance comes from the main debate concerning the freedom of the Horeca market to choose multiple suppliers and offer to the end user different types and qualities of coffee.
We can estimate that in the five countries analysed, the share of machines directly sold every year represents almost 40 per cent, while the remaining 60 per cent is distributed with the formula “coffee plus machine”.
That the espresso machine market is so closely linked to coffee roasters causes some space for debate. If Horeca operators are tied to the same supplier (in general two to five years), it could limit their ability to adapt or innovate.
There is no answer to this debate. Some countries, like Italy, are beginning to see some discussion about the price and the quality of coffee offered. The problem is not the quality of coffee roasters, but their focus on financing conditions toward the Horeca market.
The Horeca coffee market is in decline in most European countries. The economic crises and the general reduction of out-of-home expenses are causing difficulties for the industry. Furthermore, why would a person go out if he can get, in the office or at home, an equivalent coffee, among many tastes and varieties, with a single-serve machine?
The evolution of technology has reached high levels and new pod/capsule machines can make high-quality coffee conveniently at home. The advancement of these machines is also changing consumers’ tastes, as they get used to different mixtures and varieties of coffee.
Coffee roasters are following this innovation, developing new business areas dedicated to portioned coffee, with most major roasters now also working in the single-serve realm.
Only the Horeca market seems stuck on the old schemes.
Naturally, single-serve coffee will never fully replace the coffee shop experience. Going out for a coffee is a chance to socialise, but the coffee culture is becoming more sophisticated, and it is necessary to increase and vary the quality of the products offered, to adopt new technology innovations and to improve the professionalism of operators.
In the UK, micro-roasters already offer independent shops different varieties of coffee at appropriate prices.
These “specialty cafés” are opening all over Europe, often managed by people that love the coffee culture and play an active involvement in their choice of coffee, independent from their choice of machines.
These shops contribute the added value of their atmosphere, their original quality product, and the competence and professionalism of their baristas.
In these specialty cafés, the choice of the coffee machine is generally made directly by the owner evaluating technical characteristics, design, and performance.
It’s a strong sign of the future of the espresso machine market, and one that manufacturers are advised to monitor. GCR