Project Café Europe report casts uncertainty on UK’s future due to Brexit

Allegra World Coffee Portal’s Project Café Europe 2019 report has revealed that, while the United Kingdom leads Europe with greatest expansion of outlets, uncertainty over Brexit casts a shadow over its next 12 months. Allegra says ongoing uncertainty regarding the UK’s future relationship with Europe continues to frustrate planning and investment, with labour shortages, rising costs, and diminishing consumer confidence causing serious concern among coffee businesses. “The European coffee shop sector continues to perform well, with healthy growth recorded in a vast majority of national markets, and adoption of contemporary café culture now widespread,” Allegra CEO Jeffrey Young says. “However, the future of the UK coffee shop market, Europe’s most developed, is a key concern as businesses grapple with volatile trading conditions and dampened consumer confidence generated by sustained Brexit uncertainty.” Project Café Europe 2019 analyses the latest trends, opportunities and challenges of the diverse European coffee shop market. Allegra’s research is based on more than 600 interviews, consultations and surveys with leaders in the European coffee industry. The report found the European branded coffee shop market reached 33,745 outlets in 2018, representing an annual growth of six per cent. Allegra forecasts the European branded coffee shop market will reach 42,000 outlets by 2023, displaying a compound annual growth rate of 4.8 per cent. Costa Coffee is Europe’s largest branded chain, holding 8.7 per cent market share with 2923 stores across 12 markets, the majority of which are in the UK. The second largest operator, Starbucks, has slightly more than 2600 stores, but is present in twice as many European countries as the market leader. McCafé is the third-largest branded coffee chain, with 2376 outlets across 17 national markets, representing seven per cent market share. Together, these chains comprise nearly a quarter of the total European branded coffee shop market.

Eastern European consumers are rapidly adopting coffee shop culture, with Romania exhibiting the continent’s strongest annual outlet growth rate of 25.1 per cent. Eastern European leaders are also the most positive about trading conditions in their country, with Poland also enjoying robust outlet growth. Denmark’s branded chains appear to be gaining ground in a challenging at-home coffee culture, with annual outlet growth of 14.5 per cent, the second-highest in Europe. Cyprus is the third fastest-growing market, at 11.2 per cent, bucking industry concerns over economic and political uncertainty in southern Europe.

The majority of industry leaders surveyed by Allegra cite good location as having the greatest impact on coffee shop performance, with coffee quality and store atmosphere ranking second and third place. Over a third of industry leaders surveyed indicated high rents and property costs as the major challenges to their business, making these the top concerns among European businesses in 2018. Italy is the only country in Europe where a majority of industry leaders believe traditional coffee culture is impeding branded chain growth. Market-wide adoption of premium café concepts will, however, likely be catalysed by the gradual arrival of international branded chains, such as Starbucks, which entered the market in September 2018.

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