International chains remain the driving force behind European café market as Eastern nations embrace branded coffee shop culture

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Project Café Europe 2020 from Allegra World Coffee Portal - the most extensive analysis of the European branded coffee shop market ever conducted - reveals the European coffee shop segment remains in growth despite a challenging economic climate across the region. The segment added 1,235 stores during the last 12 months to reach 37,598 stores, representing 3.4% growth in outlets.

- 26 out of Europe’s 30 largest coffee shop markets* expand during the last 12 months, with 13 enjoying growth of 5% of more. Romania remains Europe’s fastest growing coffee shop market, recording 28.3% outlet growth

  • Outlet growth in UK’s branded coffee shop market, Europe’s largest, slows significantly to 0.9% amid sustained Brexit uncertainty and dampened consumer confidence
  • Turkey experienced the largest loss of branded coffee shops at -2.9%. The Hungarian, Belgian, and Swedish markets contracted by 1.9%, 1.8%, and 1.3% respectively
  • World Coffee Portal forecasts the European branded coffee shop market will reach 45,400 outlets by 2025, representing five-year growth of 3.9% CAGR

EASTERN EUROPE EMBRACES CAFÉ CULTURE BUT GROWTH IN LARGEST MARKETS SLOWS
Eastern European nations continue to embrace branded coffee shop culture, with 84% of industry leaders surveyed in the region reporting positive sales growth over the last 12 months. Romania remains Europe’s fastest growing coffee shop market, recording 28.3% outlet growth and topping the 25.1% recorded by World Coffee Portal in 2018. Kazakhstan enjoyed 26.5% growth while the Ukraine saw a 16% increase in outlets.

In the UK, Europe’s largest and most developed branded coffee shop market, outlet growth slowed significantly from 8.7% in 2018 to 0.9% in 2019 amid sustained Brexit uncertainty, dampened consumer confidence and a highly challenging retail environment. The German branded coffee shop market recorded 2.5% stores growth while French growth more than halved to 3.2%.

INTERNATIONAL COFFEE CHAINS GROW EUROPEAN MARKET SHARE
Major international coffee chains continue to grow their European presence, with 20 of the continent’s largest coffee chains now comprising 45% of the total branded coffee shop market. Costa Coffee, Starbucks, McCafé, Paul, Illy Caffè, and Segafredo Zanetti are now present across 15 or more European markets. Starbucks, McCafé, and Costa Coffee were responsible for nearly a third of new net new outlets over the last 12 months, collectively comprising 23% of the European branded coffee shop segment.

PROPERTY COSTS EAT INTO MARGINS, BUT PREMIUM AND ETHICAL PRODUCTS CAN BOOST SALES
Securing prime locations has grown in prominence among European leaders surveyed, with 48% considering it critical to coffee shop success – a 7% increase on 2018. However, highlighting the complexity of securing suitable sites, high rents and property costs were cited as the primary challenges facing coffee shops.

Confirming the continued role of premiumisation in the European coffee shop segment, industry leaders identified specialty coffee as the primary consumer trend currently influencing the industry. Meanwhile, cold brew remains the fastest growing beverage but still represents a relatively small proportion of overall sales.

DIVERSE CULTURAL PREFERENCES SHAPE EUROPEAN COFFEE SHOP PROPOSITIONS
For the first time World Coffee Portal surveyed consumers across four major national markets – France, Germany, Ireland, and the Netherlands – to analyse coffee consumption patterns. French consumers were the most likely to have used a premium vending or self-service machine to purchase coffee. Irish consumers are most likely to have downloaded a coffee shop app, predominantly for the functionality of loyalty points integration.

The research also found marked difference in the popularity of Starbucks; in the Netherlands it is considered the most popular coffee operator, while in Germany consumers are much more divided.

EUROPEAN MARKET EXPECTED TO SURPASS 45,000 OUTLETS OVER NEXT FIVE YEARS
World Coffee Portal forecasts the European branded coffee shop market will reach 45,400 outlets by 2025, representing five-year growth of 3.9% CAGR. The coffee-focused branded chain sub-segment is predicted to grow at 4.6% CAGR over the next five years to exceed 27,900 outlets, while the food-focused branded chain sub-segment is predicted to grow at 2.8% CAGR, exceeding 17,400 outlets. Growth will be driven by the continued expansion of Eastern European markets as branded concepts gain traction, while for the rest of Europe, specialty coffee represents an opportunity for premiumisation.

Commenting on the research findings, Allegra Group CEO and Founder, Jeffrey Young, said:

“Despite a challenging economic climate and deep consumer uncertainty, branded coffee shops remain in growth across most European markets. Chain concepts are an increasingly popular option for previously traditionally minded consumers. Lifestyle and consistency factors further underpin this trend.”

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NOTES TO EDITORS

Project Café Europe 2020 features:

  • Market sizing for 48 national markets now includes Albania, Andorra, Armenia, Bosnia-Herzegovina, Croatia, Estonia, Georgia, Iceland, Kazakhstan, Kosovo, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Montenegro, North Macedonia, Serbia, Slovakia, Slovakia, and Ukraine
  • Pricing for the top five largest branded chains in 24 major European markets
  • First inclusion of consumer trends, behaviours and attitudes based on 7,500 surveys for Ireland, France, Germany, and the Netherlands

SOURCES

  • Over 300 consultations with industry insiders, decision makers, and key staff, including over 100 in-depth interviews
  • Over 300 surveys with industry insiders, decision makers, and key staff
  • Over 7,500 online surveys across four key Western European markets – France, Germany, Ireland, and the Netherlands, targeted at regular coffee drinkers
  • Field research including site visits, data gathering, and pricing analysis
  • Desk research across company websites, published accounts, industry associations, trade press, and news articles

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Hannah Heath
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since: 10/2014
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