Allegra Strategies one of the leading coffee industry market research companies recently published the newest version of its Project Café Europe. The 2018 version according to this article from the Independent indicated that 21 out of 25 European countries experienced growth in the branded coffee shop market, with 18 of these more than 3%.
It suggested that the UK continued to be one of the most developed markets in the region, and continues to be a strong driver of growth. The number of branded outlets in the UK grew by 643 in 2017 an increase of 6.4%. Other countries in Europe with significant growth included Turkey, Russia, Romania and Poland. Although some countries were experiencing a decline, including Spain, Bulgaria and Austria.
The growth in coffee shops in Eastern Europe was also the focus of a recent article from Bloomberg which highlighted how the market for coffee in Eastern Europe grew by 5.3% (worth around $7.45 billion), compared to only 1.8% in Western Europe. Starbucks is emerging as a strong competitor in Czech Republic and Hungary while it is also entering into new markets including Slovakia. Given there are already so many Starbucks stores across Western Europe, turning its attention to Eastern Europe where the concentration of coffee shops per consumer seems is lower, seems like an inevitable move. The specialty coffee industry too is seeing growth with the number of specialty coffee shops rising in many Eastern European cities – the article suggests in Poland the number has risen from in 2010 to 40 by 2017.
While the growth in the region is seen to be driven by rising incomes the Bloomberg article highlights that income is a potential barrier to a faster pace of growth as the cost of drinks will be higher than in other regions in Europe making drinks in coffee shops ‘a special purchase’.
An article from Global Coffee Report provided even further detail of some of the wider European growth patterns:
- In terms of market leaders Costa Coffee remained the largest chain in Europe, adding 243 stores to reach 2755 outlets.
- Starbucks remains slightly behind, adding 251 stores in 2017 to reach 2,406 outlets. 2017 has been a year Starbucks has started to try different activities to engage the consumer, opening its Reserve Roastery in Milan for example.
- The article refers to the influence of the ‘third wave’ scene, i.e. specialty coffee, growing across Europe (largely led by independent coffee shops), with many brands trying to adapt to this introducing new stores designs (often to look less like chains), offering single origin coffees and different brewing methods, as well as more freshly prepared food. It is suggested that where these trends are not being embraced market growth tends to be slower.
The report also argues that the 5th wave of coffee, ‘the business of coffee’, with ‘high quality artisan chains adopting a more advanced set of business practices and higher standards of professionalism in order to deliver boutique concepts at scale’, will be key to growth in future years (Global Coffee Report, 2017).
Overall the outlook from Allegra remains positive (as you would expect from a coffee market research company), suggesting that market growth will continue across the continent, and that in particular consumer demand for higher quality coffee will be an important driver of growth and change.