Why the British coffee shop craze is grinding to a halt

coffee

Back in the halcyon days of 2019, you could expect to pay £2.67 for an average latte on the high street. Now, the price of the nation’s favourite coffee has surged to an eyebrow-raising £3.25.

It is a painful increase for a country that has become obsessed with the brown bean – and, increasingly there are signs consumers are taking matters into their own hands.

Dualit claims sales of its Cafe Plus coffee pod machines rose 127pc in 2022 as a growing number of drinkers seek out a barista experience at home.

“There has been a massive sea change in the type of coffee that people consume at home now compared to what it used to be,” says Jeffrey Young, managing director of the coffee expert Allegra.

“We’ve seen the arrival of capsules such as Nespresso and other capsule systems, that wasn’t really a thing ten years ago.

“If you go back two decades ago, instant coffee was the only way to get coffee or you might have had some fancy coffee in a French press. Now, many homes have an array of different coffee making devices, mocha pots, Italian-style, the filter coffee, the grinders.”

There is no doubt that legions of caffeine lovers are unhappy about overpriced takeaway coffee. But the rise in home brewing may be driven as much by the better taste on offer now as anger over costs.

Britain is often stereotyped for its love of tea, but coffee has long been the country's favourite hot beverage.

Shoppers bought more than 533 million packs of coffee in the supermarkets over the year to March 19 2023, compared with 287 million packs of tea, according to Kantar.

The sheer number of coffee shops now operating is astonishing. From mainstream brands such as Starbucks and Pret to countless specialty outlets, they have become as ubiquitous on the country’s high streets as supermarkets and newsagents.

But hitting the local coffee shop is becoming a luxury as coffee companies pass on soaring costs.

“In every element of the process we've experienced quite significant price increases,” says Bradley Morrison, the owner of East London coffee wholesaler and retailer Dark Arts. Everything from importing beans to energy and transportation has felt the crunch.

Rising prices, as well as increased home working, have contributed to a slower recovery from the pandemic for the nation’s coffee shops as life returned to normal.

Sales of takeaway coffee rose 11.9pc in 2022, according to Allegra – and sales are still below their level in 2019.

Not that this has put budding entrepreneurs off trying. In fact, the number of coffee shop outlets is expected to grow by 1.5pc in 2023, according to Future Foodservice data.

And despite the hurdles they face, big businesses are showing no sign of retreat: Starbucks, for instance, has announced plans to open 100 new stores in the UK in spite of falling profits.

That's not to say they will have an easy ride. Rather than losing custom because of high prices, big chains may end up struggling because they cannot stand out from the pack according to Simon Stenning, hospitality analyst and founder of Future Foodservice.

“The defining factor now is more around the food offer than the coffee because pretty much every single coffee shop has got to a good standard of serving coffee,” he says.

“We all know what a good flat white is so we're not seeing many developments in the market.

“The standard of coffee has reached such a level that McDonald's is just as good as Costa. And yet it's a third of the price. So what consumers are choosing on is other factors.”

He highlights brands such as Cornish Bakery, Bob & Berts, Soho Coffee Co, and Muffin Break, all of which also offer food and are growing at a faster rate than pure coffee shops.

“That's the challenge for some of the big operators… that can't quite get their food offer right. Which is why Costa has gone to M&S, to try and get more credibility,” he adds.

Meanwhile a new breed of coffee shops is offering high quality but lower prices, such as London chain Blank Street.

None of Blank Street's main coffees breach the £3 mark, owing to its focus on smaller shops where it can employ fewer staff and keep other costs down, according to UK managing director Ignacio Llado.

Llado says he is optimistic despite the cost of living crisis because shoppers are still seeking out little treats to get them through the day.

“When you do coffee right and you do retail, it fits exactly this category - it’s a low cost daily ritual,” he says.

The pandemic has helped evolve Britain from a nation of coffee novices into connoisseurs, says Young of Allegra, as it caused many people to pay greater attention to their food and drink and where it comes from.

“During the pandemic, people really understood that their daily coffee is just such an important part [of the day] - and also [sought out] a better quality coffee," he says.

Morrison, of the retailer Dark Arts, says that companies are increasingly aware consumers want to recreate the coffee shop experience in their own home.

“[Before the pandemic] we really didn't really spend much time thinking about home brewing or trying to create products for people to use at home or even just trying to communicate our coffee to people at home,” he says.

“Now we're kind of redirecting a lot of our resources and a lot of our energy to trying to figure out the best way to.”

In fact, it is supermarket coffee where shoppers are cutting back. Coffee sales in retailers such as Tesco and Sainsbury’s were down 1.2pc over the 12 weeks to March 19, compared to the same period in 2019, according to Kantar.

Ultimately, for those seeking out the “barista experience” as Young puts it, supermarkets are not necessarily the first port of call.

“What we've seen in the UK is a massive, massive rise in the number of specialty roasters all across the country that weren’t there 10 years ago,” he says.

“Now there are hundreds so consumers have access to local roasters, they have access online and can even subscribe [for direct deliveries].”

Even buying a coffee machine is not a cheap alternative.

“Some of the kinds of machines that are selling are £4,000 machines, many of them are [as much as] £1,000... then you’ve got to buy a grinder. There's also the bravado of having friends around and saying, you know, I'll make coffee and showing off your barista skills,” he says.

“If they were cutting back, they would not be buying espresso machines, and they would be having instant coffee.”

Perhaps shoppers are willing to swallow a £3.25 latte. But they are no longer prepared to tolerate a lack of quality.