Growth of Coffee Shops in UK

When I moved to Oxford in 1995, I don’t remember seeing any coffee shops apart from the odd independent coffee/tea houses. There was no major chain like – Starbucks, Costa, Coffee Republic. Now in 2010, I can visualise at least 10 off the top of my head. Costa coffee shops seem to be springing up everywhere. In the centre, there are three Costas within 500 yards of each other.

What Economic Factors are Behind the Rapid Growth in Coffee Shops in UK?

  • Change in Drinking habits. The growth in coffee shops has been mirrored by a decline in the traditional pub. Drink driving legislation and changing habits has reduced social alcohol consumption, especially in the middle of the day much lower. Instead of going to the pub, more people are going to the coffee shop.
  • Rising Income. A coffee and pastry can leave little change from £5. Rising incomes have enabled more people to be able to afford this cost, rather than drinking instant coffee (an inferior good) in the office or home. At the same time, I doubt the recession has reduced demand much. In a recession, we are more likely to cut back on expensive purchases like Cars. A takeaway coffee may be one of the luxuries we still allow ourselves to boost morale.
  • Coffee shops in Bookshops. I imagine the idea of a coffee shop in a bookshop first came from the US. Bookshops are having to adapt to changing demand due to electronic competition. My local Waterstones have recently got rid of a section of books to make way for a gift/greeting card sub-outlet. The cafe is a way to get people into a bookshop and hopefully buy books. With declining book sales, coffee shops make better use of prime retail space.
  • The Laptop generation. The coffee shop has become a portable office for many. Take a laptop and work with a nice coffee. For people who work from home, the coffee shop is a good opportunity to get away from the confines of home.
  • Coffee Shops have created a demand. In 1995, I would never think of going to a coffee shop to drink coffee. However, when they started appearing, I tried it and quite liked it.

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6 thoughts on “Growth of Coffee Shops in UK”

  1. Great post Tejvan.

    One point though: I don’t think that coffee shops have faired that well during the recession. I believe that many people have cut back. It was only last year that Coffee Republic collapsed. There are also reports suggesting an increase in demand for domestic coffee makers as consumers try to save a few pounds by making coffee at home. Also, I don’t know if you saw the report this week that put McDonald’s above Costa as the UK’s biggest seller of coffee. Part of their success has been put down to their lower prices.

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  2. I think the majority of McDonald’s sales of coffee are drive thru – people who drive for a living don’t have time to park up and walk to a coffee shop – there is a big growth potential in quality coffee shops based as drive thru outlets making use of existing real estate on closed petrol stations – far better use of the sites then another hand car wash.

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