Monday 23 April 2018

Big chains cash in on cafe culture with expansion spree

James Thompson

OVER in the UK, many of the country's biggest coffee shop chains and independent cafes have been defying the recession by going on an expansion spree.

The six big multiple chains -- including Caffe Nero and Costa Coffee -- ramped up their combined shop numbers by 47pc to 2,095 in the UK over the 12 months to September 2009, according to the Local Data Company which monitors the industry there.

"We have traded pretty well through the whole recession and our like-for-like sales have stayed positive," said Ben Price, the finance director of Caffe Nero.

"It is about a coffee being a regular daily treat for people today, and it's the change of habits over the last 10 years, and that has been sustained through the downturn."

Independents also increased their overall share of the market by 1pc to 70pc.

Economists had been expecting coffee shops to suffer from consumers cutting back on everyday spend during the worst recession since World War Two, but some are thriving, such as Whitbread-owned Costa Coffee, which opened its 1,000th store in Cardiff recently.

The chain posted operating profit, before exceptionals, up by 72.6pc at £12.6m for the six months ending August 27.

John Derkach, the managing director of Costa Coffee, said: "Places like Costa offer enormous value for money. For a couple of pounds you can get a decent cup of coffee and 45 minutes of peace and quiet in a nice environment."


The chain, which operates in 23 countries, said the average transaction in its shops was £3.70.

Two other key drivers of the growth in coffee shops are that they are a far more pleasant environment than in years gone by, offering, for example, Wi-Fi for business meetings.

And operators have also been able to strike cheap property deals given the plethora of empty shops on the high street.

Jeffrey Young, the managing director of Allegra, said: "Cafe culture itself is enormously powerful, and it is the modern form of the pub for many consumers."

On property, Mr Price said: "It is certainly a good time to be buying boxes at the moment, because there are a lot of vacant units."


But a pattern appears to be emerging as to where the chains are expanding. The Local Data Company said the chains only grew their shop numbers by 4.9pc in the UK's biggest cities.

Its director Matthew Hopkinson said: "Multiples are going into regional towns and rural areas far more aggressively." However, it has not all been plain sailing for the multiple chains.

Coffee Republic, and Limerick-based BB's Coffee & Muffins, have collapsed over recent months, but have subsequently emerged out of administration.

BB's Coffee & Muffins -- which had 37 company-owned stores and 111 franchised stores -- appointed the accountancy firm PKF as administrators on October 6.

PKF sold 16 company-operated shops to a new company Kapelad, which is now in discussions with former franchisees about buying more stores.

Coffee Republic fell into administration in July, but was rescued by property company Arab Investment.

In September, the coffee chain, which now has 143 outlets in the UK and elsewhere, including concessions, said it plans to open 20 new shops in the UK this year.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business