It's less than 15 years since London new-wave espresso cafes helped kick-start the European-wide boom in coffee bars. Early movers like Aroma, Seattle Coffee and Madison's have faded from the picture but there is plenty of activity with international brands like Starbucks, which opened its first European branch in London's Kings Road in 1997 and is thought to have more units around London - over 120 - than in any other city in the world.
The other big player is Costa, part of the UK-based Whitbread group, which has a numerically greater presence across the UK than Starbucks but was relatively later in developing a London presence. However, it has recently been expanding faster, thanks partly to a more diverse approach to siting and franchising. Units are to be found at banks (in a joint venture with Abbey National), supermarkets (Tesco), offices, book-stores (Waterstone's and W.H.Smith) as well as the more typical high street, rail station, airport and shopping centre positions.
Caffè Nero, the UK's No.3 coffee bar brand, has a particular stronghold in London with 102 stores, all company owned. Its visibility has been boosted further in the past year with Nero Express mobile take-away kiosks at main-line rail stations, mainly on sites formerly occupied by AMT. After dabbling with share ownership the company went back into private hands in 2007 with founder Gerry Ford returning as CEO and main stockholder.
Coffee has also become more important at pubs. The J.D.Wetherspoon chain of high volume pubs features a full coffee choice at all of its 685 UK pubs (many of them 'super-size' branches in the London area) and invested over £6 m in suitable equipment and staff training. It can be argued that pub and coffee shop visits are different occasions but Wetherspoon now reckons to sell at least 500 cups of coffee per week at each of its pubs. The chain is growing at a rate of 30 new units per year and aggressively promotes its low prices against those of Starbucks (which had two price rises during 2007) and other coffee bar brands.
Greene King, another pub giant, has now put franchised branches of Coffee Republic in 30 of its pubs with a further 40 planned this year.
Apart from Wetherspoon, keen prices are not a major differentiator in selling coffee in London with average spend at dedicated coffee bars running at £3.32. The Benjy's sandwich bar chain, once noted for its £0.30 cappuccinos, went into administration in 2007. Over the past decade McDonald's had value-priced McCafé coffee bars with separate counters in some of its larger London restaurants but none remain in the UK (apart from a single unit in the Birmingham area); the chain's new lounge-style designs, offering an extended range of coffees through the main menu, are thought to be a better approach.
While not directly competitive with the mainstream coffee bar brands, the hybrid shops of Germany's Tchibo have become steadily more visible around the London area, mainly on suburban high streets. It is also one of the few coffee operators to feature in TV advertising. Of its 76 UK stores, 52 have a coffee bar offer with a full espresso choice, sandwiches and baked-off cakes and pastries alongside the shelves of value-priced household merchandise. Largest units have 25-30 seats, with coffee bar spend representing 10-60% of total sales depending on location. Other stores are basically retail with packaged coffee plus drinks from an automatic machine.
New directions
London continues to dominate the UK coffee bar scene with about a third of all chain branches in the capital; research analyst Allegra Strategies puts the total within the M25 orbital motorway around London at 1,055, compared with 2,120 in the rest of the UK. At the beginning of the decade the figures were 626 and 1,382 respectively.
Brand power has not deterred newcomers and about 20% of all independent coffee bars in the UK are thought to have started in the past year. But the Big Three brands are currently taking the market forwards and there are signs that some of the second tier brands could be running out of steam. However, some smaller London operators with a differentiated offer - especially in food menu and service - continue to do well. One example is Benugo, with five cafe-delis in the capital plus 15 units within corporate buildings and two in museums.
One newcomer with an interesting menu difference is Flat White, which serves a style of coffee popular in Australia and New Zealand. The cafe's odd name refers to its strong espresso with a decorated topping of silky textured milk. There are also some interesting new-wave Italian cafe concepts such as Spianata & Co and Amano.
Bruce Whitehall
Key Features of the London Market
- growing population. After several decades of decline, London's net population is expanding, by as much as 50-70,000 per year according to some estimates. The official population was around 7.5 m in mid-2006 with the Greater London conurbation estimated at 8.3 m. - the local nature of coffee purchase requires concentrated siting in key areas, despite property rentals which are among the world's highest. One pressure is towards wider day-part activity e.g. breakfast and, on prime pitches, early evening trade. Caffè Nero tends to open later than most: at least 7 pm in the suburbs and 11 pm on some central sites (4 am at its Soho branch). - competition for the caffeine spend from well-branded competitors in other convenience foodservice segments, from established sandwich chains like Pret A Manger and EAT and more upscale cafes like Carluccio's, Paul, Apostrophe and Le Pain Quotidien to hundreds of niche operators in bagels, donuts, wraps, muffins, juices and pies.