Costa Coffeehigh on Brits' caffeine habit

Our coffee addiction has brought success to a number of chains. But new challengers are emerging. By James Thompson
  • @Thompj

In 1992, John Major won the general election, Leeds United lifted the first division trophy, and "Stay" by Shakespears Sister topped the charts. It was also the year Costa Coffee embarked on what has become one of UK plc's most impressive run of sales growth.

Alongside its full-year results on Tuesday, the Whitbread-owned coffee chain will boast a 44th consecutive quarter of rising revenue, with few, if any, signs that Britain's thirst for lattes and cappuccinos is waning.

The UK's 15,723 coffee shops – including the big chains and independents – saw sales increase by 7.5 per cent to £5.8bn in 2012, according to the research consultant Allegra Strategies.

The nation's caffeine addiction means that one-fifth of UK consumers visited a coffee shop each day last year, up from one in nine in 2009. Jeffrey Young, the managing director at Allegra, says: "The UK coffee market continues to astound even the most optimistic of forecasters, by growing significantly in value, in outlet numbers and also in the social psyche of the nation."

Forecasts are that what appears to be a drenched market will continue to grow to 20,000 outlets and £8bn sales by 2017.

However, discerning drinkers are forcing operators to improve the quality of their coffee, food, customer service and spruce up their stores. More specifically, this is being reflected in a shift towards "artisan" shops with new independents popping up. Although there has been plenty of growth outside London, the biggest drive has been in the capital with new operators, including The Attendant, Freestate Coffee, Timberyard and Salt.

Young says: "We have seen an acceleration in interest in artisan independent coffee shops. This has played into the hands of the big chains because it has provided the challenge of improving their offer, store environment and coffee credentials." For instance, Costa has introduced 25 metro shops, which are trendier with sleek, bespoke furniture. And Starbucks has a programme to tailor the look of stores to their locales.

Arguably the most noticeable recent entrant into the market has been Harris+Hoole, which is nearly half-owned by the supermarket giant Tesco. Harris+Hoole, which has 14 shops, prides itself on being artisan, but still has aggressive expansion plans, including selling coffee inside Tesco stores.

Its chief executive Nick Tolley says convenience was previously the main driver for drinkers, but now they are more influenced by the coffee's quality. Customers have developed a more discerning palate, such as the "texture of milk", and the freshness of food on offer.

Mr Tolley argues: "What is most encouraging is demand for quality coffee just seems to be getting bigger and bigger. Our food is fresh and baked locally and we are seeing customers increasingly come in for food as well as coffee."

For the time being, there appears to be enough demand for all operators as long as they continue to up their game, which is reflected in Costa's tripling its number of shops to 1575 in the UK and to 941 overseas over the past six years.

If Sir John Major were campaigning on his soap box today, he would most likely have a cup of coffee in his hand, while voters looked on sipping their mochas and ristrettos.