Common sense blows the froth off coffee shop hype

Designer coffee shops have long defied logic by persuading apparently sane customers to part with £2 for a simple latte and more than £3 for more exotic concoctions.

But common sense may have caught up with the phenomenon after Starbucks, the market leader, announced on Friday that it was pulling out of deals to open 15 new branches in the UK.

Starbucks will not now be opening in Birmingham, Oxford and Windsor, according to Property Week magazine. Residents of Hammersmith, the prosperous west London district, may also be unhappy to hear that they are not considered affluent enough for the Starbucks experience. Then again, at £3.35 for a raspberry mocha chip, there is no shame in that.

The American company, which has opened 221 outlets since 1998, led the way in trying to introduce cappuccino culture in Britain. But an initial surge in popularity has turned into a steady decline across the market.

Last week, McDonald's announced it was auctioning its 36-outlet Aroma chain bought two years ago. Coffee Republic has seen its share value halved in the past six months because a much-hyped expansion failed to materialise. Instead of opening 40 coffee bars, it opened 20 and closed three.

The first wave of retrenchment has come in smaller towns where a reluctance to pay more for a cup of coffee than a pint of beer is strong, especially with recession looming.

In response, the various companies are experimenting with more seasonal drinks, such as chilled and frozen summer specials, as well as a wider range of snacks.

The popularity of American sitcoms such as Frasier and Friends, with scenes set in coffee bars, would, the industry hoped, make designer coffee more fashionable here. But some market analysts believe that coffee bars are too antiseptic and bland for British tastes and customers are becoming bored.

However, while the coffee bars face an uncertain future, a new competitor has entered the market. Michael Green, the man who brought Haagen-Dazs to Europe, has just opened the first Mombo designer tea bar in Britain.

The designer coffee companies contend that the coffee habit has caught on and they will survive the temporary blip. Gerry Ford, chairman of the Caffe Nero chain, said: "There is a move away from alcohol, and coffee shops are hang-out places where customers can relax on sofas, read the newspapers and chat."

At present, 60 per cent of the branded market is controlled by just four chains: Starbucks, Costa Coffee, Coffee Republic and Caffe Nero.

Starbucks said "Plans for individual store openings change on an ongoing basis. From time to time, we make a decision not to proceed with a property deal."