Project Café8 Europe is the most comprehensive research ever conducted on this fast developing market, focusing on the growth of branded chains across 22 countries.

Key findings

European coffee shop still growing at double digit rates, despite global financial crisis
Over the last decade, branded coffee shops have revolutionised high street and shopping environments across the UK, and the purchase of Cappuccinos and Lattes have become an every-day habit for many consumers

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. ‘Modern coffee shop culture’ is now also growing across Europe, overcoming global economic challenges and traditional coffee drinking patterns.

Market Size and Dynamics
Branded coffee shops are growing in importance across Europe
The European branded market across Europe now totals 8,863 outlets (across 22 countries covered), having added almost 1,200 stores in the last 12 months and representing an annual growth rate of 13%.

While most European markets remain highly fragmented and dominated by independent cafés, branded coffee shops continue to grow in importance relative to independent coffee shops.

Traditional coffee drinking habits remain prevalent in many European countries but quality speciality coffee drinks grow in popularity, driven by increasingly demanding and more mobile consumers.

Branded chains attract particularly young and urban consumers with higher disposable income who embrace a ‘modern’ coffee shop culture as a fashionable lifestyle choice.

Developments by Country
The UK remains the coffee shop ‘flagship market’
The UK is by far the most developed branded market, with approximately 40% of the total European market (3,578 outlets). Further growth is forecast at an annual rate of approximately 6%.

The next most established markets are Germany, Republic of Ireland, Spain and Poland.

The fastest growing markets in terms of outlets are France, Sweden and Germany. Growth in France and Germany has been largely contributed to by McCafé, which added 183 outlets last year in Germany alone.

The Republic of Ireland is the country with the highest number of coffee shops per capita in Europe.

Key Players
Starbucks holds the position as leading Pan-European player in terms of number of outlets
Starbucks is the leading Pan-European player, trading from more than 1,100 outlets across 14 European countries. The global brand launched in Czech Republic, Belgium and Portugal in 2008, with plans to entry into several new European markets imminently.

McDonald’s McCafé has grown rapidly in the last year to reach more than 770 outlets in October 2008 and is expected to roll-out further across Europe.

Other important European players include Whitbread owned chain Costa Coffee, Italian coffee bar brand Segafredo and transport hub focused Caffè Ritazza. UK brand Caffé Nero also ranks among the top 5 players in Europe.

Market Dynamics and Trends
The credit crisis and economic downturn dominate current concerns
The global credit crisis and the toughening economic climate dominate the current concerns of industry executives . Other important challenges facing the industry include high rents, rising food costs, excessive competition and staff turnover.

A number of consumer trends are impacting the European coffee shop market: Due to the difficult economic environment, rising costs of living and price consciousness are affecting consumer spend. Aside from the effects of weakening economies, the key consumer trends across Europe are: convenience, more demanding and knowledgeable consumers, and increasingly mobile lifestyles.

Sustainability and environmental issues are increasingly important for operators across Europe, with businesses in Western and Northern Europe most likely to be impacted by these issues. The most popular initiatives are recycling and ethical sourcing.

Future Outlook
Further growth expected
A number of European markets are showing the characteristics of the UK market a decade ago . Allegra anticipates that these markets will become even more similar to the UK and that others will follow. If the growth achieved in the UK is any indication of future trends, these markets will be significant in the next few years.

Further growth of the European branded market is expected, ultimately dominated by a smaller number of large multi-national operators.

The European coffee shop market is forecast to grow at a compound annual rate of 8% to exceed 12,100 outlets by 2012.

Further information: www.allegra.co.uk


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