Coffee in the United Kingdom

2020 IMPACT

Retail coffee sales record strong growth supported by stay at home measures

Prior to the emergence of the pandemic in the UK, retail sales of coffee had continued to be impacted by strong competition from foodservice. This was a trend driven by a notable café culture which was gaining further momentum as consumers looked to specialist coffee shops as places in which they not only socialised but also perceived as alternative work spaces for the self-employed or those already operating under flexible working from home policies.

Convenient and premium coffee at-home

As consumers faced the closure of their local cafés, they have displayed an increasing willingness to recreate a barista experience at-home, buying high-quality coffee. This is leading to strong growth for fresh coffee, especially fresh ground coffee pods, also boosting demand for coffee machines in 2020.

Consolidated competitive landscape within coffee but foodservice brands invest further in retail due to increasing at-home demand

Coffee in the UK remains a fairly consolidated competitive landscape, led by major players Nestlé UK Ltd and Jacobs Douwe Egberts due to their strength in both fresh and instant coffee, with well-known popular brands such as Nescafé, Nespresso, Kenco and Tassimo. Nestlé also entered a partnership with Starbucks to sell Starbucks-branded coffee across retail channels towards the end of the review period, launching its first Starbucks Nespresso coffee pods in 2019.

RECOVERY AND OPPORTUNITIES

2021 offers more positive outlook for foodservice coffee sales, impacting retail demand

While foodservice sales of coffee are likely to recover over the course of the forecast period, a full recovery to pre-pandemic levels is not predicted until 2023. Although 2021 is set to see a marked upturn in demand through this channel as lockdown measures are gradually relaxed, many cafés are expected to face severe challenges.

Fresh coffee to continue to attract consumers for a more premium at-home experience

As a result of the rising flexibility in terms of home working over the forecast period, an increasing number of consumers will most likely try to recreate their own occasions to enjoy their cup of coffee at-home, boosting premium coffee sales. Therefore, there is likely to be stronger innovation in the category, as manufacturers continue to invest in their portfolios to meet new consumer needs.

Focus on channel mix

Manufacturers are likely to become ever-more focused on their distribution channel mix strategy. During the lockdown, consumers showed new shopping behaviour, favouring e-commerce and local convenience stores, in order to avoid long queues and crowded public spaces.