7.1 Market overview
The coffee and sandwich shop market continues to grow in the branded sector, in terms of both numbers of outlets and turnover.The reported saturation within the market place does not appear to have affected growth of the larger branded stores, but is at the expense of the small independents and minor multiples.
Branded shops are also taking new business at out-of-town shopping centres, concessions within other retailers’ outlets, and travel-related locations such as railway stations, airports and motorway service stations. Profitability of the branded operators is assisted by the fact that outlets outside London in particular are likely to reach a level of profit more quickly than those in high-rental, prime central-London locations.
Branded coffee shops accounted for a value of £710m in 2005, up from £375m in 2001. Major branded sandwich shops experienced a similar increase in turnover value, from £271m in 2001 to an estimated £525m in 2005.
The leaders in the branded coffee-shop segment are Starbucks, Costa and Caffè Nero, while their equivalents in the branded sandwich-shop segment are Subway, Pret A Manger, Bakers Oven, O’Briens and Benjys.These are gaining share within the total branded outlets sectors, particularly through their offering of a wider range of food and drink products.The distinction between coffee and sandwich shops is blurring.
Despite growing competition from other retailers – such as grocery multiples and department or variety stores – the branded coffee and sandwich shop sectors are predicted to grow at a rate of between 7 per cent and 12 per cent per year in value terms over the period from 2005 to 2009.The total coffee-shop sector is estimated to grow at a rate of between 3.9 per cent and 5.3 per cent per year, reflecting anticipated gains in share by the branded coffee-shop operators.
7.2 Key players performance
Within branded coffee shops, the single largest operator is global company Starbucks, with 465 UK outlets in 2005 and a reported turnover of £244m.
The two next-largest operators are Whitbread-owned Costa, with 370 outlets and a turnover estimated at £145m, and Caffè Nero, with 221 outlets and a £70m turnover. Other relatively smaller but important branded shops include Compass’ Caffè Ritazza, and the franchises Puccino’s, BB’s and Coffee Republic.
In the sandwich sub sector, the international franchise Subway is now the largest of the branded sandwich-shop operators, with 480 UK outlets in 2005 and an estimated £175m turnover.
Unlike some of its key competitors, Subway operates predominantly on a franchise basis, with nearly all its UK branches being run by franchisees. In second place is Pret A Manger, with 137 outlets and an estimated turnover of £155m; Greggs-owned Bakers Oven, with 214 outlets and a turnover estimated at £85m; and the O’Briens franchise, with 142 UK outlets. Other important operators are Benjys, EAT and Ponti’s.
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