Coffee drinking is becoming increasingly common around the world, as busy individuals seek a caffeine fix as they go about their daily lives and for a socially connective experience such as meeting a friend or loved one for a coffee.
It is estimated that in the UK alone, around 165 million cups of coffee are drunk every day. This equates to an annual spend of more than £1bn ($1.2bn) and is expected to rise to £4.5bn ($5.8bn) by 2024.
According to a GlobalData survey, 37% of consumers rated their coffee expenditure as high in terms of both the amount bought and the purchase of premium or high-end products. This signifies that coffee is a highly lucrative market with significant growth potential.
Particularly in the west, the trend of ‘craft’ coffee is becoming increasingly prevalent. The growing availability of milk alternatives and a wide variety of flavoured syrups offers customers a more personalised drinking experience.
Moreover, social media has accelerated this trend. Global coffee chain Starbucks frequently promotes via online channels, with current flavours including a Strawberry Funnel Cake, Frappuccino and the Pistachio Latte. This has added value to the coffee drinking experience, attracting customers and boosting revenues.
The Covid-19 pandemic has created challenges for coffee shops
However, the Covid-19 pandemic has caused significant disruption to the global coffee market, with branded coffee companies most adversely affected. Nationwide lockdowns, business closures and social distancing have all contributed to a sharp decline in revenues. For example, Starbucks saw its revenues and net profit margin decline by 11.3% and 70.9% respectively in 2020.
In addition, the hospitality sector is experiencing a labour shortage due to self-isolation requirements and a reallocation of employees to more secure industries. This hinders productivity and creates challenges for delivering efficient customer service as lockdown restrictions ease.
Nonetheless, demand for coffee remains high and it is therefore imperative that global brands and independent coffee shops alike find ways to adapt their offering and remain profitable during challenging economic times.
New technology can be used to enhance the coffee shop experience
The integration of new technology in the coffee market has become a popular way to increase efficiency, respond to labour shortages and overcome the challenge of legal restrictions on human contact during the pandemic.
Technological advancements have meant that automated coffee machines are now able to offer premium products whilst simultaneously delivering convenience for customers. The number of automated coffee machines in the UK has almost doubled over the past five years.
Robotics and the deployment of artificial intelligence (AI) have also become increasingly common in the coffee market. In 2020, the Californian technology company Botrista Technology Inc secured a $10m investment to develop its DrinkBot beverage concept. The DrinkBot is able to produce a full range of personalised speciality coffees at the click of a button. This enables the company to capitalise on the consumer trend of craft beverages without needing to increase expenditure on barista staff or bar stocking.
Nevertheless, according to a survey conducted by the World Coffee Portal, two-thirds of consumers in the UK continue to view the human interaction and skill offered by in-person baristas as an essential aspect of visiting a coffee shop. Therefore, to truly attract customers and boost revenues, branded and independent coffee shops alike would benefit from integrating new technologies to enhance, rather than completely replace, the coffee shop experience.