The demise and re-invention of the pub that we have witnessed over the last 20 years, has a lot more to do with the future of the coffee shop than you might first think.
Pubs have suffered from relentless competition on practically all fronts in the last 2 decades and The Campaign for Real Ale, CAMRA, estimate that they are closing at a rate of 31 per week. A lot of the reasons for their closing, have actually been a benefit to the coffee shop industry.
Price & Availability – Up to a few years ago, the government increased the amount of tax on alcohol in every budget which constantly increased the price of your pint, the supermarkets have benefitted massively and increased the amount of alcohol bought for home consumption. Now over twice as much alcohol is off sale compared to that bought from pubs. ‘Prinks’ or ‘pre drinks’ are the what people do before going out to a pub or club because they can get their spirits raised for a fraction of the price of drinking out.
Where coffee consumption has been growing in coffee shops it has mostly been a shift from instant coffee consumption, as people become more discerning. The rise of the automatic self serve coffee machine now found everywhere from the garage to your office lobby will start doing what the supermarkets did to pubs for coffee shops.
The rise of the coffee pod machine, it’s one of our favourite Christmas gifts with sales up 45% in 2013 and with the cost of pods coming down all the time since Nespresso the biggest maker of pods lost its patents, a decent coffee can be had for less than 30p per capsule at home, this will cause a shift as people no longer have to get to a coffee shop to get great coffee. These machines are so consistent that they are used in many of the world’s top restaurants, so coffee shop owners should not be complacent to this threat.
Pubs have always been at a disadvantage when they have been ‘tied houses’ where they are only allowed to sell a certain range of beers from their brewery. The rise of the craft beer and microbreweries has transformed the fortune of many a pub. The same can be seen with the rise of the 4th wave of coffee houses. Jeffery Young of Allegra Strategies, who are the coffee industry statistician’s, predicted at the London Coffee Festival in May 2015, that the science of coffee will become the 4th wave and that the chains are looking to follow into this market too, with echoes of the craft beer movement.
To survive, the pub is reinventing itself as an all day, female friendly casual dining establishment. The success of the Loungers concept is testament to this, with its fantastic growth over the last 5 years, it’s coffee sales are a very important part of its business with the staff getting coffee training on a par with any coffee shop. Wetherspoons too are using coffee as a weapon to attract customers away from coffee shops, by the offer of free refills.
In contrast the coffee shop has always been female friendly but has generally has a poor choice of food and shorter opening hours, the opportunity for the modern coffee shop is to improve the range of food it serves and open longer. There is also a fantastic opportunity for licensed coffee shops to sell craft beers and wines as well, a trend that is very evident in the London and Manchester coffee scene. The 4th wave of coffee shops will offer a variety of single origin coffees that will be made in a variety of different ways from brew bars to siphons, they will roast their own coffee on site and have the coffee knowledge to the same level a sommelier in a restaurant has about wine. They will educate their customers in the science of coffee to increase the enjoyment and discernment.
Coffee shops have always benefited from WIFI, as many pubs have been slow to realise the potential of allowing people to work effectively from their premises. This advantage is being quickly eroded with the introduction of 4G, as people are able to work from places that don’t offer WIFI. The opportunity is to make it even easier and more convenient for people to work from the coffee shop, by providing electric charging facilities and a variety of seating with good lighting
The pub companies were critisised by many for turning unprofitable managed sites to tempting opportunities for people wanting to run their own pub and then watching them loose their money and be labeled as cannon fodder. There is a trend emerging that those people who would have looked a running a pub, think they can open a coffee shop and make money. There are many coffee franchises out there if the prospective owner thinks they need the support and there are many others who just go it alone. Many of these new coffee shops open and close quickly under the radar, as they are in the wrong position, their rent is too high, the concept flawed or the franchisor does not offer the right support and is not motivated by the profitability of the franchisee.
Overall coffee shops are predicted to outnumber pubs in 10 years at the current rate of growth, this seems realistic as the UK’s coffee consumption is still the lowest in per head in Europe. The opportunities for the increase in coffee sales are great but the opportunity to consume it are growing as fast or even faster than demand, so the successful coffee shop could take many lessons from the evolution of the pub. In Darwinian terms ‘it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself’.
About the authors
Andrew and Claire Bowen have run their own coffee shops for the last 8 years starting as franchisees and moving to develop their own independent business. The knowledge and experience gained from this has been used in the development of Café Success – the UK’s best resource for coffee shop, café and tearoom owners. Free to Join at cafesuccesshub.com it is growing to cover all aspects of setting up and running a coffee business. Please link in with them and join the Coffee Shop Owners of the UK discussion group on linked in.