Focus on coffee: how big is coffee in pubs?

The coffee market is booming and there seems to be no sign of it abating.

It was only a few years ago that asking for a “flat white” would get a perplexed response from the staff in most pubs and cafés. However, coffee is now mainstream and growing.

Research from Allegra World Coffee Portal says the market is expected to reach a turnover of £16.5m by 2020, with non-specialist operators such as pubs helping to drive this.

Speciality coffee, which now accounts for an estimated 15% of the total volume of the out-of-home coffee market, is predicted to double in value in the next five years. Allegra forecasts growth of 13% year-on-year, outperforming the wider coffee market by 10% a year.

So what is driving the overall coffee market? It’s pretty simple... consumers.

The British public spends about £730m on coffee each year and consumes 70 million cups a day, according to recent research from personal finance company Buddy Loans. 

With consumers demanding more coffee options, their desire for quality is also growing.

Richard Green, head of beverage solutions at Nestlé Professional argues: “For food-led pubs, in particular, a quality cup of coffee is no longer something that is sought by consumers, it is simply expected.”

And it is this expectation that is driving operators into this lucrative market.

JDW chairman ... ​

JD Wetherspoon’s chairman Tim Martin recently revealed the chain sells one million cups of coffee a week and 25 million breakfasts. (Sacla Eating Out — Today and Tomorrow report)

“I’m told that’s more than Pret A Manger and Caffè Nero. I have said that, as a business, we should aim to triple this during the next 18 months,” he says.

And Wetherspoon is not the only operator to get in on the coffee buzz as a raft of pubcos from managed to tenanted such as Brains with coffee shop chain Coffee#1, Shepherd Neame Coffee & Ale House, and Fuller’s Brewer Street Coffee have all made major inroads into the sector.

Chris Jowsey, trading director at Star Pubs & Bars says the category has grown massively for pubs.

“Coffee used to be a question of ‘shall we or shan’t we do it?’ Now the question is ‘where shall we put the coffee machine?’,” he says. “Even a pub with limited space can have a good compact pod coffee machine making high-quality espresso.”

While coffee growth seems set to continue, it is widely recognised that pubs with a strong food and breakfast offer provide an ideal opportunity to drive sales of coffee.

Mark Stevens, owner of gastropub the Rose at Shenfield, Essex, sells 1,200 cups of coffee a month, with the top sellers being cappuccino and Americano. He opened the pub in November 2014 and used the Star Pubs & Bars exclusive Kimbo deal to launch the coffee range.

“We still have a bar area but we are finding the designated driver who has a couple of soft drinks will add a coffee or even a speciality tea,” says Stevens.

“Coffee is a bonus sale. If you are selling a meal then you can encourage customers to have a coffee at the end.”

Significant uplift​

The pub is about to launch breakfasts and Stevens predicts a further significant uplift on the back of this.

Bryan Unkles, managing director at Cafeology, which supplies a range of operators including Inventive Leisure and TCG agrees that breakfasts can have an impact on coffee sales.

“The breakfast has certainly highlighted that hot beverages are available during early mornings,” he says.

But he admits there is a challenge for pubs to encourage sales outside the traditional food times.

Free Wi-Fi, designated coffee areas as well the opportunity to offer grab-and-go at the end of a meal all provide potential to drive coffee sales, he argues.

Phil Smith, head of category and insight, UCC Coffee UK & Ireland agrees. “Our latest research found that consumers expect a more extensive hot beverage offer from pubs when there’s also food available,” he says.

However, he admits that some pubs are recognising the value of driving coffee sales at traditionally quieter times and expects to see further growth in this part of the sector.

For the future, though, Unkles argues that innovation in the coffee market will be essential for pub operators and suppliers.

“This can be seasonal promotions such a Black Forest Mocha or a Pumpkin-Spiced Latte,” he says. 

“It is coming up with new ideas to take on the high street coffee chains. Pubs have got to keep evolving because coffee is a major profit generator if it is done right.”

Evening appeal

The Brasenose Arms in Banbury, Oxfordshire, has taken its coffee offer to the next level. Publican Johan Smal is producing his own-brand coffee, named Brazen Bean, fresh roasted from beans on-site, and serves this to customers, as well as selling it in branded bags.

He says the offer is a good driver of sales: “Even on £2 per cup, the GP on coffee is still good because it doesn’t cost more than about 12p to make,” he says.

Smal took over the Enterprise Inns pub, restaurant and bed & breakfast in August 2014 and completely overhauled the offer. It serves a high volume of coffee through its accommodation and breakfast business, but does find it drives sales during quieter times when a younger clientele comes in to use the free Wi-Fi.

“Coffee is all about location and we are in a small village town, not on a highway. We find the local market is slowly growing with us but you have to cultivate a bit of a culture with it,” Smal says.

While food is a driver, it is the evening trade where the pub sees a real growth in coffee sales.

“At dessert time, the staff are very busy on the coffee machine because a lot of people order espressos, lattes and cappuccinos at the end of the meal.”

Fuller's beans

Fuller’s launched its own branded Brewer Street Coffee in 2012 and opened its first stand-alone retail outlet the Fields in 2014 next to one of its pubs in Ealing.

The coffee, now sold across its 180 managed pubs, is in double-digital growth every month with Fuller’s selling around 1.3m coffees a year.

“The UK coffee market is going to grow and I am convinced it is going to continue,” says Fuller’s retail marketing manager Nick Corden.

“There are a lot more customers looking for coffee and as pubs become more food focused and premium, they have to start taking coffee seriously.”

Fuller’s took the decision to make its own blend of coffee to keep with its ethos of offering quality products from beer to food. Food, especially breakfasts, are a major driver across the estate and it should come as no surprise that its biggest breakfast site at Heathrow Terminal 2 has very strong coffee sales.

“Pubs can play a part in that afternoon coffee with a bit of Wi-Fi but it is more about growth in food and breakfasts and more people using pubs to eat out,” he says.

Corden says the stand-alone retail outlet is currently not part of a plan to roll out a coffee shop chain, but serves as a “beacon” for the rest of the estate. Fuller’s is now also offering Brewer Street Coffee to its tenants.