Tricks of the coffee trade

As large parts of our industry (the big brands, the bigger retailers) find themselves working very hard for any growth, it is instructive to look at the phenomenal success of coffee chains.

The turnover of branded coffee chains in the UK has grown by over 500% in the last 15 years, according to Allegra Strategies. How have they achieved this? Well, geographic expansion has been key but then again, how have they created the consumer “pull” to justify all those new outlets? There are three things I see, relevant to our industry.

First, talking confidently about quality. Costa, Starbucks and Caffè Nero radiate a consistent, confident narrative about the quality of their coffee, which helps to justify the price.

Our industry has great quality stories, too. Think about what we’ve achieved with prepared meals. Think about the daily miracle of fruit and veg arriving super fresh in stores. But do we talk about these enough? Many of the big brand successes in the 2000s - Walkers, Warburtons, Tropicana, Tesco Finest - were rooted in a consistent quality narrative. But now we seem to leave this territory to the premium brands - BrewDog, Yeo Valley, Waitrose 1.

Second, securing the impulse purchase. Most people visit coffee shops for the coffee. But they often buy food. Conversion from beverage to food is critical in the sector so the chains work very hard at tempting presentation, especially of sweet treats. Harris + Hoole and Costa are both masters of the art. Grocery has plenty of foods that can attract the impulse purchase. Can we not sell them more temptingly?

Third, consistent pricing and rewarding loyal customers. Costa, Starbucks and Caffè Nero rarely if ever discount. They have taught consumers roughly what a quality coffee costs. In our industry we have discounted heavily and regularly. And we have often found we have promoted ourselves into a corner. Why should a consumer who has bought a product for £1 three weeks in a row then be expected to pay £1.75 for it in the following eight weeks? Do we think they won’t notice? The industry is waking up to this, but it is hard work to get the genie back into the bottle.

And when they do promote, the coffee chains reward loyal customers, via their card schemes. In our industry, it’s often been the disloyal who we’ve rewarded. The £10 off when you spend £50 is sent to the shopper who rarely comes, not the weekly visitor. The highest average price paid for a brand over the year, is paid by the person who buys it every week, not the ‘cherry picker’.

Paying attention to these things won’t add up to 500% growth, but they will make growth a bit easier to come by.

Jeremy Garlick is a partner of Insight Traction