A month ago, James
Hoffman wrote a three-part
thought piece detailing the state of speciality coffee globally using London as
a case study. It’s definitely worth a read. In it, he pointed to the positive
outlook in the industry and warned that the current rate of growth the market
was likely set to experience a market correction. Whilst agreeing with some of
the assumptions, I disagreed slightly with some of the conclusions. By popular
demand from many of those in the industry, the following is a modified version
of my response to Hoffman’s article.
The Bubble
I believe the bubble you've described
is beginning to form in London. I have mentioned it briefly to a few people in
the industry that there will be natural saturation point. You covered these
points in the Lull and Bubble excellently. However, it may be a while before
this happens and I anticipate we will see (and already have seen) a change in
business models as coffee shops adapt to new trends. Of the 330 coffee shops I
put on my map a year ago, I estimate only 20 - 30 have closed. There is still
quite a bit of growth potential. We might see what you've described in
particular areas of London first though. I can think of a few places where I
believe the market is at capacity.
Growth in London
Within London, coffee shops that are
opening are, as you mentioned, not innovative. Most new entries (those who are
new to the industry as a whole) are, as you highlighted, those office
workers/career changers who've been attracted to the growth of the industry.
Usually these individuals will have an espresso blend and machine supplied from
one of the main London roasteries. These rarely have filter options and the
quality is largely dependent on which roastery they go with and the subsequent
training they receive. The other category are those baristas who have realized
after 3-4 years that the only way to progress in the industry is to open your
own place.
Currently, London is set to undergo
another wave of rapid expansion caused by three trends:
First, coffee shops in London that
have operated for 1-2 years have been immensely successful and owners are
looking to open their second or even third site. Most coffee shop owners that I
know are looking to expand and/or begin roasting their own coffee.
Second, we are witnessing the growth
of "independent
chains." Notes/Grind/Taylor Street/Fernandez and Wells/Beany
Green/Dept of Coffee all have ambitious expansion plans. Both Grind and Beany
Green raised bonds of over £1m to fund new sites.
Third, big London institutions (like
the National Opera, the Tate, etc.) and public institutions (churches, libraries)
are retrofitting their outlets to take into account of the growth of specialty
coffee. Big chains (Pret, Starbucks) are either changing their language or
launching their own concept stores. There is now the direct establishment of
specialty coffee stalls within offices.
All of this supports your analysis.
However, something important I think you've missed out within your analysis is
the consumer.
The Consumer
Coffee is a longstanding consumer
staple. In its long history, people have always consumed coffee in one from or
another. What's changed is how it's consumed (for example, the rise of instant
coffee after WWII) and the environment in which its consumed (the rise of cafe
culture around the world.)
What Starbucks managed to do, and the
"third wave" built upon, was convincing people to pay a premium for
coffee and of the difference between bad and good coffee. To the average
consumer, it's an easy distinction to learn. What's more difficult to discern,
for the average consumer, is the difference in taste between good and better
coffee. Being critical, this is where I think the London coffee scene has not
invested nearly enough into. (Michael from Assembly summarized this problem
brilliantly in this comic.)
Speciality Coffee Versus Cafe Culture
To give an example, of the 400+
coffee shops that I've visited and are still trading, I estimate only around 80
offer filter coffee as an option. I think for many, filter is seen as a bit of
novelty or even an annoyance- particularly during rush hour, that offers
terrible financial returns. I have sat in coffee shops during rush hour and
seen baristas dissuade customers from ordering filter and suggesting a long
black instead. Some coffee shops with high trade have tried to circumvent this
by offering batch brew instead. It’s not difficult to see why, overwhelmingly flat
whites and lattes are what customers order.
I am going to go out on a limb and
suggest this: specialty coffee is not growing. Coffee shop culture
is growing instead. This is partially due to urban trends (Cities are growing.
Suburbia is not.), the role of cafes as replacing traditional community hubs
(such as the pub) and the rise of the experiential economy. There is now a
research study of the University of Coventry looking at the
role of coffee shops in urban environments. The role of cities has changed
dramatically. Coffee shops are unwittingly part of a wider trend.
Coffee shops have already adapted
their business models. Timberyard is not purely a specialty coffee shop.
Timberyard is a co-working space for London's growing tech/creative sector with
specialty coffee. The Grind group is a brunch/cocktail bar with specialty
coffee. Beany Green is catering to the huge rush of office workers with a
compelling takeaway lunch menu. Association Coffee/Workshop are catering to
office workers who need high-end and affordable meeting spaces. In outer London,
there is an entire new market of "play cafes" catering to the market
of women with young children that serve specialty coffee.
So where
can Specialty Coffee go from here?
In the past, coffee-producing
countries collaborated and collectively pumped millions into advertising,
research and PR to grow their customer base. They knew they all benefited from
working together to increase the size of the market. If the market for specialty
coffee is to become saturated, than another solution is to try and increase the
market.
As you pointed out, in the UK- per capita consumption has barely grown and the UK remains one of the only countries where instant coffee is favored to fresh ground of fresh coffee beans. There is still massive scope to covert people to specialty coffee.
This was one of my first observations
about the UK coffee scene. There is no collective voice that reaches out to try
and engage customers. Coffee classes are ridiculously expensive (one coffee
shop has an "introduction" that costs £160.) and cuppings and events
that are currently being held I find inaccessible to the average consumer.
Caffeine Magazine is a welcome step for the UK as is the introduction of sites
like Perfect Daily Grind, but there needs to be something even a bit simpler.
I think there is room for an
organisation to collectively band the independent coffee industry together
through subscription/membership fees with the sole aim of promoting and
training the next generation of consumers to appreciate good and better coffee.
Publishing free coffee introductory guides to be stocked in independent coffee
shops. Launching integrated social media campaigns (such as Kaffeine's
#SaturdayCoffee), encouraging coffee shops to hold free cuppings on specific
days (they really should be called coffee tasting) and free training courses.
Holding events with a greater focus on consumers and a greater focus on coffee
shops and coffee culture in London. Recognizing that unless more people are
converted into specialty coffee, then the industry itself might become just
another trend.