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What business to start in 2012: Independent coffee shops

With the UK coffee shop market expected to grow by 25% between 2009 and 2014, now could be a great time to grab a slice of the action

1. Career coaching
2. Cycling
3. Dance and Zumba
4. Frozen yoghurt
5. Hobby and crafts
6. Independent coffee shops
7. Mobile apps
8. Smartphone repairs
9. Social gaming
10. The Olympics

Why is it so promising?

Almost two decades ago, the cast of Friends introduced Britain to the delights of a casual natter in a coffee shop. Since then, this languid pastime has become a cultural phenomenon, and coffee shops like the iconic Central Perk beloved by Joey, Chandler and co can now be found on every UK street.

In the last decade, the number of branded coffee houses in the UK has risen three-fold, driven by an exponential increase in demand. According to Mintel, around 57% of UK consumers now use coffee shops regularly, enticed by the emergence of upmarket chains such as Starbucks, the increasing availability of ‘gourmet coffee’, and the popularity of coffee-fuelled sitcoms such as Friends.

The financial value of the industry is huge. In 2010 coffee shops were worth around £5bn, while last year total UK coffee sales were £2.1bn, 10% up on 2010 and twice the level of 2005. In 2009 the British Coffee Association predicted that the market would grow by almost 25% in the five years to 2014, and so far this eye-catching forecast seems well-founded.

With consumer titles such as Which? propagating the idea that independents provide a better cup of coffee and a more intimate atmosphere than the major chains, much of today’s demand focuses on boutique outlets rather than the big boys. In 2010, the number of independent coffee shops was almost equal to that of high-street giants such as Starbucks, Costa and Caffe Nero. In London, 35 independent bars opened last year, compared with 56 big-chain branches – and the gap could narrow further in 2012.

“Cappuccinos and lattes are our biggest sell, because those drinks can’t really be recreated at the consumer’s house” 

What are the specific opportunities?

When we talk about independent coffee shops, we’re invariably referring to self-consciously boutique outlets which serve high-quality coffee, and allow guests to eat in as well as take away. According to Mintel, around 47% of coffee shop users prefer to ‘sit in’ with their drinks, while just 8% take their coffee away, so you’ll need to offer a comfy, cosy area for people to lounge and chat. Meanwhile, offering WiFi so customers can hold meetings, or listen to bands in the evenings, could help to make your venue a popular destination within the community.

Another option in this sector is to become a mobile barista. These have become increasingly common outside stations and commuter routes in recent years, and give you the option of moving to markets or other locations during the day or at weekends.

Mintel’s stats also reveal that, of those who regularly consume hot drinks beyond the confines of their home, around half favour cappuccinos, lattes and mochas. So it’s essential that your coffee shop provides each of these three staples. Hot chocolate, filter coffee and traditional tea are also fairly popular, but there’s significantly less demand for cold drinks and smoothies. If you want your coffee shop to fly, it’s best to keep your drinks hot.

Finally, you need to think about the amount you charge. Although footfall in the coffee sector has soared in recent years, the amount individual consumers are spending has actually fallen – from an average of £3.50 in 2009 to £3.18 in 2011. So you’ll have to strike a delicate balance between premium quality and affordable pricing.

Who’s doing it?

Stephen Chiverton, The Coffee House Lymm

“I’m from Lymm, a small village outside Manchester, and before this I worked in music retail, where I met one of my business partners. We opened around six months ago, and we’re surpassing expectations. We were looking to break even in the first six months, and we’re doing better than that.

“Opening a coffee shop wasn’t a lifelong ambition. I looked at the buildings available in Lymm, and thought that this one would really suit a coffee house. The shop itself is quite a big unit, so we’ve designed it to be open and spacious. One of the top complaints we used to hear about coffee houses was that the tables were too close together, so we’ve deliberately left plenty of space between them, which seems to be a great feature.

“In terms of demographics, we get a lot of elderly customers, but also 25-35 year old women with young kids, and local businesses. The majority of our customers are women, but it’s not particularly pronounced. When we launched our business, we wanted to create a generally warm and relaxing atmosphere. It wasn’t gender-specific.

“Cappuccinos and lattes are our biggest sell, because those drinks can’t really be recreated at the consumer’s house. But we also have a siphon coffee machine, a Japanese invention which looks a bit like a chemistry set, and the coffee we get from that is selling well. And we do food, which is an important part of the business – a lot of coffee shop customers want light bites.”

If you’re a people person and you can meet the costs involved with setting up a coffee shop, this could be the venture for you. To find out more, read our full-length guide on how to start a coffee shop.

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