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Thu 19th Jan 2023 - Update: UK coffee shop market growth, Deliveroo, Junkyard Golf Club
UK branded coffee shop market now valued at £4.9bn as it defies difficult trading conditions to achieve strong sales and outlet growth: The UK branded coffee shop market is now valued at £4,9bn having grown 11.9% over the last 12 months, according to the Project Café UK 2022 report from World Coffee Portal. However, total sales remain below pre-pandemic levels as operators grapple with inflation, soaring energy costs and changing consumer footfall. Meanwhile, the number of outlets grew 4.4% to reach 9,885 stores. Major UK coffee chains have responded to shifting consumption patterns by investing in new sales channels, including drive-thru, delivery, self-serve, and smaller format stores. World Coffee Portal forecasts the UK branded coffee shop market will surpass 10,200 outlets in 2024 and exceed 11,600 stores by January 2028. Sales are forecast to exceed £6.4bn by 2028, representing a compound annual growth rate growth of 5.6%. The UK’s drive-thru coffee market grew 17.6% to reach 696 sites over the last year. Drive-thru market leader Costa Coffee added 41 sites over the last 12 months to reach 316, with Starbucks adding 14 to reach 284 and Tim Hortons more than doubling its drive-thru presence to reach 55 locations. Self-serve coffee concepts, such as those recently launched by food-focused chains Pret A Manger and Leon, are also providing low-cost, convenient alternatives to costly high street locations. A total of 53% of UK consumers surveyed by World Coffee Portal ordered from a premium self-serve machine in the last 12 months, with 9% purchasing from a drive-thru on their last coffee shop visit. However, 56% of consumers surveyed indicated they prefer counter service, with the proportion of those ordering ahead at least once over the last 12 months falling from 35% to 27%. Just 37% of industry leaders surveyed by World Coffee Portal indicated trading conditions are positive, down from 56% 12 months ago. Meanwhile, 61% agreed the cost-of-living crisis has already negatively impacted their business. However, despite inflationary pressures prompting all major coffee chains to implement price increases over the last year – with the average price of a 12oz latte increasing by £0.33p (11.3%) to £3.25 – overall rising sales indicate UK consumers still consider out-of- home coffee an affordable luxury during the cost-of-living crisis, according to the report. Despite ongoing trading challenges relating to inflation, lingering covid fallout, Brexit, and the prospect of recession in 2023, international branded coffee chains continue to invest in the UK with operators such as Tim Hortons and Cooks Coffee Company still expanding and others such as US specialty coffee chain Blank Street entering the market. Allegra Group founder and chief executive, Jeffrey Young, said: “The UK branded coffee shop market is now trading strongly post-covid, however, staff shortages, structural inflation – including energy and food prices rises along with a tightening of consumer disposable income – means success will be found among operators that can maintain an impeccable offering with fine-tuned execution.”

Propel’s The Who’s Who of UK Food and Beverage to launch on Monday: Propel’s The Who’s Who of UK Food and Beverage will launch on Monday (23 January) – the first time full profiles of more than 650 of the UK’s top food and beverage operators will be available in one place. It is the fifth major database exclusive to Premium subscribers and will feature more than 165,000 words of content. The companies, listed in alphabetical order, will have their most recent results reported as well as broader information around Ebitda, plans and trading style available. The database, which will be updated monthly, has taken 16 months to pull together, merging Companies House information, interviews and other public information to provide an easy to reference and exhaustive guide to the sector. Premium subscribers also receive access to four other databases: the Propel Turnover & Profits Blue Book; the Propel Multi-Site Database, produced in association with Virgate; the New Openings Database and the UK Food and Beverage Franchisor Database. Premium subscribers are also to be given exclusive access to the recording and slides to Propel Multi-Club Conferences. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription. Subscribers also receive access to Propel's library of Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before.

Deliveroo reports ‘solid performance’ with full-year UK and Ireland orders up 7%, profitability ahead of previous guidance: Deliveroo has reported a “solid performance” in 2022 with gross transaction value (GTV) in the fourth quarter in the UK and Ireland up 9% year-on-year and said full-year profitability is ahead of previous guidance. Full-year GTV in the UK and Ireland was up 9% and orders increased 7% to 158.4 million. The company stated: “In the UK and ireland, GTV was £1,030m and orders were 40.6 million in the fourth quarter. Year-on-year, GTV growth was 9% in constant currency, ahead of order growth, which was broadly flat, due to an increase in GTV per order versus the fourth quarter of 2021 driven by item level price inflation and optimisation of consumer fees during 2022. Sequentially and in constant currency, GTV and orders were up 9% and 8%, respectively, after the seasonally weaker third quarter, while GTV per order was up 1%. For FY 2022, GTV growth was 9% in constant currency, with order growth of 7% and GTV per order growth of 2%. Group wise, in the second half of 2022, adjusted Ebitda approximately breakeven for all operations (including Australia and the Netherlands); this represents a significant improvement in adjusted Ebitda margin (as a percentage of GTV) from minus 3.2% in the second half of 2021 to minus 1.9% in the first half of 2022 to 0% in the second half of 2022. Full year profitability is ahead of previous guidance, driven by gross profit margin expansion and cost control. FY2022 adjusted Ebitda margin (as a percentage of GTV) is now expected to be approximately minus 1.0% for all operations (including Australia and the Netherlands), better than previous guidance of minus 1.2% to minus 1.5%. We had a solid year of growth in 2022, with GTV up 7% for continuing operations (excluding Australia and the Netherlands) and 5% for all operations (both in constant currency) - within the guidance range of 4-8% growth (in constant currency). In 2022, market share increased in key markets such as the UK, France and Italy through relentless focus on the hyperlocal consumer value proposition. In the fourth quarter of 2022, GTV grew by 6% year-on-year for continuing operations. GTV per order was up 8% driven by item level price inflation and consumer fee optimisation; orders were down 2%, reflecting the continuing difficult consumer environment. In the fourth quarter of 2022, GTV increased by 10% sequentially versus seasonally weaker third quarter. Adjusted Ebitda is expected to continue to improve in 2023; management will provide 2023 guidance at FY2022 results on 16 March 2023.” Will Shu, founder and chief executive of Deliveroo, said: “I am proud of the team delivering significant improvements in profitability while also still delivering growth in a difficult macroeconomic environment. I am particularly pleased we have done so while improving our consumer value proposition, meaningfully increasing the selection of restaurants and grocers available on the platform. As always, we continue to be focused on strengthening our offer for each side of our marketplace through a hyperlocal lens. Amidst an uncertain outlook for 2023, we remain confident in our ability to adapt financially and to make continued progress on our path to profitability.”

Junkyard Golf Club invests £2.7m and earns certified carbon neutral status: Crazy golf brand Junkyard Golf Club is investing £2.7m in the business and revealed it has achieved carbon neutral status. It comes as the business gears up to open its second London site, in Camden Market, while international expansion is also on the horizon as the brand looks to launch in the US. The Camden opening, which takes the total number of sites to seven, will see the company invest £2m in refurbishing the former Shaka Zulu restaurant and at 19,500 square foot, will be its biggest venue to date. At the start of 2022, Junkyard Golf Club committed to becoming certified  carb on neutral by the end of the year. It has reduced emissions by 38% through several initiatives, including sourcing electricity from renewable energy providers, and removing single-use plastic cups. Sam Jones, managing director of Junkyard Golf Club, said: “We are proud to announce that Junkyard Golf Club is now a certified carbon neutral company, and we will continue to find ways in which to reduce our carbon footprint across all our sites, with next year’s goal to become a zero waste to landfill brand.” Meanwhile, £500,000 has been invested to improve its venues in London, Leeds, Liverpool, Newcastle, Manchester and Oxford and coincided with the business’ full rebrand. As a Real Living Wage employer, Junkyard Golf Club has increased its hourly pay structure by 8.1% in London and 10.1% across the rest of the country. It has also invested £200,000 in a new team training programme, more than doubling its annual training budget. Jones said: “Junkyard Golf Club began as a pop-up in 2015 and at the time, we genuinely believed we would only be hosting the pop-up experience for about three weeks. Seven years, six locations and one pandemic later, it’s obvious we’re here to stay.”

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