Uday's avatar
$96.6m follower assets
Moreee coffee
According to Allegra's Project Café UK 2022, the UK branded coffee shop market witnessed a sharp rebound in 2021 and is currently valued at GBP4.4bn, reaching 87% of pre-pandemic value. The branded UK coffee shop market has also returned to outlet growth and now stands at 9,540 in total, an annual increase of 324 rising by 3.5%. It expects outlet growth to be ~2.1% for the next 5 years and the market value to increase at 5.8% CAGR.

On the other hand, number of coffee species under threat of extinciton has been increasing. The Royal Botanic gardens cited recently about 60% of coffee species fall under this category now due to ever increasing temperatures across the globe.

Coffee reserves have been depleting whereas demand for coffee remains strong, and is growing.

$SBUX , Are you watching this?
Conor Mac's avatar
Was reading this (linked below) FT article this morning about Starbucks, had some pretty interesting insights related to their potential outsourcing of the rest of their UK stores. You may enjoy!

Uday's avatar
@investmenttalk thanks! Was trying to think about what does this decision mean for Starbucks from a growth/returns perspective? Franchising means lower revenue share/lower share of growth vs investing further in the market as you are optimistic about it having a meaningful impact to the parent's financials. They opted for the former didn't they?
Conor Mac's avatar
@uplusk Yea lower revenue, higher margin profile if they do that. My thought it, they already have about 75% of those stores franchised in the UK, so the 300 or so will be somewhat immaterial to the larger picture.

The biggest consideration will be what their overall strategy with the UK turns out to be. Costa Coffee dominates that market, but Starbucks are still number 2, and Pret are noway near as well capitalised to beat Starbucks, but the competition is fierce (they have that subscription offering).

So, I don't think its going to have a meaningful impact, but am more so concerned about the incentives to grow in the market going forward. Seems like Schultz wants to put all the eggs in the US and China basket.

Uday's avatar
@investmenttalk makes total sense, thanks!