The UK coffee shop market is dominated by three major players – Starbucks, Caffe Nero and Costa. Following the announcement that Costa has opened another 141 stores and with profit up by 11.4% to £356.5 million compared to last year, Kate Jones, Director at Added Value UK, urged readers of Marketing Magazine to ‘Wake up and smell the success of coffee’. And unwittingly sparked an impassioned debate in an office of coffee consumers, connoisseurs and critics: just who is the King of Coffee?
Of the three brands, Caffe Nero caused the biggest stir in the coffee cup. An office divided, those driven by quality praised Nero for catering for people who know and like real coffee. “But they don’t even do a flat white!” claim the protestors. Each of the big chains has a clear point of difference, they are all by and large offering the same thing, but differentiate through their brand offer and character. Starbucks, the worthy American with profits of £360.5 million, Nero the coffee-obsessed Italian, and Costa, the slightly quirky Brit where you get your tea in a pot and singing heads in their “Coffee lovers” campaign.
When it comes to the brand experience, Caffe Nero is not as impressive. Nero appears to be stuck in the past with a dated view of what a coffee shop is, unlike Starbucks, who gets that coffee today isn’t about some hankering for a Mediterranean lifestyle or European sophistication. Coffee is slick, urban and modern. Melbourne or San Francisco are more the heart of coffee culture than Milan or Rome and the brand experience of Starbucks reflects this. It seems that ever since Starbucks wanted to be the third space, high street coffee in the West has become less about the liquid.
It is undeniable that Starbucks pioneered the coffee shop experience, but what about the negatives? Most find being asked for your name annoying, rather than charmingly personal. A corporate giant trying to be local feels somewhat inauthentic and lacking integrity; “if you’re my local and my regular coffee haunt, you should know my name and order.”
With a crowded coffee shop market, innovation is key to success. Costa does this through a wide and varied channel base, arguably treading a fine line to over-exposing their brand, but actually it seems to be working. ‘Costas’ abound, from corporate foyers to Costa Express in petrol stations and even at home, thanks to their partnership with Tassimo.
The watchout here will be quality: the experience of a self-service petrol station machine through to a barista-prepared serve in a coffee shop. Costa should be careful to not become the Tesco of coffee chains and undergo the inevitable backlash of losing loyalty or worse cheapening the brand.
Starbucks has answered the same challenge through product and business model innovation, which has led them into alternative channels through a ready-to-drink offer and partnership with PepsiCo, placing their brand on supermarket shelves the world over.
It’s difficult to be mainstream and a connoisseur at the same time when it comes to coffee. With Costa moving from premium to mass market, Nero offering us a dated perspective on coffee and Starbucks’ take on personalisation falling flat, could their crowns be in danger of slipping? Is the trend moving on, and is it time for the reign of the independents, or “Brew Bars”, who truly care about coffee and believe in making us the best flat white we’ve ever tasted? Probably, but whilst the category continues to grind out record profits and serve up lattes for £3 a slurp in times of austerity, coffee chains are still “Waking up to smell the success of coffee” every morning.
Starbucks: less inspiring.
Starbucks may have emerged from a few difficult years with outstanding business results in 2012. But this year’s Cultural Traction™ study shows that trouble is on the horizon for the American giant. Its lofty mission ‘to inspire the human spirit – one person, one cup and one neighbourhood at a time,’ if brought properly to life, should generate strong scores for “Inspiring.” Yet its rank on this dimension is lower than Coca Cola, Nescafé or even Lipton, highlighting a real problem. At number 20 in the global study, Starbucks makes an even poorer impression for ‘Vibrancy’ in the UK, at number 48. Similarly WPP’s BrandZ report places Starbucks down 2 places from last year, as the 44th most valuable global brand.
It seems Starbucks is reacting by changing its focus, having recently announced a strategic decision to grow its food footprint by acquiring French pastry bakery La Boulange and removing the word ‘coffee’ from its famed siren logo. But with a premium-priced paper cup of hot stuff an essential part of the daily routine; is Starbucks about to lose out on coffee to the independent rising stars?