UK Coffee Industry

Case Study
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In 2005, the UK coffee market was valued at 680 million worth of sales with a 5-7% annual growth rate since 2000, indicating recovery from the recent price decline during the 1990s. Coffee products are differentiated primarily between instant coffee and ground or roast coffee, with instant coffee sales dominating with an 85% (580 million) market share in 2005, compared to only 15% (100 million) for ground and roast coffee during the same year, illustrating a contradictory case within the European market, where consumers favour ground and roast.


Dominance of instant coffee is attributed to a combination of aggressive marketing and branding campaigns by brand manufacturers, as well as the price consciousness and brand loyalty characteristic of coffee drinkers. However, instant coffee growth rates lag behind ground and roast, increasing only by 11.1% from 2003-2005, compared to 13.6% for the latter, which can be attributed to the development of new pod technologies and the decreasing prices of coffee machines, which allows consumers greater convenience in home brewing; and the prevalence of repertoire drinkers2, indicating an increase in consumers drinking both instant and ground coffee.
The market is also highly segmented with distinct divisions in terms of age groups, geography, and consumer behaviour. Demographically, consumption increases with age as majority of heavy coffee drinkers in both sectors found among the 35-64 groups, with 76% drinking instant coffee and about 43% drinking instant exclusively. With respect to ground coffee, consumption is concentrated in more affluent regions of the country, indicating price consciousness among drinkers.
Only a few manufacturers do ...
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