5 dynamics shaping the European branded coffee shop market in 2024

Baristas keep a watchful eye on coffee preparation at The Miners in Prague, Czech Republic | Photo credit: The Miners

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1. Economic challenges constrain growth

World Coffee Portal’s Project Café Europe 2024 report shows the vast majority of European branded coffee shop markets achieved outlet growth over the last 12 months despite many operators grappling with high operating costs and low consumer confidence.

As inflationary pressures have eased over the last 12 months, 62% of European industry leaders surveyed by World Coffee Portal indicated positive trading – a 4% year-on-year rise. Major markets, including the UK, Russia, France and Turkey all achieved single-digit outlet growth. Remarkably, Ukraine achieved double-digit outlet growth despite Russia’s ongoing invasion. Germany was the largest market to contract by outlets, while Greece saw a low single-digit decline in store numbers.

While most operators reported positive sales growth, high costs for raw goods, staffing and lower consumer disposable income remain key obstacles to profitability. With average beverage prices rising faster than annual EU inflation, operators are under growing pressure to demonstrate value-for-money in an increasingly competitive trading environment.

Nevertheless, European industry leaders are cautiously optimistic for the year ahead, with 42% believing the trading environment will improve over the next 12 months. Nearly three-quarters believe there is further growth potential for branded coffee chains in their market.

2. Premium coffee driving success in Germany

Germany’s branded coffee chains faced a tough economic backdrop in 2023, with weak consumer confidence, high energy prices and labour shortages contributing to a 1.3% market contraction by outlets.

Amid difficult trading, major food-focused operators, such as Kamps, Ditsch and Dat Backhus closed stores over the last 12 months, while many other bakery-led operators have sought to improve coffee quality to stay ahead of the competition. 

World Coffee Portal research shows German consumers surveyed consider staff attentiveness, beverage consistency and specialty coffee as key aspects of a high-quality coffee shop.

German bakery-café chain Backwerk has introduced a premium coffee and beverage offer | Photo credit: Backwerk

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In January 2023, 690-store bakery chain Schäfer’s launched a rebranded range of Fairtrade 100% Arabica and robusta blended coffees at its stores. The following April, 350-strong bakery operator BackWerk introduced premium barista-prepared coffee and juices to focus on higher quality and make the brand ‘fit for the future’. Meanwhile, most German bakery-café chains, including Steinecke, Junge and Brothaus, now deploy re-usable coffee cup schemes.

Highlighting increasing competition on coffee quality in the German food-focused segment, UK-based Pret A Manger has identified Germany as a ‘key growth market’ and is tapping into opportunities in Berlin with franchisee PM Nord GmbH with its premium food and beverages menu.

In a further sign that premium coffee-focused operators are broadening their appeal among German consumers, market leader McCafé, domestic leader Coffee Fellows and JAB Holding-backed Espresso House all gained outlets. In the specialty segment, German brands The Barn, Five Elephants, Bonanza Coffee Roasters and Exclusive Coffee are also trading strongly, with UK boutique operator EL&N making its Germany debut with a store in Düsseldorf in late 2023.

Premium coffee chains are also seeking new opportunities regionally. In July 2023, Sweden’s Espresso House partnered with the German subsidiary of Italian foodservice giant Autogrill to scale its presence at airports and railway stations. Coffee Fellows is also seeking to build its presence across Germany’s transport network. In January 2024 the domestic chain acquired 25 Waynes motorway service station stores from Tank & Rast to take its total store footprint to nearly 270 outlets.

3. Specialty coffee gaining traction in France

The fourth largest branded coffee shop market in Europe, France has long had a strong food-focused café segment, which currently comprises more than two-thirds of the total market. Two of France’s largest bakery-café chains – Marie Blachère and Brioche Dorée – posted strong outlet growth over the last 12 months with 68 and 51 net new sites respectively, ahead of Starbucks’ 26 net new stores.

However, the French branded coffee shop market’s total 2% outlet growth over the last 12 months has been led by coffee-focused chains, with a burgeoning specialty segment gaining significant traction in Paris.

A Coutume Café specialty café and coffee shop in Paris, France | Photo credit: David Foessel/Coutume Café

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Specialty coffee roaster Noir opened six net new stores within the last six months, while Brazilian small-format operator The Coffee, Spanish takeaway focused GoodNews and French specialty coffee group Terres de Café also expanded their footprints in the French capital.

Highlighting the growing international appeal of Paris’ specialty coffee market, Dubai-based Saddle Café and New York-based Ralph’s Coffee both opened their first stores in France in the latter half of 2023 in Cannes and Paris respectively. Meanwhile, Japan’s % Arabica will re-enter the market in 2024 with ‘several’ stores in Paris.

World Coffee Portal research shows more than a fifth of French consumers surveyed visit or order from coffee shops daily, with nearly a quarter doing so more than once a week. Of those surveyed, 59% consider specialty coffee to be important to a high-quality coffee shop, ahead of barista skill, ethical credentials and single-origin coffee.

While Paris is the epicentre of France’s developing specialty coffee market, operators are also seeking new audiences regionally. Ten-store Parisian specialty coffee operator Coutume Café began seeking regional master franchisees in September 2023 to explore growth opportunities in France’s large provincial towns and plans to open its first sites outside of Paris in 2024.

Danish specialty chain Copenhagen Coffee Lab opened two new French stores in 2023 but has yet to launch in Paris, instead opting to develop a network of seven sites in the southern cities of Nice and Cannes. Moreover, the success of Le Paris Café Festival, which attracted more than 10,000 visitors in March 2024, shows France’s specialty coffee segment is hotting up.

4. Coffee chains gearing up for growth in Poland

A rise in personal consumption is believed to be the main driver behind Poland’s forecaste 2.7% GDP growth in 2024, with rising wages and subsiding inflationary pressures likely to boost out-of-home coffee sales.

Reflecting the positive economic outlook, the total Polish branded coffee shop market grew nearly 5% over the last 12 months to reach 1,170 stores and is forecast to exceed 2,000 outlets within the next three years.

A Costa Coffee store at the Krzywy Domek or ‘crooked house’ in Sopot, Poland | Photo credit: yanishevska/Shutterstock

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Reflecting the positive economic outlook, the total Polish branded coffee shop market grew nearly 5% over the last 12 months to reach 1,170 stores and is forecast to exceed 2,000 outlets within the next three years.

As demand for premium coffee grows, international operators are increasingly tapping into opportunities for expansion in Poland. US-based Starbucks and Green Caffè Nero both posted stronger outlet growth over the last 12 months following modest expansion over the last five years.

Meanwhile, Israeli value-focused operator Cofix has established its European headquarters in Warsaw and is seeking to open at least 18 new outlets in 2024. UK-based boutique café group EL&N opened its first store in the Polish capital in November 2023.

However, indicating that convenience is increasingly important to Polish consumers, World Coffee Portal research shows 57% of coffee shop customers surveyed spend less than 30 minutes in-store, with more than a third preferring to order at a self-service kiosk rather than ordering at the counter.

Convenience and value-focused market leader McCafé opened 26 net new stores over the last 12 months – nearly double that of the second fastest growing brand So! Coffee – to hold a 30% share of the total market.

So! Coffee is owned by French travel concession group Lagardère Travel Retail, which completed the acquisition of master franchise rights for UK-based coffee chain Costa Coffee in Poland in February 2023. Despite closing 12 net Costa Coffee stores within the last 12 months, the on-the-go focused travel retailer still collectively holds a 10% total market share in Poland via the two brands.

Meanwhile, domestic specialty coffee roaster and café chain White Bear Coffee is also seeking a greater share of Poland’s convenience coffee market and has announced plans to introduce take-away only kiosks in a bid to scale at speed and cater to demand for convenience formats.

5. EU deforestation rules could impact mid-term coffee supply

New EU rules on deforestation-linked products are set to impact coffee roasters and supply chains in 2024. Introduced in mid-2023 and set to come into force by December 2024, EU Deforestation Regulation (EUDR) will oblige companies importing commodities into the EU, including coffee and cocoa, to prove goods have not contributed to deforestation before 31 December 2020 – and face hefty fines for non-compliance.

However, with roasters and importers grappling with uncertainty over EUDR implementation, the International Coffee Organization (ICO) has warned that Europe could face a shortage of coffee by 2025. EUDR could also impact coffee supply from certain countries, including Ethiopia, where a reduction in European trade has already been reported by some farming cooperatives. 

German roaster Dallmayr, which purchases approximately 1% of the world’s coffee supply every year, has also indicated it could soon significantly scale back coffee purchases from Ethiopia due to EUDR.

New EU deforestation rules could lead to higher prices for some coffee imports in 2024 | Photo credit: Diego Catto

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In early 2024 the European Coffee Federation (ECF), which represents major green coffee importers, including Lavazza, illy, JDE Peet’s, Nestlé and Starbucks urged the European Commission to delay EUDR implementation to safeguard the livelihood of smallholder farmers, particularly in Africa and Asia, that rely on access to the EU market.

Responding to coffee industry concerns, in March 2024 the EU indicated it would delay the December scheduled classification of deforestation risk countries as ‘low’, ‘standard’ or ‘high risk’. It now intends to classify all countries as ‘medium’ risk to give businesses more time to adapt and avoid disadvantaging some producer countries.

However, some of Europe’s largest coffee companies have already taken due diligence action. In February 2024 JDE Peet’s partnered with sustainability assurance provider Enveritas to conduct a deforestation assessment with coffee producers in Ethiopia, Papua New Guinea, Tanzania and Uganda to ensure its supply chain complies with EU rules. Meanwhile, two of the world’s largest coffee traders, Sucafina and Louis Dreyfus Company (LDC), have already locked in future sales contracts with an EUDR price premium.

Those roasters and operators with direct trade sourcing relationships will need to communicate clear intentions to regulators, stakeholders and suppliers, develop company management systems, map supply chains and traceability and engage directly with suppliers – all of which could generate extra costs and lead times over the next 12 months. 
 

Project Café Europe 2024 is World Coffee Portal’s strategic report and vital guide to navigating the diverse European branded coffee shop market, providing operators, investors and suppliers with the latest market data and insights to build powerful business strategies – and delivering all the crucial information to stay ahead of the competition.

For further information and report pricing, email: enquiries@worldcoffeeportal.com or call: +44 (0) 20 7691 8800