From Italian Espresso to Swedish Fika – Thoughts from the European Coffee Symposium

At the recent European Coffee Symposium in Milan – the annual European coffee bar industry event – global leaders, smaller players, industry suppliers, and the specialised-industry consultant Allegra, discussed key issues facing the industry. We left the session with enough “coffee for thought” to reflect on the current and future operating context for branded coffee chains in the region. Below are some of the key themes from the day.

Competitors and suppliers are delighted with the recent opening of the Starbucks Reserve Roastery in Milan, hoping that its visibility will open the appetites (and the wallets) of Italians for premium and specialty coffee. With the standard price for an espresso in Italy at EUR 1, speciality coffee-suppliers have to overcome strong resistance to higher prices, but there is room for optimism.

Given the structure of on-trade coffee-suppliers in many European countries, expansion may continue for a number of years. Sales are also increasing, and business sentiment remains positive.

The development of on-trade coffee varies greatly from country to country within Europe. This goes from store density (there is one specialised coffee bar for each 8,400 inhabitants in the UK, compared to one for 59,000 in Italy where independent cafés dominate), to pricing, and beyond (see below for more).

Food offerings within coffee bars are becoming a key area of focus. Once again, thinking local can make the difference. In Sweden, sustainability and availability of organic food are significant factors for staying in business. In Italy, availability of local favourites, such as panettone, is likely to make a greater difference.

Customisation, exclusivity, and a local focus are important buzzwords, but what should be the priority: consistency in delivery or a local approach? All players are confronted with this dilemma. For the moment – at least in Europe - it appears that there is a place and a moment for each.

Labour-related issues were clearly a perceived challenge. In-store experience remains a key success factor for coffee bars. In addition to the overall look and feel of the location, the skills of the service are crucial for the quality of the drink and the customer feeling. How to find, train, motivate, and retain personnel, while managing costs to remain competitive, was a recurring theme.

Coffee companies are keeping a close eye on innovation. Tetra Pak’s major push in the water segment, RTD cold brew, and caffeinated-flavoured water attracted the public’s attention during the breaks. In some cases, such as cold brew, limited competition in the space results in low visibility and slow growth. We see opportunities for players, like Coca-Cola, to help cold brew grow in Europe.

While location, quality, and customer experience remain key factors for success, the importance of gaining visibility through mainstream communication and press coverage were also highlighted. Furthermore, classic profitability issues such as “business case” and “financial sustainability” were also mentioned, putting expansion and innovation in the right frame.

As the large become larger, it is also a moment to reflect on the future of mid-sized players. Listening to Wayne’s Coffee, which was established in Sweden in 1994 and sold to the German motorway-service operators Tank & Rast in 2018, we realised that there is a good number of successful, smaller coffee chains where founders feel that the moment has come to team-up with external partners.

Branded coffee bars in Europe are in good health, with new openings and rising sales. However, in this very dynamic industry, players need to keep up with the competition for clients, locations, and employees. They need to constantly adapt to fast-changing consumer trends and ensure that their business model achieves sustained profitability. All this may be reached through very strong brands with international appeal, but also, at a different scale, through local expertise and selective expansion. As the number of outlets grows, it will become increasingly important to make the right choices to remain competitive. This also includes choosing the best partners.