1. Introduction

Take a walk down any high street in a major town or city in the UK, especially in the South East and you will not fail to see several sandwich and coffee retail chains. In London, especially, it seems that on every street where there are shops there is a Starbucks or a Pret a Manger, the two retail kings of this sector.

However, it has not always been the case. Pre-packed sandwiches were pioneered by Marks & Spencer and proved immensely popular with lunch-time shoppers. Marks & Spencer's high street rivals Boots realised what was happening and launched their own range of ready-to-eat sandwiches and the supermarkets also realised the opportunities offered by this high-margin business. Following on from the success of this, Pret a Manger opened a small number of outlets in the business districts of London specialising solely in sandwiches, some of which had exotic fillings, or at least at the time they were considered to be exotic because the alternative was a cheese and pickle sandwich from your local bakery.

Today, sandwich retailers have sales of some £2.2bn a year, however the market remains very fragmented, despite the apparent strength of Pret a Manger, Marks & Spencer, Boots and the supermarkets. There are literally thousands of individual, independent operators selling sandwiches to the lunch-time crowd. In addition to these operators, there is a sizeable market in the delivery sector, catering for office workers.

Similar developments are afoot in the coffee retail market. The growing popularity of coffee, allied to the increasing consumer sophistication and the quickening pace of daily life has stirred up demand for refreshment and rejuvenation on the move. As with many retail trends, the coffee shop has as its spiritual home, the US, where coffee shops are found on virtually every street corner. Café society has been aided and abetted by the huge success of the US-sitcom, Friends, which bases itself around a group of friends who seem to spend half their lives in a coffee shop.

In times gone by, if you wanted a coffee on the move you were lucky to get much more than a spoonful of coffee powder in a polystyrene cup. Today's coffee shops are bright, airy places. You have the choice of sitting in or take-away. Coffee is served in specialised cups to retain the heat, but prevent you from burning your hands whilst holding the cup, and most important of all, the coffee actually tastes good. And, whereas choice was confined to 'black' or 'white', there is now a whole spectrum of coffee varieties and styles for consumers to choose from.

This 'revolution' has led sales through coffee shops to grow at a staggering rate over the last few years. Whilst dwarfed by sandwich shop sales, coffee shop sales have grown at around 20 percent a year and currently stand at around £225m and growing. The best known coffee shop is probably Starbucks, the American chain which now has almost 90 stores in the UK. Others include Coffee Republic, Costa Coffee and Madisons. There is even a certain amount of cross-over occurring now. Pret a Manger, the sandwich chain allows its customers to buy different blends of coffee and other outlets, such as Aroma, are very much 'dual retailers' offering both coffee shop-style coffee blends and sandwich shop-standard sandwiches.

Throughout this report, use is made of the results of a survey Market Assessment commissioned from National Opinion Poll Solutions (NOP) to examine the consumer profile of coffee bar and sandwich shop users.