How bakeries became the UK’s main coffee battleground

For much of the past decade, the out-of-home coffee market has been defined by rapid expansion. Branded coffee chains colonised high streets, transport hubs and retail parks, while independent cafés flourished on the promise of craft, community and quality. But as the market matures and growth in traditional coffee formats slows, a different channel is accelerating.

Bakeries and sandwich shops, once viewed as incidental coffee sellers, are now emerging as some of the most dynamic players in the UK’s coffee economy. New research suggests coffee is no longer a supporting act in these venues, but a primary driver of footfall, loyalty and spend. In doing so, bakeries are beginning to challenge the dominance of established coffee chains and reshape consumer expectations of where, and how, they buy their daily brew.

Across the wider out-of-home market, coffee volume growth has cooled. Rising costs, intensified competition and cautious consumer spending have taken the edge off the expansion that once defined the sector. Yet within this flatter landscape, bakeries and sandwich shops are bucking the trend.

Independent research from private-label coffee roaster Lincoln & York shows coffee sales in bakery and sandwich outlets rising by 15.4% year-on-year, despite overall out-of-home growth slowing. The figures point to a structural shift rather than a short-term anomaly: consumers are increasingly choosing bakeries as their preferred coffee destination.

“Bakeries and sandwich shops, once viewed as incidental coffee sellers, are now emerging as some of the most dynamic players in the UK’s coffee economy.”

That shift reflects broader changes in how people eat, drink and socialise. As households manage costs, many are trading down from full-service hospitality without abandoning quality altogether. It appears that bakeries – with their combination of fresh food, accessible pricing and increasingly sophisticated coffee offers – are well placed to capture that demand.

Perhaps the most striking finding from Lincoln & York’s research is how decisively coffee now influences consumer choice in this channel. According to the report, 81% of consumers say the quality of the coffee is a major factor in deciding which bakery they visit. Nearly half buy coffee from a bakery or sandwich shop at least once a month, while one in five 25- to 34-year-olds does so weekly.

Recommendation behaviour reinforces the point. Some 68% of consumers say they would recommend a bakery or sandwich shop to friends or family based on the quality of its coffee alone, while more than half report switching bakeries altogether because of poor coffee.

“It would be easy to assume that coffee is an afterthought in bakery and sandwich shops, when consumers visit to buy breakfast or lunch,” says Ian Bryson, managing director of Lincoln & York. “But our research shows that’s far from the case. Coffee is driving consumers into this channel and is being purchased, even when food isn’t.”

That last point marks a significant break from long-held assumptions. Some 40% of consumers say that when they buy coffee from a bakery or sandwich shop, they always purchase the drink, but only buy food around half the time. Among 25- to 34-year-olds, more than half rarely or never buy food alongside their coffee in these venues.

For operators, that behaviour reframes coffee from a secondary add-on into a standalone commercial proposition.

“New research suggests coffee is no longer a supporting act in these venues, but a primary driver of footfall, loyalty and spend.”

The generational dynamics behind this shift matter. While latte remains the most popular coffee order in bakeries overall, demand skews heavily by age. More than half of 55- to 64-year-olds typically order a latte, compared with just 26% of 18- to 24-year-olds.

Among younger consumers, cold coffee dominates. Lincoln & York’s research shows iced coffees and frappes are now the most popular coffee choices for 18- to 24-year-olds in the bakery and sandwich channel, with 51% opting for cold drinks. 40% of this group also actively seek out speciality coffee for its flavour and quality.

“The significance of the younger demographic in coffee isn’t new news,” Bryson adds. “But what we must take from this is that the bakery and sandwich sector needs to continue to meet their demands for new and exciting flavours to ensure they continue to get their caffeine fix in this channel.”

Crucially, this shift is not diluting value. Younger consumers are driving higher average spend, with 74% of 18- to 24-year-olds and 79% of 25- to 34-year-olds typically spending between £5 and £7 on a coffee in a bakery. It was found that 15% of under-25s report spending more than £7.

“The quest for quality is closely followed by a search for value for money,” Bryson adds. “Overall, this balance between quality and affordability is key to the success this rapidly growing sector is experiencing right now.”

“It would be easy to assume that coffee is an afterthought in bakery and sandwich shops, when consumers visit to buy breakfast or lunch, but our research shows that’s far from the case.”

If the data outlines the opportunity, operators such as Cornish Bakery show how it plays out on the ground. The independent chain reported record summer trading, with total sales up 24% year-on-year and like-for-like sales rising 8% in August. The August bank holiday delivered the biggest sales week in the company’s history, with several branches setting individual records.

Those results came against a challenging retail backdrop. Over the same period, the Confederation of British Industry (CBI) reported a decline in overall retail spending, underlining the strength of Cornish Bakery’s performance.

Founded in Cornwall but now operating nationally, the business attributes its growth to rising footfall, higher average transaction values and strong performance from new and refurbished sites, including Hereford, Woodbridge and York. Further openings are planned, with five locations already in advanced discussions for early 2026.

“Our founder, Steve Grocutt, has long said that ‘bakery is the new coffee shop’, and we’re seeing that trend play out,” says managing director Mat Finch. “The premium bakery segment is growing faster than traditional coffee shops, and customers are seeking fresher, higher-quality food that’s baked and served on-site, not wrapped in plastic.”

Behind that performance sits a deliberate strategic shift. Speaking about Cornish Bakery’s rebrand nearly two years ago, founder Steve Grocutt describes a move away from overt destination branding towards a clearer focus on product and experience.

“Our old tourist brand basically said to the customer, ‘come in through the threshold of the bakery and you’re in Cornwall’,” he explains. “But it was clear that on the high street, people didn’t really want the Cornwall angle that much.”

Instead, the business dialled down overt branding and “dialled up the bakery”. The change coincided with new product development and a sharper focus on coffee.

“The high street model is actually completely different, even though it’s selling the same product range,” Grocutt says. “Coffee participation is enormous. So has participation in pastry sales, lunch products and non-pasty lunch products.”

For Grocutt, coffee has become inseparable from the modern bakery proposition. “Wherever you go in this country, you now expect good coffee,” he says. “When I said ‘bakery is the new coffee shop’, what was very clear to me was that there was a gap in the market for a venue where you could have coffee-shop service with a bakery experience.”

“Our founder, Steve Grocutt, has long said that ‘bakery is the new coffee shop’, and we’re seeing that trend play out.”

That belief is not confined to independents. At the premium end of the market, Gail’s Bakery has become a bellwether for the bakery-coffee hybrid model, attracting sustained investor interest and expanding at pace.

The group plans to open 40 new bakeries across England by February 2026 as it continues to push beyond its London heartland. Sales rose 20% to £278m in the year to November, while revenues at parent company Grain Topco reached £231.8m for the year to February 2024.

Although pre-tax losses widened slightly as the business invested heavily in new sites, staff and production capacity, directors described the retail arm as the group’s “faster growing and more profitable” division. 

Taken together, the data and operator performance point to a clear conclusion: bakery coffee has moved from convenience to strategy. Operators that once treated coffee as a necessary extra now see it as central to their proposition.

As Bryson notes, “Despite already delivering strong growth in value, volume and consumer penetration, there remains significant potential as bakeries and sandwich shops continue to challenge traditional high street coffee chains.”