It was the Latte Revolution that once looked unstoppable. Gradually, on every street, at every station, in every shopping centre, there was a Starbucks or a Caffe Nero or a Costa.

It was the Latte Revolution that once looked unstoppable. Gradually, on every street, at every station, in every shopping centre, there was a Starbucks or a Caffe Nero or a Costa. But now, with the news that one of the biggest players, Coffee Republic, has gone into administration, could the revolution be over?

Coffee Republic, which has 187 outlets in the UK and overseas, is now in the hands of administrator KPMG, which said yesterday it was planing to complete the sale of the chain by the end of next week. KPMG said it had already received calls from interested parties, mainly other coffee-bar operators.

Whether the sale goes ahead or not, it is a disappointing chapter in the story of a famous brand created by the glamorous brother-and-sister team of Bobby and Sahar Hashemi. After its launch in London in 1995, the company rapidly expanded.

But KPMG's Richard Hill said the recession had taken the steam out of Coffee Republic's business. "The recession is hitting discretionary spending on the high street, and some of the less profitable bars with expensive leases have suffered," he said.

Coffee Republic is not alone in feeling the pressure; even the biggest are not immune. Earlier this year, Starbucks announced it was planning to cut 7000 jobs and close 300 stores around the world.

But in other respects the market seems to be holding up. Between last December and May, 124 coffee shops opened in the UK.

Fiona Hamilton co-owns the Glasgow-based retail and restaurant business Fifi and Ally, which bought the Beanscene chain after it went into administration last year. She has announced plans to expand the number of those coffee shops from 12 to 22.

Some might question the idea of expanding a coffee chain at a time when others seem to be so publicly struggling, but Ms Hamilton says it is actually a good time to be growing. "The reason we are expanding is that for young, growing companies it's a good time to be negotiating with landlords because we're getting fair deals.

"We're finding that our customers are not buying a new carpet or going on big holidays - but they will still treat themselves to a coffee."

Ms Hamilton also believes the culture of drinking good-quality coffee has become so embedded that not even an economic downturn can dent it. "I remember going to the States and seeing people walking about with cups in their hands and thinking, How sophisticated is that?' Now walk down any street in the UK and that's how people are."

However, Ms Hamilton does believe there is a readjustment going on in the market. "A lot of companies are paying the penalty for coming in late, but what we don't want is for the market to be dominated by Starbucks and Costa.

"There did need to be a readjustment. We all got carried away in the good times and there was over-expansion, and what happens is that the fittest survive. The credit crunch shines light on the weaknesses."

John Richardson, who works as a consultant to coffee shops and is the co-author of a book called Wake Up and Smell the Profit, believes the tightening market means weaker coffee shops were bound to suffer.

"Coffee Republic was quite a good business to begin with, but it would be fair to say they were never brilliant and never really made any proper money," he said. "The kind of coffee shop that was being opened at that stage, you could compare to the internet bubble - a lot of people jumped in."

Mr Richardson believes good cafes offering good coffee will survive. "The really good ones will continue to get the money but those who have been greedy are suddenly being held up to quite a severe light.

"I'm not sure if the bubble has burst - it's gone down a bit like one of those wrinkly balloons. Coffee Republic and a few others are the air that has come out of that balloon."

He added: "If we are feeling the pinch then we are going to cut back on going to top-end restaurants but the £2 to £3 cup of coffee is affordable. It gives you a feel-good factor - but it has to be really good.

"I'm confident about the future but there are a lot of people out there who do not deserve to be in business. We are going to end up with better operators."

Starbucks said yesterday that it believed the market was holding up. A spokesperson said: "Like many other companies, we are seeing some softness in the UK business during the economic downturn, but have no specific evidence that consumers are moving from drinking their coffee in coffee shops towards drinking coffee at home."

Gordon Muir, of Glasgow coffee supplier Matthew Algie, whose customers include Pret A Manger and Marks & Spencer, also said the market was resilient. "We have a recession but it's uneven in its impact. We are seeing a fairly decent year and most consumers are loath to stop their daily coffee fix."