Economic Crunch: How Will It Affect Our Business?

[javaqueen]

I would love to hear what you think the repercussions of the economy will mean to the coffee industry.

I have my inclinations and will share when the discussion begins to roll.

[Brady]

Based on what we've seen so far, I bet many customers will cut back for a while, then return as they adapt. Dailys may turn into couple-of-times-a-weekers for a time. Bean sales should increase as more people stop coming daily and brew at home instead. People may start favoring their neighborhood shop more to cut back on gas usage. Profits squeezed as costs continue to be passed along.

So kind of a mixed bag, I think. We'll all need to keep finding creative ways to grow in the face of increased costs and competition. Sound kinda like business as usual?

[Shawn]

Denise Smith said:"... but then you didn't ask about how politics will effect our business."

Exactly. Please keep your unsupported political opinions to yourself on an industry website.

[Banks Thomas]

Bush helped get us into this , so you think McCain will get us out? That would be funny if other people did not think the same. I hopefully Obama will win and save this country and its image in the world.

Denise Smith said:

Caffeine is an addictive mood enhancing product. Let's just say I have no problem with the fact that I'm about to go sign a loan for our property today.
I believe over all everything will be okay. I believe in the power of answered prayers and I believe the people of our nation will use good sense when they go to polls and that McCain w& Palin will help our economy and our nation to become stronger.
Of course if Obama is elected as president then all bets are off and I will go hang my flag upside down as a sign of national distress... but then you didn't ask about how politics will effect our business.

[Alun Evans]

Forgetting politics, I think you could look at historical parallels to this question. Coffee consumption during the great depression (or the "Greatest Depression up until this one") remained strong. I think coffee is seen by many as an affordble luxury, in some cases a necessity of course. Being able to continue to enjoy a good cup of whatever brew you drink every morning is a constant. Yes it could be argued that this habit is a burden on shrinking personal disposible income, however I would say the counter to this is the fact that coffee is an important part of many peoples lives, routines and indeed the modern worlds social fabric.

However... when it comes to the food side of a cafe business, I might be inclined to think that while coffee sales should remain strong, some people may just bring lunch to the office in a paper bag from home!

[miKe mcKoffee aka Mike McGinness]

I've already seen a decline in food sales. We do light breakfasts (oatmeal, granola, bagels, breakfast sandwiches etc.) as well as the more usual scratch scones & muffins etc. Lunch scratch soups, salads, quiche and made to order deli and panini sandwiches. My counter/plan to combat is to increase food quality even further getting rid of all processed meats in favor of custom smoked meats etc. Plan to launch new menu Nov 1. OTOH front of the house sales while a bit up and down have remained strong and slowly growing as reputation spreads. What's tough is appropriately staffing for the bizarrely swinging lunch rush. In the same week this month have had both the slowest and busiest days of the year. (as told by where it counts, the register...)

But in reality I don't really mind the declining food sales as long as overall revenue grows. And higher percentage front of house versus back of house is a good thing! I'd much rather be roasting more to supply increasing whole bean sales, more press pots to order and pulling more shots etc. than slicing more meats and cheeses:-)

[Steve]

This has nothing to with Bush....this has everything to do with Fannie & Freddie backing worthless mortgage backed securities...wall street greed. Just as a side note...Obama hired the recently fired Fannie Mae CEO to find his new VP.....just an FYI.

COFFEE FOR PRESIDENT!!!!!!!!!!!!!!!!!!


Banks Thomas said:

Bush helped get us into this , so you think McCain will get us out? That would be funny if other people did not think the same. I hopefully Obama will win and save this country and its image in the world.
Denise Smith said:

Caffeine is an addictive mood enhancing product. Let's just say I have no problem with the fact that I'm about to go sign a loan for our property today.
I believe over all everything will be okay. I believe in the power of answered prayers and I believe the people of our nation will use good sense when they go to polls and that McCain w& Palin will help our economy and our nation to become stronger.
Of course if Obama is elected as president then all bets are off and I will go hang my flag upside down as a sign of national distress... but then you didn't ask about how politics will effect our business.

[Alun Evans]

We have a lot of Amercian customers over here- we are a stones throw from a US Embassy Compound. With the mix of customers- Embassy, Oil Personnel, NGO staff and International School teachers the political views are quite diverse. Hear a lot of arguement and lively debate for both candidates, both parties. We also have an Election coming up...New Zealand that is. I bet no one knew that, probably not even all the Kiwis on this site!

Anyway, I would like to know what coffee each of the Candidates and their VP nominees drinks... that might tell us something about the kind of people they are. Agreed...Coffee for president!

[BaristaOnDutY]

I just had to respond to this, all because I'm not only Coffee Core, but Country Core this is not about politics, but since I fought for this country for you politicians to be in this chat talking politics here is my voice HEAR me loud and clear, we can't point the finger @ BUSH we the people elected him and if he has done wrong so have we the people by keeping him in office, as far as OBAMA is concerned he can do no more or no less than BUSH, but WE THE PEOPLE CAN~ Back to the Subject Alun you are absolutely right about the Coffee Consumption during the depression, which brings me to pat myself on the back, what people will do is still drink their coffee, they will just redirect their spending habits, like instead of going to the cafe to buy a latte before work, the will contact me as they have been about getting free machines for purchasing coffee on one of my free machine programs, not to Blatently self promote what I do, but I'm a business man an I recognize trends, one of the reasons I'm successful, I mean I can go and consult a coffee shop on opening and making the best drink, but honestly if the people aren't coming out to purchase what does it matter, right now wages are @ a stand still gas is up, for what reason I don't know, and the economy is and has been messed up for quite some time, now little folk are actually feeling it because they can no longer cover up, what mess we are in. I say Diversify Diversify Coffee Communities Need To Stick Together Because We Are In This Together, So If You Guys Wanna Brag About Who Has The Best Coffee Etc Etc, I'm Gonna Come Pull Up With My PAN, And Show You Up, Take Ur Business And Not Split Any Profits!!! So Lets All Be Friends And Share Ways To Over Come There Is Enough Money And Beans Out There For Us ALL, I'm Here To Help Anyone Or Business That Needs~ Signing Off....Your Baristaonduty...Love U Guys...Grammar Mistakes Take Them For Love English Is Not My 1st Language Business iS..

[Alun Evans]

Good on you GodBod, well put.

[javaqueen]

Very cool discussion here... great to see you all are willing to speak your opinions.

While attempting to discover the reason the U.S. economy is in crisis could be productive, placing blame probably isn't going to help find the solution.

Action must be taken because the economic structure of the world is affected and will continue to be affected if we do not pick ourselves up, brush off the dust and get back to work.

There is a lot of restructuring that must be done... and our businesses will need to respond to the changing market.

Yes, it will continue to change and if each one of our businesses is to survive, we will need to pay attention to what our market is in the new economic reality.

The Seattle based Green Giant has seen their market change around the world. What changes are you seeing in your business and your market? How are you responding? What are you changing in your business plan?

[Brady]

javaqueen said:
"I have my inclinations and will share when the discussion begins to roll."

I think its rolling... let's hear them. No holding back either, or we'll send BoD and his badass PAN your way :)

[Alun Evans]

GodBod I like the Pan!

On a serious note, the old addage "when the US sneezes...the world catches a cold" is sadly an economic reality. I know most of you in the US probably your economic updates off the American channels- Bloomberg, CNBC etc. Here in Asia we get those channels plus Eurpopean, Singapore and HK based and Australian media. I was watching one of these late last night (3am ish). The economist being interviewed was talking about the continued problems in the real estate market. Some parts of CA are looking at around 40% foreclosures/defaults on home mortgages taken out over the last 36 months. To me that is just plain scary!

In Asia the markets have been buffeted (not "Warren Buffetted!!") over the last few weeks. NZ, my home country, has slide into the first recession in 10 years. All the markets are slowing down

So far I would say that coffee sales from my perspective have not been affected. However, for sure I am seeing a BIG slow down in demand for machines as new cafes are delaying opening and existing chains are slowing down their expansion plans. I think for established roasters, cafes the next 18 months will be one of consolidation...however most that are quality driven and have adequate volume should be fine IMO. However I would probably think twice if opening a new place, at least in Asia, unless I had good capital reserves to ride out what might be tight economic times for a while to come