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.

[Richard Penney]

Euro problems? Why pay twice what a machine is worth. May I suggest buying a made in USA machine?? Small store= Salvatore or Astra, one or two machines. Larger store; Astra multi group. Both of these makers' prices from the factory and their customer service and parts availability are fantastic! Astra also has a heavy duty dedicated steamer available
-Richard

[Audrey]

In our coffee shop, we see over 500 people a day almost every day of the week, with often only two baristas working behind the counter. Even with this high volume we place our highest emphasis on making a quality social experience with the customers as much as giving them a delicious drink. It's probably because everyone who works behind our counter is looking for a great conversation, including a short one during the morning rush. Even when just handing over a cup of black coffee to-go, if you mention someone's name or that you like their hat or "Oh my goodness, what happened to your arm?!" when it's in a sling, the customer will want to come back and see someone who cares about them.

When you create a community for people to come to is when the business becomes well insulated from the latest CNN scrolls about Wall Street.

[Denise Smith]

Politics aside because what is done is done... We must pull together as a nation and support our president (and no I didn't fly my flag upside down). Our economic situation as a nation does effect other nations around the world.

But like BoD stated we must pull together as an industry and support each other. I am very grateful for the opportunity to come on BEx and discuss the specialty coffee industry. You are all an amazing group of professionals and your insight and direction have been very helpful to me.

What we are seeing here in our region of Tennessee (and this may be world wide)is that people may cut back on family vacations and purchases of new cars or other high ticket items... but they still like their 'little luxuries'.
This community is on fire awaiting our opening. I have had nothing but positive feed back from people here. They are tired of the chain stores and mega marts and they want to support the small business owners. I have spoken to a great number of people from folks in the construction industry, banking, shop owners, local government and city management to the locals here in the neighborhood who are lower income and fixed income. The response has all been the same... a warm welcome. I can only hope that it will be the same the same when the doors open.
I may not draw in the folks here in the neighborhood who walk to the gas station across the street every day (yes sometimes more then once a day) to buy their $.89 coffee. They are not looking for the flavor and quality that we will have, but I might get them to come in every now and then to buy a scone or pastry to go with their gas station coffee as they walk home. A frequent buyer card discount might help get them to change over.

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.

[Regina Alleman]

Thanks for the advice. Especially the piece about "Dancing Goat". Trademark laws are mind boggling. There is so much to consider when opening a new business. While economic conditions are rather bleak; I agree that people are still enjoying their smaller luxuries and foregoing larger ones.
Zech said:

Regina Alleman said:

I am starting a new coffee roasting business. I have been reluctant because of the current economic conditions, but have decided to forge ahead. Any advice from you seasoned veterans would be appreciated.

OK. So, my first bit of advice is probably not going to be an easy one to hear.

You have to change your company name. There is already a Dancing Goats Coffee Company. They are the retail arm of Batdorf and Bronson Coffee Roasters, a highly respected thirdwave company. You don't want to get into a scuffle with these guys over trademark rights.

Second, I would say that it is best to STAY AWAY FROM RETAIL! At this time, the worst thing you could do is increase expenses by having to pay a staff, buy lots of brewing equipment, and settle into one location. Diversify by going the wholesale route. This way, regardless of whether or not the coffee business as a whole starts to tank [it won't] your operation will outlive the retailers.

Third, and perhaps most importantly [depending on your market] focus on QUALITY! Hire someone who knows what they are doing if you don't. Don't be afraid to pay a seasoned roaster for a while as you learn the ins and outs for yourself. Coffee is a complex of interwoven systems. Like the ecosystems where coffee is grown, everything effects everything- you really must know what you are buying, who you are buying it from, and what conditions are like on the ground.

Fourth, use the power of the internet. You already seem to have this bit of knowledge. Wholesalers need to have an effective webcampaign to reach out beyond their delivery route. Barista exchange and sites like it are a great resource for knowledge [and I probably shouldn't give so much away in such clearly defined terms] but nothing can top experience.

Good luck to you! You don't need a weatherman to know which way the wind blows.

[Zech]

To address the wholesale versus retail issue:

I agree that focusing on training, ambience, etc, plays a crucial role in the success of a retail business. AND I agree that it is extremely important for coffee houses to remain socially conscious, community involved institutions. However, I disagree that retailers should roast or that roasters should retail.

IMO, the two fields should remain distinct from one another. I believe this for a number of reasons. Firstly, a retailer's job is to sell commodities: cups, shirts, bags-of-coffee, etc, etc. A roaster's job is something different: to develop a signature work which no one else can replicate. While the two worlds depend on one another for success, it is important to keep the consumer mindful of the various stages of metamorphosis coffee takes along it's journey. Coffee roasters are equally a part of the community.

Sure, many people want to own a shop and roast their own. And if that's what they choose to do, so be it. I, however, prefer the notion of a barista or shop owner being part of a business which acts as one stage of coffee's development rather than several. This way, we create more jobs and dialog entropy in our communities which we prize so much.

[Jason Haeger]

"a retailer's job is to sell commodities"

Careful, there. Few of us believe specialty coffee to be a "commodity", and I don't think many agree that a barista's job is merely to sell items.

Similarly, I don't know of many roasters who think their roll is more significant than the retailers.

The best anyone can do is to refrain from ruining what's already there. There is much skill, knowledge, and care involved with this, and to box retailers into "sellers of commodities" is something I would not want to see uttered to consumers of quality coffee. Ever.

[[e-mail]]

Well said.


Jason Haeger said:

"a retailer's job is to sell commodities"

Careful, there. Few of us believe specialty coffee to be a "commodity", and I don't think many agree that a barista's job is merely to sell items.

Similarly, I don't know of many roasters who think their roll is more significant than the retailers.

The best anyone can do is to refrain from ruining what's already there. There is much skill, knowledge, and care involved with this, and to box retailers into "sellers of commodities" is something I would not want to see uttered to consumers of quality coffee. Ever.

[Brady]

Yeah, agreeing with Jason here as well. Zech, I find very little to agree with in your post - from your role of barista/retailer to the role of roaster. Here I though I was supposed to be making good coffee and that our roaster was trying to get great flavors... I'm also confused as to how hiding the roaster offsite in a warehouse makes the customer MORE aware of the coffee's metamorphosis.

[Rich Abker]

Much good advice offered here!

On the flip side of the coin, some things that can kill a good specialty coffee shop business are:
**Bad location
**Under capitalized
**Poor Management
**Employee underachievers
**Investment, or overhead too high to succeed
**Remote, or ghost ownership
**Poor Planning
**Lack of industry knowledge
**No real budget
**Poor quality

Eliminate these mistakes and you have a good chance to succeed.

[EL LAGO COFFEE]

hi i wouldn't worry about the coffee industry. it is the 2nd in the world comody sold in the world , demand out side of oil - its the same as fuel -price & demand - its a great buz to be in - at least i think so .
el lago coffee

[Doc Rob]

Looking at the monthly gross at each of 4 locations indicated a consistent drop in business of about 20-30% from 2007-2008 (depending on the relative average income in the area around the shop). This became particularly evident about September 2007 and continued through the end of the year 2008. Checking in with restaurant owner friends of mine, they are also down about 30%. Depending on how close a shop's margins are, drops of this magnitude can become quite critical. One of my shops was in the red for 2008 as it is. In my opinion, small business proprietors are most likely near the limit of what they can tolerate in business downturns. We can ride through if it doesn't get much worse and improves before too long. However, if 2009 ends up another 30% below 2008, the viability of the business and the jobs it provides are at serious risk.

Forget "Joe the plumber", I am worried about Barry the Barista!

[Jason Haeger]

Interesting. A shop here (past student of mine) has seen continued growth for the last year or two.

The growth has slowed considerably, but the point is that it's growing, not shrinking. Even in this economy.

I'm under the impression that others who have said that people are just prioritizing the value of their spending are spot on. People will still spend, but now they're more concerned with the value of the product against their cost. Is it worth it? If they don't think it is, they won't come as often, or at all.

Coffee is not expensive, really, and it has been an "affordable luxury", and remains to be so. But the value of that luxury when compared to the affordability is now more critical than it was before.

Just some thoughts, and not really a response to anything in particular.