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.

[Mellisa]

Mike,
My specials are comprised of a toasted sandwich, the soup of the day, and a cookie. Single menu items are virtually untouched. I agree that they want a group of items.

A post note: I'm selling pies for TG with $1 off for advance orders. Well, guess what? The orders are coming in. Its comfort + money saved = sales. That seems to be the formula for success in these times. Knock wood, of course.

Mike Spence said:

This post about specials reminded me of something my customer service department is seeing. Our customers that offer more food (lunch etc) are calling to see how specials can be done. The trend for some of our customers is in how they can package a drink and a pastry or even lunch items together in some sort of combo price to help boost sales (they can then track those though the pos).

I think Mellisa nails it here with the fact that people are looking for both a "deal" and that personal touch. If customers are going to "splurge" on a drink - they want to feel good about it.

Mellisa said:

My coffee shop/cafe is in a very small (population 750) Midwest town. I'm seeing some changes here; not all are negative.

For coffees, more drip is being sold. I can't keep the airpots full. However, Lattes & caps are almost history. A few devotees remain.

More beans are being sold to the customer. Many more!

For meals, the heartier and simpler the better. They want a special. A special translates into one featured menu item which is about 25 cents off, but they sell like hot cakes, because they are "on sale".

Likewise, on my slowest day (Usually Mondays) I sell "a cup of Joe" (drip) for 25 cents with any meal (not a special that day). Man, they are flocking in.

As long as you keep them coming in the door, even if you are selling less volume for less money per, then the habit is there and they still have a place to come to vent and express themselves about the state of things. That is SO important to my customers. They are miffed if I don't personally speak with them (if a crowd descends) and they love home baked pies and cookies. Its COMFORT.... and we get the distinct pleasure of dishing it out on a daily basis. A much better line of work than the accountant next door..... Comfort them and they will keep coming. Just my two cents (hey, can I get a discount?)

[Dave]

The crunch has just started to hit in Australia. Have noticed already that more people are bringing in their coffee from home and making it at work. Four or five months ago we were paying A$2.50 for a standard. Now you are luck if you can find a good cafe that sells the same size for A$3.20.

[javaqueen]

Dave... are you referring to the cost of a regular cup of coffee?

Dave said:

The crunch has just started to hit in Australia. Have noticed already that more people are bringing in their coffee from home and making it at work. Four or five months ago we were paying A$2.50 for a standard. Now you are luck if you can find a good cafe that sells the same size for A$3.20.

[Luis Flores]

I believe it could slow down in some products, people tend to adapt in order to maintain their life styles. Some will not buy a $4 coffee but will buy a $2 coffee. In that sense coffee comsuption may not decline but the amount people spend in coffee will.

[Lucas Elia]

"Coffee consumption during the great depression (or the "Greatest Depression up until this one") remained strong." written by Alun Evans

I'm curious if you know where I can find some statistics that illustrate this point. I have heard that is the truth but I can't find any reliable sources anywhere.

[Bel Townsend]

Hey again,
There was a section on the BBC's Newsnight program the other night about coffee and the credit crunch - specifically Starbucks closing down 600 stores in the US? I haven't noticed any *$ closing here in the UK, but the program was suggesting that it's affecting lots of cafe/coffee shop businesses, even the big chains. They pointed to Starbucks as the symbol of economic prosperity in the US - as in, a luxury everyone can now afford in this wonderful age of debt-fuelled decadence etc etc - and now of course, less people are buying Starbucks. Whereas that would normally be a good thing, I don't think it's just starbucks they are not buying....

[Brady]

If I recall correctly, the sequence of those events was not quite accurate. Didn't starbx decide to close stores based on weak performance several months before all this credit stuff started happening?

This credit crunch, while clearly very real, is creating convenient cover for some already-about-to-close businesses to shift blame to the economy. "It wasn't that we were serving crappy coffee and growing willy-nilly, its that darn economy." Is this another good example of that?

[ray peck]

We are up 10% to date from last year and I keep driving myself to work.

[Bel Townsend]

You may be right Brady - I don't know! Like I said, I haven't heard about starbcuks closing branches in this country, there was just this piece on the news about it happening in the States - and it was definitely presented as a sign of the economic downturn. But I agree it does sound likely that the economy is being used as an excuse!

Brady said:

If I recall correctly, the sequence of those events was not quite accurate. Didn't starbx decide to close stores based on weak performance several months before all this credit stuff started happening?

This credit crunch, while clearly very real, is creating convenient cover for some already-about-to-close businesses to shift blame to the economy. "It wasn't that we were serving crappy coffee and growing willy-nilly, its that darn economy." Is this another good example of that?

[Richard Penney]

From what I see in the Midwest countryside, there are a lot of folks going to coffee shops and houses. I think it is a way to get away from TV and the bad news. Even the poor quality coffee houses are doing quite well. One coffee house that had sold the business has started a new up scale house and now after months of Hot milk drinks and smoothies has added a new Cimballi and properly trained the help!.
I must point out that this is a college town.
-richard

[graeme finegan]

In fairness ghuys, this is just not a US problem, its a global one. Bare bones I think the consumers of the world although eager to cut back they will inevitably cut back on exspensive ones, 3 course meals will decine, formal dining will decline, but i feel the cafes of the world can really make it through this downturn, if like the previous post we concentrate on quality, coffee and associated items, I know my food is getting better, so that I can attractr those cutting back on formal meals, they will still want to socialise and eat and drink with friends, so give them an option, I know from instore research I've done people would rather go for a coffee and a sandwich 5 times a week rather than a formal dinner once a week!!

There is a whole new market out there we just have to attract and sell the social aspect of the cafe!!

[Jason Haeger]

graeme finegan said:

In fairness ghuys, this is just not a US problem, its a global one. Bare bones I think the consumers of the world although eager to cut back they will inevitably cut back on exspensive ones, 3 course meals will decine, formal dining will decline, but i feel the cafes of the world can really make it through this downturn, if like the previous post we concentrate on quality, coffee and associated items, I know my food is getting better, so that I can attractr those cutting back on formal meals, they will still want to socialise and eat and drink with friends, so give them an option, I know from instore research I've done people would rather go for a coffee and a sandwich 5 times a week rather than a formal dinner once a week!!

There is a whole new market out there we just have to attract and sell the social aspect of the cafe!!

I think you are exactly right.