Economic Crunch: How Will It Affect Our Business?
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.
I have my inclinations and will share when the discussion begins to roll.
Replies to This Discussion
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Permalink Reply by BaristaOnDutY on
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Alun Get Ur Own PAN, we are friend and all, but this PAN is personal, shes like my, well you can shes my $$$ Maker!!! J.D will translate that for you if need be..lol...How is this a Newbie comes in stirs all this commotion, and shes out somewhere drinking coffee, while the world waits for her guidance and wisdom, it's gonna be a long night good thing my PAN is hot, from the last Roasting, I may have to use it soon!!!O.K...The way I see it is with all these changes going on, the people we just have to adapt and pull together, because honestly, if the GOVT cared about us little people we wouldn't be in this mess, you'd think they would ask us, before making such rash decisions, but it has been done, all we can do is suck it up, like we always do, not like if we don't ,we actually have a choice. I say hole our heads up, put them together, and lets roll with the punches...Say It With Me " Baristas Unite ".. please don't make me have to use PAN persuasion !!! When I say I'm truly here to help anyone I mean it!! I live on a Farm, so honestly the economy doesn't scare me, just don't come trying to milk my cows without permission ya DIGG!!! Oh yeah Alun don't stay up late night early am watching the news get your rest, leave it up to us Insomniacs!!!
Alun Evans said: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
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Permalink Reply by Tougo Coffee on
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For the sake of Coffee! just keep making great coffee, community and our small moms n pops shops will be just fine. We have a dedicated following of good hard working folks, that come to us not just for "Goddess" in a Cup, but for the warmth that we bring to their lives.
I know in our case we just focus on the fact that we continue to provide outstanding service, pay close attention to our Coffee quality and the rest corrects itself. If you have to make changes to your orders to reflect a hiccup in sales (Just DO It) but don't get down on anything that we small coffee houses do.
Kevin Costner, "build it and they will come" they did come right? well lets just keep building community, quality service, and the best possible product and they will continue to come.
Just my thoughts on how the econ will effect our small coffee houses.
We Love our guest for what they bring to our lives. big business just loves the money.
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Permalink Reply by Jason Haeger on
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Brady said:
ROFL!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 :)
I think habits have changed, but the roasters I have talked to are reported an actual increase in sales. What's more, this is even during the summer months, specifically August. This leads me to believe that while dollar profits may be decreasing somewhat for retailers, people aren't drinking less coffee, but they are altering their consumption habits somewhat.
What does this mean for retailers? That remains to be seen. Frankly, I think people are more likely to cut down or eliminate a lot of excess expenses. This does take an adjustment, but it comes down to the fact that an economic crunch will cause people to re-evaluate their expenses. This initial reaction will probably cause your shop a loss of business. BUT, what changes is that they begin keeping track of expenses a bit more stringently. Then, when budget appropriations are being planned, priorities are evaluated.
To me, coffee is quite a high priority. Unfortunately for this analysis, I can't remember the last time I have actually needed to purchase any. I have, but not for any other reason than entertainment. And honestly, the coffee at home is better.
However, those customers who place a high priority on the pleasure the simple luxury item like specialty coffee brings them will budget for that expense, and will eventually continue normal consumption habits. This does not mean that what they are ordering will remain constant, but they will continue their patronage.
disclaimer: This is almost entirely speculation from what I have read, seen, heard, and experienced. Do not take this as absolute truth and base the actions of your business on it.
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Permalink Reply by javaqueen on
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Whoa, I have to apologize. I didn't think that you would be waiting to hear "my inlinations". I have been working, not slacking... just so you know. Through it all, we have to make sure that our business survives.
Obviously, we are all concerned about what the economy will mean to us. The reality, in my mind, is that if we all pay attention to our individual markets, we can not only survive but thrive.
Godbod, you have a product that is different from any of ours. If you can find out how to promote your unique product to your market, you will continue to sell your product. While you don't want to waste your marketing, you will need to look for ways to expand your market.
So, what is the best way to do that? I will continue to survey my customers. Find out what is their priority and make sure that you cater to it.
Sorry this is so disjointed... but I need to sleep and be prepared for what the sun rise brings. Please forgive me.
I will be back with more info, when I am more awake and able to think clearly.
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javaqueen said:
Just to be clear, I believe they were just teasing. No need to apologize!Whoa, I have to apologize. I didn't think that you would be waiting to hear "my inlinations". I have been working, not slacking... just so you know. Through it all, we have to make sure that our business survives.
Obviously, we are all concerned about what the economy will mean to us. The reality, in my mind, is that if we all pay attention to our individual markets, we can not only survive but thrive.
Godbod, you have a product that is different from any of ours. If you can find out how to promote your unique product to your market, you will continue to sell your product. While you don't want to waste your marketing, you will need to look for ways to expand your market.
So, what is the best way to do that? I will continue to survey my customers. Find out what is their priority and make sure that you cater to it.
Sorry this is so disjointed... but I need to sleep and be prepared for what the sun rise brings. Please forgive me.
I will be back with more info, when I am more awake and able to think clearly.
But we are curious as to what you think of all this. Take your time. :)
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Permalink Reply by Amelie & Barb on
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Shawn said: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.
I couldn't agree more!!
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Permalink Reply by Bel Townsend on
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A view from across the pond?
Us Brits with our stiff-upper-lip and mustn't grumble attitude (ahem) are still feeling the effects of the credit crunch!! We've had one bank collapse and another had to be rescued too, and just like this "Blame-Bush/elect someone else and all will be well" idea that seems to be coming from the States (at least, in our media), we've got the Get-Rid-of-Gordon-Brown brigade here too. Personally I don't think changing the political figurehead will make one iota of difference, but that, as has been pointed out already on here, is not the point.
The credit crunch, in real terms, means that normal people have less money. We have all borrowed far more than we can comfortably pay back, energy prices, food prices and petrol prices have gone through the roof, and those of us with mortgages can't sell our houses in order to move somewhere cheaper. This means we all have less disposable income.
Coffee - going to coffee shops, is a luxury. Most coffee shops charge extortionate amounts for coffee from the consumers point of view; the mark up on espresso based coffees, particularly in chain shops is always pretty high. So, in todays economic climate, it is not something that people will choose to buy when they have more important things to spend their meagre budgets on.
In turn, the people who run coffee shops are in the same position - no-one has any money. Their own mortgage and lease payments, energy bills for running the shop etc have probably gone up too; and those who remortgaged their house to support and invest in their coffee business are basically up the proverbial creek minus paddle. So what can they do? Raise prices in the cafes in an attempt to make more profit. And in turn, this drives customers away further. My favourite coffee shop has recently put all its drinks up by 20p - not a great amount, but they've also sneakily made the cups smaller too!! It is still very very quiet in there as a result...
Similar example, but in this country at least, a great many pubs are closing. Our chancellor put up the tax on beer at the last budget so the pubs actually have to charge more for the drinks anyway (There was a campaign to bar Alistair Darling from every pub in britain actually - very funny!). Plus now that none of us have any money, and coupled by the smoking ban, no-one is really going to pubs any more. I read somewhere that one pub closes a week in this country now. Sorry to be all doom and gloom, but it wouldn't surprise me if coffee shops went the same way too.
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Good Morning!
Bel, your thoughts are running the same track as mine.
First, we all know that the economic crunch here concerns the world. We have a global economy, thus making it even more important that all of our reactions and solutions be the right one.
While blame is not effective, it is important to remember how we got here and who we choose to listen to and select as our leader out of this mess... and that doesn't necessarily refer to the next president of the U.S.
Who we listen to must have a complete understanding of economics and the repercussions of the actions that we take. We must trust the solution and we must be given the path to follow ouirselves because, if all of the people in America stop spending what little money they have, the economy will continue to fail.
Scary. In one sense, we all start thinking about 'hunkering down' and saving our pennies because of our fears. I'm afraid that is my tendancy. But you can see the danger in that. No money spent, no businesses survive and the spiral continues downward.
We simply can't continue to spend beyond our budgets, that is the crux of the problem; too many people who spent beyond their means, mounting debt that can't be paid and insufficient funds to meet the cost of daily living requirements. Nothing new here, you already know that.
However, not everyone is in that boat and I am not just talking about the rich people. I am talking about a lot of middle income people. Those conservative people who stayed in their modest homes because they could afford it. Even the lower income folks who stayed clear of debt might be in better shape than others with huge debts. These are the people who must keep this economy alive.
These people need to continue to support their local businesses. Americans need to rebuild the economy in the states and the rest of the world will balance as well.
These are our individual markets. We need to focus on our customers, realize their plight, survey our market, test solutions, evaluate and revamp if necessary. Responsive businesses will survive. It cannot be business as usual, or business as it was.
We all need to spend our money wisely....
None of us were around at the time of the depression, but history indicates that there were people with money. There were people working and making wages.
What is it that the people in your neighborhood want, need and what is a fair cost that you can afford to charge and they can afford to continue to pay.
Coffee is a staple. Lattes and espresso may be a luxury... a treat, perhaps not a daily purchase any more.
There will always be some luxury buying, but not to the extent that we have had the last couple of decades. Our business models need to change in order to survive and I think each neighborhood is different.
So, tell us about yours.
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J2, Thanks for clearing that up!! Of course I was only kidding about waiting...The bottom line here is that we, know there is a problem, and lot of valid point have been made.I'd like to Send you on making the best coffee home, I do go out and support my shop owners, but when it's crunch time I'm not afraid to go out back and Milk the old Heifer!!1?Last note, I appreciate IQ bring this discussion out, I myself thought about it,but it seemed to touchy for me because this is a sensitive matter, so all in all we must support each other and come up with ways to support each other, spread the wealth of knowledge so that we all my profit.I thank you all for participating in this I look to learn more from all point of views, and J3 Keep up the good work, just know I got my eye on you remind me of me in my younger days just a lighter shade of coffee.. IQ keep doing what you do,you are appreciated!!!
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Permalink Reply by Richard Penney on
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FWW,
I have noticed over many years that the relatively inexpensive "feel goods" are going to be continued during an "economic slowdown" They cost little and allow a person to relax. Many folks will let "Big Ticket" items pass but enjoy what really gives them pleasure.
I may not drive as far and may not spend as much but, I shall have my "Caffeine Solution" and relax with a book. That, perhaps, instead of a going for a big meal at a nice restaurant. I have noticed in this small college town that the coffee houses are thriving and the expensive restaurants are closing.
Perhaps instead of bemoaning the economy, it might be an idea to have quality at a low delivered cost. Have basic menu items to draw folks in and have ala cart additions to them at a premium cost. " Substitute: Prosciutto $1.75" ??
Just an old phart's meanderings but?
Cheers to all that make my world a better place!
Richard
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Hey Richard...
That's exactly what I was alluding to...
Make your coffee shop what the market will bare. Who says we have to charge $4 for a latte? What if you charged half of that, provided excellent product and great environment and service?
How busy would you be?
Sometimes volume sales are a better business plan than a few larger sales.
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javaqueen said:
In an environment in which every product sold must be made by hand, it is important to acknowledge the fact that higher volume means higher labor cost.Hey Richard...
That's exactly what I was alluding to...
Make your coffee shop what the market will bare. Who says we have to charge $4 for a latte? What if you charged half of that, provided excellent product and great environment and service?
How busy would you be?
Sometimes volume sales are a better business plan than a few larger sales.
Not that you weren't already aware, or anything, but it wasn't addressed, and I think it ought to be mentioned.
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