recession affecting coffee sales

[dsc]

Hi everyone,

I'm guessing that this question is mostly pointed at people in the coffee business, be it retail/consultancy, but I thought I would ask everyone as I'm curious what your POV is. I'm interested whether anyone has noticed the amount of coffee sales going down due to the omnipresent recession. I know that most of the products are going up, food especially and that people are looking to cut how much they spend each month. I've heard of M&S and Waitrose sales going down and people switching to Morissons, Tesco and Asda. I've heard that people are selling their cars and switching to public transport, some of them start riding their bikes again, walking and stuff like that, just to keep a bit more money in the pockets.

Have you seen the recesion hit coffee sales as well? Less clients coming in each day? less people ordering coffee online? less milk drinks being prepared and more drip/FP being ordered?

There's a similar topic on coffeed and I just thought I might as well start an interesting discussion here.

Regards,
dsc.

[GreenBean]

A very good question Tom. I await the answers from those in the know with interest. As for me the recession will have to be very bad to stop me enjoying my coffee. Whilst I have a water supply and electricity I will continue as now. Food, clothes paying bills etc. would all be lower on my list of priorities.

Come to think of it even without electricity I would try to continue, grinding beans between two bricks if necessary and boiling water on an open fire.

[mattmills]

This is a very valid discussion. So far we have not seen an effect at origin, however it wil taek time for this to filter through.

In essence we can expect that general coffee consumption will remain the same, although how a globle downtrend will affect the economies such as India and Brazil remain to be seen, but we do need to consuider that it is these economies who have driven forward the coffee consumption.

The area that may get hit is the specialty market as a whole (better coffees and certifieds). It is possible that consumers will not feel the need to pay up for morally correct coffees and will buy the most economical coffee. ie cheapest. The very high end may not become effected but the middle part of the industry.

However, saying all of that a lot still depends on the New York market. We have seen a significant drop during the past month and are now trading a low levels, which makes coffee look fairly cheap. If we were to remain at these levels then it is possible the the higher grades of coffee would become more affordable.

Very interesting times!

[kingseven]

It is interesting to see the C-market price stay high, as a lot of investors have seen it as being a potential earner (which makes sense if you look how high prices were in the past). This has happened, as far as I understand, with a few of the soft commodities like cocoa etc.

[mattmills]

James,
Today we have seen C market crash close at 114 down 8cts
During the past month we have dropped some 25 cts. In essence many of the big funds are simply liquidating their positions and pulling money out... to focus on bigger issues.

[chissit]

Our 2 coffee shops are doing well despite the 'credit crunch', we're 29% up (year to date) on previous, with the busiest qtr still to come (Oct-Dec). In fact, last week was our busiest in the last 7 years. IMHO it certainly shows no signs of slowing, although the big boys may see the sales of their 20oz cappuccinos decline...
I recently talked with a local machine supplier who had seen a considerable downturn in new machine sales but an increase in refurb' work. Suppose that makes sense...
I obviously don't know about how other people are doing, but selfishly, our bubble shows no signs of bursting yet.. gulp

Good luck everyone!!

Gary

[EspressoSquirrel]

a friend started asking me questions about coffee a few months ago, he saw the market problems a mile off and wanted to move into soft commodities like coffee, all i could really tell him that was relevant was the difference between arabica and robusta and in the end he stuck with his gold investment, (a good choice after todays market crash) from a more retail viewpoint i think coffee shops will be hit, we have already seen starbucks struggle because they are seen as an luxury (they are overpriced), cheaper coffee will become more popular certainly, but its not the first thing on the list to go, the new house, new car, new kitchen are the things people worry about, the daily coffee is a habit that people will only really think about when things get really bad.

[leecb]

but its not the first thing on the list to go, the new house, new car, new kitchen are the things people worry about, the daily coffee is a habit that people will only really think about when things get really bad.

I agree with that Squirrel, I think people are too used to their daily coffee to give it up whereas the big purchases in life can be delayed.
In fact I think people will, in hard times, keep those small habits that make each day bearable/enjoyable as long as they possibly can.
It will depend on exactly HOW bad things get I suppose!

[BazBean]

Feedback on the ground from general public is based around the fact that while larger expenditure requires careful consideration the smaller luxury’s of good coffee and the like, seems to be a point at which most will draw the line...
A kind of "take most things away from me but don’t you dare take away my one daily comfort" type of attitude.

[Gouezeri]

I think there are possibly deeper issues here. I expect that chains like Starbucks will lose out on business as people cut back on spending. However, this is where I think the independents differ. Customers visiting an independent coffee shop are far more conscious of where their money is going; they know the true value of the product they are buying, and they know whether they are getting their money's worth or not. For me it is a completely different mindset to your average *$ customer, who is buying into an image, rather than any conscious appreciation.

[NickCK]

The independent retail sector shouldn't feel anything but a few minor fluctuations, although watch the big chains for serious problems, as I believe they will filter through to smaller businesses eventually. You can ignore *$ current dire situation as that was caused by bad management and over extension rather than sector problems.

The real issues will come from the C-Market and the US dollar. If both crash, in a few years there will be supply issues as farms are foreclosed due to poor sales.

I will add now that I am NOT an expert in any way on the markets or the industry as a whole. Just an avid enthusiest whose life revolves around coffee.

Neither our retail or wholesale businesses have been affected in the slightest so far, it's full steam ahead!

[Narra]

Just get some of these guys to work for you. Problem solved.

http://news.bbc.co.uk/1/hi/7654267.stm

[radish]

Ha - nice one - but can they do latte art?

[Kaz]

Feedback on the ground from general public is based around the fact that while larger expenditure requires careful consideration the smaller luxury’s of good coffee and the like, seems to be a point at which most will draw the line...

I absolutely agree.
The only non-negotiable part of meeting up with friends, either for shopping or just a chat, is finding a place that has a decent ambience and sells a decent coffee – and when we do we’ll regularly go back there even if it’s a bit out of our way. We have got to the point where, in a couple of cafes, we look first to see which barista is on duty, because things can be inconsistent at times, in which case we'll either go somewhere else or drink tea!

[MrG]

As with some of the earlier replies. We've not really seen a decrease in sales, although obviously there are cost increases in areas like food, milk and we recently had a rent increase.

It seems people are thinking more about the large/expensive purchases than the smaller ones (thankfully) and with all the doom & gloom in the media, most seem to enjoy those luxuries that are still affordable.

So far the weather still has more of a impact on our daily sales than the credit crunch But I think it'd be foolish to say were 'safe' !

One bit of advice I would offer is to run a very critical eye over your own business, paying particular attention to cutting costs (not quality).
A bit of shopping around can really help. A few phone calls last month gave me significant savings on my weekly milk/bread bill .... every little bit helps. Sometimes it's easier to save a £ than earn one !

A local espresso machine service engineer, did tell me that he had seen a change in the type of work he is getting. People are still paying out for repairs, but less inclined to give their machine a regular/routine service or replace water filter/softener (maybe a bit of a false economy in the long run ! ).

Anyway ..... good luck to all those out there selling it
And Thank You to all those out there still buying it !