- by eigital content team |
- July 22, 2020
- Food Service | 11 min read
Is Coffee Recession-Proof?
Most nonessential services experienced a significant downturn in business since COVID-19 shut down most of their revenue streams, and coffee shops aren’t immune to some of these highs and lows. All around the country, workers are being laid off and furloughed while cafés close, reduce their hours and make other temporary adjustments to accommodate the changing landscape of food service in a virus-ridden America.
So why are coffee shops more optimistic about their future than many other, similar businesses in the food service and hospitality industries?
How have coffee shops fared so far?
Specialty coffee sales were growing approximately 5.5% every year before COVID-19 swept the nation and triggered major shutdowns across these businesses. Throughout the pandemic, these sales naturally declined with less walk-in business, however people continued to crave their caffeine fix and thus the industry didn’t see as hefty a loss as others, like restaurants, did. You can make your own pasta at home, but it’s harder to perfect that secret recipe for your specialty Frappuccino.
That’s why many coffee shops experienced business growth after adjusting their sales model to support online ordering. Many cafés didn’t previously utilize the digital market because their sales came primarily from walk-in revenue. To subsidize the loss after COVID-19, a lot of business owners decided to implement restrictions in line with federal and local mandates which protected the public from COVID-19 as effectively as possible without completely limiting in-person service.
Those that remain open to the public usually take a lot of the traditional measures adopted by businesses who want to retain in-person revenue: Mandatory face masks, six feet of social distance, installing barriers, beginning new walk-up services or outdoor seating, and more. All of this is done to make customers feel safer patronizing those businesses.
However, these measures alone won’t be enough to offset the massive loss that coffee shops have already faced because of the pandemic. Anyone trying to flatly reopen their normal business operations will quickly find that customers are less willing to break self-isolation to visit a physical store location and even when they do, government-imposed limited capacity regulations means that the shop can serve fewer customers anyway. Across the industry, this has and will continue to cause major revenue loss for coffee shops, both big and small.
How can the industry cope?
Direct-to-consumer and grocery sales take off
To supplement the loss of in-person business, many cafés have opened new revenue streams like direct-to-consumer sales, while others take their recipes straight to market shelves.
In Los Angeles, Go Get Em Tiger (A.K.A. GGET) has worked hard to beef up their online market after COVID-19 dried up sales in all their usual channels. They spent the months since improving their subscription process and online sales marketplace. Overall, the specialty coffee brand estimates that these new methods have increased web sales up to 300% and doubled their subscriptions. The online market is thriving right now. Undoubtedly, direct-to-consumer sales are extremely important for any coffee brand who wants to survive these tough financial times.
However, one extremely important sales avenue gets routinely ignored: Grocery stores.
GGET attributes 25% of their total sales now as having come directly from grocery stores. Although people are, overall, drinking less coffee (even accounting for those now brewing it themselves in their own kitchens), supermarkets report a significant increase in bagged coffee sales, indicating that because of the shift toward in-home brewing, struggling coffee brands should take advantage if they want to boost their overall profits.
Profits from coffee will decline worldwide as a direct result of the pandemic, even if overall consumption increases: It’s just more expensive to buy from a coffee shop than to purchase all the ingredients and make the drink themselves, or even to buy that brand at the grocery store. Nonetheless coffee sales won’t plummet completely since, of course, people enjoy their difficult-to-make brews and secret recipes that they can only get from their favorite location. That’s just another reason why brands looking for new sales channels should consider stocking grocery shelves with their specialty coffees.
Listen to consumers and take their feedback seriously. They know what they want, what they need, and are great indicators of where trends are heading in the future. Don’t stop thriving just because we’re in a pandemic: Instead, pivot your approach.
Coffee that saves lives
While some coffee shops bolster profits by selling to a different market than they’re used to, others have taken a more radical approach and completely rebranded their business to demonstrate a new loyalty toward serving healthcare workers as well as others who help their communities survive the pandemic.
Some coffee shops partnered with nonprofits to deliver coffee to healthcare workers, often by finding organizations who bring them food and adding caffeine to their run. Others took a more radical approach: In New York, one coffee chain completely changed their image, branding and mission statement to show their support for frontline workers during the pandemic.
Everyman Espresso, now known as Fuel Frontlines, closed down in April after a few weeks of trying to run their normal business with social distance measures in place. They reopened under a new name to demonstrate their shift in a different direction. Now, they bring together out-of-work delivery workers with their own workforce to get coffee to hospital workers all over New York City. It’s an under-represented but extremely necessary service that keeps Fuel Frontlines in business and simultaneously brings an important pick-me-up to the healthcare workers who need it. They’re documenting their progress on Instagram to raise awareness so that from all over the world, people can pay it forward.
The future of coffee
Coffee shops, like so many other businesses right now, are experiencing a changing tide. Grocery and direct-to-consumer sales have become normalized, and these changes as well as others that prioritize convenience and health will likely remain steadfastly in place, long after COVID-19 stops being a concern. Like many practices that would have seemed foreign mere months ago, the effects of the pandemic are now deeply ingrained in societies worldwide and these changes that champion independence, alternative revenue streams, online sales and community support are sure to stay.
So the answer to the question, Is coffee recession-proof? is yes…and no. Coffee will thrive regardless of the economic problems we face, but sellers will have to adjust their sales strategy to survive in a fluctuating, evolving market. Coffee shops will shutter and furlough workers like other, similar businesses have to do to survive fewer walk-in customers and increased restrictions on how many people can come inside at once. However those who supplement their income, pivot revenue streams or find new target audiences likely have the adaptability thats necessary to survive in a post-COVID world.
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