Caffeinated stimulus to demand
Coffee shops seem - by and large - to be surviving the recession and, in many cases thriving. The number of independent coffee stores has grown by more than 7% in the last year. Across the country hundreds of new stores have opened. This doesn’t make coffee an inferior good - whose demand rises as real income falls. Instead there are stronger forces at work, for example the rise of the nomadic entrepreneur who prefers to work away from expensive offices. Hugh Pym provides an overview of the strength of retail coffee demand in this piece from BBC news. London has the highest concentration of coffee stores in the UK followed by Edinburgh.
Not every brand is enjoying the same performance. Costa Coffe which has 974 stores in the UK has reported like-for-like sales growth yesterday of 2.5 per cent in the six months to the end of August.
Caffè Nero, which has almost 400 UK outlets, is believed to be trading at a similar level to Costa, although Starbucks has like-for-like sales down by an estimated 4.5 per cent to 5 per cent in recent months. Brand fatigue in action.
Beanscene battles to avoid being a has-bean
The BBC reports that one of Scotland’s fastest growing coffee houses has gone into administration as bottom-line losses became unsustainable. Beanscene’s 14 shops are spread across Scotland from Ayr to the border town of Hawick to the old town in Leith.
read more...»Starbucks and AMT
York Station this morning ...... and I just had enough time before jumping on a train bound for London KX to grab a coffee and a bar of chocolate from AMT coffee - the first national coffee chain in the UK to be 100% fairtrade. It was a great coffee at a fraction of the price I would have paid on the train itself or at Starbucks. AMT will become my default choice on future train and airline journeys. I recommend AMT to you all.
Today’s Big Question in the Independent is about the fading charm of Starbucks and one of the sections alerts us to the mystery of the short cappuccino which Tim Harford and others have written about in the past. There is a really good graphic that could be used in a classworksheet on competition in the retail coffee industry.
Starbucks on the slide
Here is a really interesting story for business economics students to follow in the weeks and months going forward. Starbucks has announced that it plans to close one store in 20 across its US branch network - meaning the loss of around 600 stores.
read more...»Organic growth for Costa
It is early days yet, but the new Costa Coffee store on my local high street seems to be bedding in nicely. The passing trade has been boosted by providing free wifi access in store (I am sat here now enjoying a small latte writing this blog article) and there is a really nice open patio area behind the building for coffee-lovers to sit watching the Thames go by. The Starbucks over Windsir Bridge is fast becoming a distant memory.
Whitbread, the owners of Costa Coffee and Premier Travel Inn has announced plans today for a very large organic growth of their business - the number of Costa stores worldwide is set to double and the room capacity of their budget hotel business may grow by 50% over the next five years. How recession-proof are these businesses? Despite the increasingly congested markets for retail coffee sales (McDonald’s is making a strong pitch for some of the action) I reckon they are a decent bet providing Whitbread can keep their costs under tight control and limit price rises on the high street. With a weakening pound against the Euro, many more people are likely to holiday at home this year and next boosting the demand for good value budget hotel accommodation en route or at chosen destinations.
Higher prices brewing for coffee
Record global demand and falling stocks have driven up the price of raw coffee beans around the world. And now these higher prices are filtering their way through the supply chain with latte lovers feeling the brunt when they queue up for their daily caffeine fix. There is an excellent article about this in today’s Financial Times which explains how changes in raw bean prices work through the wholesale market through to retail level. The key is the extent to which suppliers are able to pass on higher costs to their consumers.
read more...»Black Gold – an extraordinary documentary about coffee
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