Coffee Shop Profitability<\/strong><\/p>\n\n\n\nIt is harder to examine the industry\u2019s profitability, but it is widely appreciated that the range of profitability extends from the loss-making to the financially lucrative.<\/p>\n\n\n\n
This is typical of most industries and it is hoped that the better operators are able to create more profitable businesses; although there is some evidence to suggest that this hasn’t always been the case of the past two years. <\/p>\n\n\n\n
As we noted then, low barriers to entry and a hyper-local market catchment make coffee shops particularly vulnerable to new market participants who open a store, naively undercut on price, run at a loss in an attempt to seize market share, and in doing so reduce or eliminate the profitability of the incumbent and themselves \u2013 all too often with terminal consequences.<\/p>\n\n\n\n
This is the nature of business, and not unique to coffee shops. But coffee shops are maybe uniquely vulnerable because of the relatively high capital investment in site infrastructure making relocation financially difficult for many small and medium coffee shop businesses, compared to say a florist or retail store.<\/p>\n\n\n\n
Looking forward<\/h3>\n\n\n\n The present trends are likely to continue because the drivers of those trends remain largely unchanged. <\/p>\n\n\n\n
Coffee shops need to be thinking deeply about how they will structure their operations and proposition in order to be able to pay higher rates of pay, and provide the right level of profitability to justify their investment.<\/p>\n\n\n\n
There are increasing signs that the specialty coffee market is finally segmenting into niches. For example, a number of brands are now sourcing cheaper green while others are regularly spending circa twice and working to build premium brands with premium pricing.<\/p>\n\n\n\n
It is now also reasonable to wonder if, after a decade of rapid growth, specialty coffee has saturating its natural market niche, as total shop numbers grow only a little in the main urban UK cities. Beneath the more static headline numbers there is significant market churn. Each month as many as a dozen shops open, and others close, in London. <\/p>\n\n\n\n
United Baristas welcomes a maturing market which seems to be naturally settling around a market volume, retail prices, cost structure, and return on investment. Increased normalisation and clarity of these figures, such as in the more mature coffee markets in the United States and Australasia, is to be both welcomed and expected.<\/p>\n\n\n\n
\n\n\n\nOther trends<\/strong><\/p>\n\n\n\nIf you have experience or insights on the factors shaping coffee shop profitability, please comment below or get in touch via the usual channels<\/p>\n\n\n\n
References & data<\/strong><\/p>\n\n\n\nInflation & Consumer Price Inflation (CPI): Office for National Statistics<\/a><\/li>Cup prices: anecdotal evidence, assuming shift from circa \u00a32.70 in Q4 2017 to \u00a33.00 in Q4 2019<\/li> Barista wages: job listings United Baristas Jobs<\/a> and UK Government<\/a><\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"Analysis comparing wage, revenue, and inflation over the past two years shows the coffee industry is paying its staff more by raising prices<\/p>\n","protected":false},"author":2,"featured_media":24827,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1852,289,80,194],"tags":[154,298,82,121],"false":[],"ppma_author":[1926],"yoast_head":"\n
We've made progress on wages, but there's still much more work to be done - Industry News - United Baristas<\/title>\n \n \n \n \n \n \n \n \n \n \n \n \n \n\t \n\t \n\t \n \n \n \n \n \n\t \n\t \n\t \n