Café survival in the specialty coffee industry
By Paul Jackson
It’s official: Australia is seen by the world as the most competitive and demanding coffee nation on the planet. Not by a short span, but a country mile! Coffee machine producers, automatic milk doser inventors, grinder manufacturers, roast profiling companies, roaster manufacturers, green bean suppliers – the world sees Australia as the coffee leader. It’s the place to partner with and an endorsement to succeed more than anywhere else in the world.
Small in population, but huge on innovation and technology pick up, the Australian coffee spirit is fierce and competitive. But how can you survive as a café owner? More importantly, how can you build a sustainable, profitable café in Australia?
Eight out of every 10 cafes that open will fail in the first twelve months. Yet more and more cafes open every day to “live the dream”. Or the nightmare, as new café owners quickly discover that people don’t change their coffee habit easily and become your loyal customer. They may try you once, then their habit will revert.
What makes you special that you survive the first twelve months of business so you can keep paying the rent hikes, the increasing wages and supplier costs, all with the hospitality smile? Managing costs is essential but cutting costs and taking short cuts in the wrong areas, like your coffee beans, may also be a fast track to failure.
The rise of contract roasting
The trend to use cheap contracted roasted coffee or roast your own at the local community roaster has become popular. But is it wise? It may be commercial suicide for the majority who choose this path. It’s become an ego trip to see your café name on the bag of beans and hope you beat the odds and save money on your coffee beans. Although it may feel good, pride and ego are not a currency your bank or suppliers accept.
In an environment of super competitive ‘authentic’ specialty coffee roasters, the wholesale offer to cafes has seen competition drive down the wholesale cost of roasted coffee. While the cost of a kilo of coffee has come down, the quality has not. Instead, specialty coffee has had to go to a whole new level of flavour. If you were a coffee roaster 25 years ago achieving $28/kg to a 30kg a week account, that roaster, if still current, would be lucky now to get $26/kg for that size account. Is this what they call negative inflation?!
Over that same 25-year period, wages have more than tripled, rents have at least quadrupled, equivalent fit out costs have tripled and new coffee equipment has tripled with the new technology machines.
Coffee brands (brands that actually roast their own coffee) that have survived the café “de-brand” trend are seeing the sophisticated social media-educated end consumer look for the brands they know, like and trust. Being invisible or hiding the identity of the cheap coffee roasting source is now impossible with the pace of social media where our lives, knowledge and buying choices are virtually controlled by our phones and devices.
Café survival relies on quality, expertise and flavour
As all coffee consumers know, coffee today continues to generally improve in flavour. Some significantly, some slightly, even the big chains that dominate the coffee volumes due to the way they are able to distribute a “convenient coffee”. You know the ones, where you don’t even have to get out of the car to grab a fix when you get fuel. It’s not great tasting, but convenience makes them a winner in the eyes of those consumers that just want or need the caffeine hit.
For the quality driven consumer, specialty coffee brands are the winners. If you are not partnered to a brand that has all the expertise, knowledge, experience, resources, connections and the flavour, good luck. You’ll need it.
If you’re not sure how to make your way around all the above, just search for “specialty coffee and barista training”. They go together. One without the other is not specialty coffee.