Focus on being a better business to survive tough market ahead, say experts
The coffee sector is going to get tougher for operators as increased competition and growth continues, warns David Blair, director of Beanworks. But all is not lost for those who rise to the challenge, take control and run a better, more profitable business. Michelle Perrett reports.
“How do you turn coffee into a fantastic business whether you are a small independent boutique chain, or whether you are as big as Costa? It is about fundamentally running it as a business,” said Blair, who joined Angel Hill Food’s director of coffee Tim Sturk on stage at the European Coffee Expo Conference, sponsored by WMF & Schaerer, to discuss ways to survive the 5th Wave, which Blair described as the era of making money from coffee.
Blair predicted the market would see an increase in competition, despite the rapid growth in the last 10 years of classic chains, independents and specialists.
“It will get tougher, it will get harder and you need to run your business like a business,” he said. “But don’t assume that will happen. Understand your key metrics of gross profit margin, staff costs, wage costs, wastage costs - run it like a business.”
He compared the growth in the market to what has been happening in the casual dining sector. While the sector saw massive growth it is now seeing number of casualties, such as Jamie’s Italian and Strada. “Growth doesn’t guarantee success,” Blair continued.
He told operators “not to be ashamed about making a profit”, and advised them to keep on top of trends such as the consumer demand for more healthy products, sustainability and immersive experiences.
Getting in experts to help build a better business and increase profits were topics tackled within other conference sessions at European Coffee Expo.
Caravan Restaurants, Bar & Coffee Roastery’s director and co-founder Laura Harper-Hinton explained that they’d recently employed a finance director, Greg Hinchliffe from Bill’s, as finance had been the area all three founders – Harper-Hinton, Chris Ammerman and Miles Kirby – were weakest in.
And Grind’s CEO and co-founder David Abrahamovitch revealed that he wished he’d spent more on systems while the business was growing, as implementing new HR systems with 200 staff was “a nightmare”.
While speaking on how businesses would survive the 5th wave, Tim Sturk (pictured left) spoke about the importance of coffee quality - not just quality of speciality coffee, but all coffee. He said consumers should challenge a bad cup, in the same way they would would food and send it back.
Sturk also took the time to reflect on what each of the five coffee waves was about (below), and how the 5th wave was important to the whole coffee industry as it would have an impact on the quality of coffee served everywhere.
The First Wave
This was when instant coffee became available. “We didn’t challenge it, we didn’t care about it as much and we didn’t know anything as consumers about coffee,” he said.
The Second Wave
This was the revolution of the high street with the branded chains such as Costa in the UK and Starbucks in the US. “They brought understanding and awareness to coffee and the café culture,” he said.
The Third Wave
This was when the Australians and New Zealanders came to London and found the quality of the coffee was not good. “Instead of complaining they just opened their own coffee shops and imported their antipodean lifestyle to London,” he said.
The Fourth Wave
Consumers wanted to know more about what they were consuming and the science of coffee explained how coffee could be better. “We had accepted mediocrity in coffee but times have changed,” he said.
The Fifth Wave
This has been defined as being about boutique coffee shops such as the Taylor Street Baristas. A “Boutique" coffee is taking over and it is about craft coffee and it is about people wanting, demanding and getting better value for money,” he said.
- See Tim Sturk speak about 5th wave by clicking here.
- Tim Sturk, Laura Harper-Hinton and David Abrahamovitch are members of the European Coffee Expo steering panel.