In this post I continue my round-up of interesting predictions for 2016, and look at a potential negative trend for coffee shops in the local area. I found this prediction while reading the blog of James Hoffmann and it has since triggered a lot of thought processes (not that I need any more thoughts triggered!). His predictions extend over three blog posts but one statement in particular stood out for me:
What I believe we are heading towards is, simply, a situation where we have more cafes than we have customers for them. This leads to a pretty obvious conclusion: a substantial number of cafes are going to close.
Essentially this prediction is based upon the growth of the independent coffee industry over the past few years: 50% of all coffee shops in the UK have only been operating for the past two years. He argues that the number of coffee shops on our high streets now outstrips consumer demand. In other words there are not enough members of the coffee drinking public to sustain this number of coffee shops.
As we operate in the wholesale sector of the trade, we tend to become very aware of the number of new startups within the local area. Somewhere like Keswick, for example, has a large number of catering establishments, all competing within a finite customer base. Many of these establishments have either opened or changed hands in the past couple of years, and with rental costs very high in the town, the ability to build a sustainable customer base will be critical. Those that prosper may be the ones who have taken custom from their competitors.
Interestingly I believe the quality offered to tourists has improved in Keswick over the past couple of years, and this is likely to be due in the main to competition caused by the new openings. I’ve seen this trend repeated in a number of towns across Cumbria. I see 2016, and possibly next year, as a period where the quality will increase further, and where certain businesses will grow on the back of this ‘quality’ message. I think we will also continue to see a growth in the number of catering establishments in our local towns. In response to this, some of our more established businesses will need to increase their quality further still. If the improvement in hotel and restaurant coffee also comes to fruition, we are going to see an increasingly competitive ‘quality’ end of the market. This can only be a good thing in the short term as visitors (and locals) will be presented with more choice.
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I’m not convinced that the market has reached saturation, certainly not in big cities. I look at the number of chains and I look at the number of speciality independents and there is a huge discrepancy in the numbers, particularly when you look at the differences in size of establishment. It only takes a few percent of the chains customers to convert in order to keep the speciality sector busy.
The killer is rent (and its evil twin rates). Where I live in Guildford, we have 10 chains, but independents struggle because of the really high rents. I feel that the market is there, in terms of customer base, but the high cost of entry is what holds the speciality market back.
You make a fair point Brian and I agree: the picture differs depending on where you are. There are towns in Cumbria which I feel have reached saturation point and others where there may be potential. My concern is that we’re all fighting over the same customer base and are not actually converting customers from the chains. Maybe this boils down to trust – with a chain you know what you are going to get whereas with independents, particularly if you don’t know an area, it is very hit and miss. That’s why we need people like you to keep us informed!
That is exactly why I set up the Coffee Spot in the first place 🙂