Impact of recession?

admin

Hi guys - about 3 months ago, I was interviewed on ABC radio, where they asked me what i thought the effect of the downturn would be on cafes.

At that stage, I said it was too early to tell for sure, but I suspected that our daily espresso has become something that we consider a necessity, rather than a luxury item, and for that reason, I doubted it would have much impact on cafe coffee sales [not sure about food/meals].

It seems like The Financial Review has reached the same conclusion - I'm not a subscriber, but if you are, you can read the full article [from Monday'ss Fin. Review] in an article titled The long and the short of it is, we're coffee addicts here: http://www.afr.com/home/login.aspx?EDP://20081117000030544858&section=news

In either case, would be interested in hearing any anecdotal evidence from cafe owners on this thread.

-A

over_extracted

Hi all I was in Sydney working in a cafe during our last recession during the early 90,s.......(ohhh long time and so many coffee,s) As far as can remember the impact on the sales of coffee were not affected then, this time ....so far here in London the sales of coffee are still strong even though high st shops have price reduction of 25% plus  on most item already. It would take a hell of a recession for myself not to have my fix. Chicory anyone????? ;D Good night OE OE

Koffee_Kosmo

I feel that most cost cutting during a recession would be in the order of if you don

psaigh

I'd say Alcohol sales on the whole would increase, though sales of premium alcohol would decline.  IE/ Less Moet, more clean skins, less Tanq10, more cheap nasty gin. In times of 'criss' people always look for comfort.

admin

there was a story in Monday's Australian that small retailers in general are now suffering badly - story had a pic of a cafe with a coffee cup in the foreground, but there was no info. as to how cafes are actually going. -A

psaigh

apparently coffee consumption is up 2.2 percent (though this doesn't state whether this is in the home, or at the cafe, or even dreaded instant)

over_extracted

Hi all, well the financial impact has gotten worse here over the last few weeks, The U.K government today announced more money for the banks. Ohh dear http://www.thisislondon.co.uk/standard/article-23622553-details/NatWest+in+crisis:+shares+dive+to+10p/article.do

Koffee_Kosmo

The Australian government is handing money back to taxpayers in the order of $950 per taxpayer earning less that 100k But this strategy has a sting in the tail Mr Rudd is sending the whole country into a defecit Last time the Labour party put the country into defecit of around 90 billion it took 11 years to pay it off I dont have a preference of a political party I just don't want my kids to have a hard time paying our debts off KK

psaigh

The Australian government is handing money back to taxpayers in the order of $950 per taxpayer earning less that 100k

..Dumbest idea ever!

DoubleRistretto

actually I don't agree - from what I've read, it makes sense for the Government to spend to help get the country out of recession. -dR

askthecoffeeguy

my understanding is that coffee and alcohol sales go up in a recession because they are both considered to be affordable pleasures, and those lucky enough to be working are probably working harder than ever just to stay ahead thank god for the home roast - it still keeps coffee affordable! cheers pat

askthecoffeeguy

The Australian government is handing money back to taxpayers in the order of $950 per taxpayer earning less that 100k

..Dumbest idea ever!

and bailing out the banks and big industry to the tune of 100's of millions of dollars is a good idea? any cash back in the punters pockets is a bonus as far as I'm concerned! who was it who said 'let them eat cake' - I say let them drink coffee! p

admin

Sorry but have to disagree with a couple of the earlier posts. I did an economics degree and try to keep up with these things. Basically a recession is when there is not enough spending to keep things growing. Therefore, it is accepted as sound economic policy that when demand from the private sector [ie consumers and businesses] is dropping then then the Government should step in and take up the slack. Effectively they act counter-cyclically to make try to keep demand up, when it would otherwise drop too low, hopefully keeping industry [& the economy in general] ticking over, until consumer spending picks up again. Therefore it is absolutely sound policy to spend massive amounts now, to try to keep the economy going. What you spend that money on is up to you - some people would think it should go to some sectors of the economy, some to others, but the point is that it is crucial for the Govt to keep spending up, when no-one else is. -A

psaigh

Let me just clarify, obviously spending during a recession is the best thing anyone can do to help get the country out of one, and anything the go'vt can do to help stimulate this, is certainly a good thing. My issue however, with the specific $950 bonus paid to anyone earning less than $80k is that $950 to 'most' of those people is not a lot of money, however $950 multiplied by 10 or so million people is a great deal of money.  Now some of those people will put that money towards reducing their credit/loans or put it towards their excessive electricity bills (due to the heat waves etc).  Some will have the budgeting will power to 'split' the bonus up and spend a little more than they usually could (say $50 over 19weeks etc.) on groceries, consumer goods, or simply treats, this gradually giving a boost to the economy.  But most, will take the bonus, head to the shops, and have 'one last splurge before times really start to get tough'.  This will result in a big (upward) jolt to the economy, money will pour into the retail sector, owners will take their higher profits (along with their $950 bonus), and the week or maybe month after, when things slow down again, those shop owners will cut back on staff, wages and everything else, and we will be back exactly where we are right now. This year in Australia, we are looking at a quarter of a million people losing their job.  The impact of 250,000people both no-longer inputting (in any great measure) back into the economy, plus having these 250,000 new people relying on welfare now (not to mention a whole plethora of roll-on effects in housing, bad debts, etc etc) will adversely effect the economy on the whole a great deal more, than the positive injection of $950, spread over maybe a month, into the economy. In order to stimulate the economy, on the whole, over the long term, I believe the money would be better spent offering business grants (to stimulate more businesses opening, therefor more jobs, and greater money flow), securing more peoples jobs, making new jobs available (by way of increased gov't tenders etc etc), or by giving everyone a brand new coffee machine and grinder (i don't know how that will work, it just will ;p) ..just my thoughts on the situation, sorry if i've offended anyone.

Koffee_Kosmo

I believe they tried a similar stimulus plan/s over the last decade in Japan and it did not work KK

admin

Hi there - no question of offending anyone here - everyone's opinion's are equally valid on the forum, and hope it will always stay that way. My understanding is that the money in peoples' pockets is so that demand [for products & services] stays up, so that hopefully fewer people lose their jobs in the first place. I must admit that i also feel unfortable about giving people handouts, but the only point i was making is that it is seen as responsible Government behaviour to encourage spending in a time of recession. There is certainly debate about things like whether it should be given as a handout, or used in investment projects which will help long-term infrastructure, but which unfortunately won't have an immediate stimulatory effect. -A

psaigh

At the end of the day, there is on 'right' answer.  All one can do, is spend, have a coffee, spend some more and hope for the best.  Oh, and did I mention have a coffee

admin

I'LL DRINK TO THAT!

askthecoffeeguy

I read this in the age today: http://www.theage.com.au/national/handouts-stay-in-wallets-20090218-8bh8.html that discretionary spending in cafes in Aus is down by $10mil per week, and has declined for the fifth quarter in a row... perhaps not a great time to be opening a new cafe! Pat

blanyon

Good cafes in the right areas will continue to do well, the ones that are on the edge will go under. Capitalism at its best. It actually may be a great time to open a cafe if the opportunity arises as spaces may be opening up in prime retail as shops close, landlords desperate for tennants may be more flexible on rent etc. However you would want to do your homework as it could go pearshaped quicker than normal. If the right opportunity was presented I would jump at the chance (I would just not tell the wife until it was too late to back out!!)

askthecoffeeguy

Yeah its such a volatile market at present I think its a good time to be cashed-up as opportunities galore ought to be cropping up and a smart operator ought to do well in any environment I'm planning on starting a new venture with an accomplished chef which will definitely be market and coffee driven - watch this space! Cheers, Pat

admin

Hi guys - there's been a lot of media discussion recently about the repeal of Work Choices, especially in The Australian; would be interested in the opinions from cafe owners about the effect this will have. -A

admin

Interesting article in today's Australian, about the effect that the new IR laws will have [using Gillard's Victorian home town of Altona as an example]: http://www.theaustralian.news.com.au/story/0,,25179467-5013404,00.html Would be very interested to know if anyone knows the actual cafe that they mention in the article [where Gillard 'still ocassionally stops for a flat white']!! -A

DoubleRistretto

Hi Admin - think it's called the Pier Lounge Cafe - no idea what the coffee's like tho! -dR

askthecoffeeguy

making conditions harder for employers to operate competitively just encourages a cash economy in which case taxes do not go back into the system and back into the economy now is definitely not the time to impose tougher conditions and increased wages upon the hospitality industry we already pay top dollar at my work for top employees, and this is reflected in the caliber and excellence of the product and service that we provide introducing loading pay is just going to discourage employers from late / additional trading hours, or else force owner operators to work those extra hours themselves on top of what is already for most a 60hr working week not happy jan (or Julia for that matter)! Pat

admin

Interesting footnote to our discussion a few months ago - apparently economists now agree that the govt's stimulus spending has helped keep Australia the world's only advanced nation out of recession - see report from today's 'The Australian': The Government, through its cash payments to pensioners, carers and others, has kept the Australian economy going while the private sector is in retreat and until such time as our infrastructure investment kicks in," Kevin Rudd said yesterday. The Prime Minister cited Treasury estimates the economy would have contracted by 0.2per cent in the quarter if it had not been for consumers spending their cash handouts. By growing in the March quarter, the Australian economy has avoided the technical definition of a recession - two consecutive quarters of contraction. Economists confirmed the Government's claim that its stimulus spending had contributed to one of the world's best growth performances. "There is now clear evidence that the stimulus spending has worked," said Access Economics director Chris Richardson. "After the December accounts you could still argue the point, but the Government can clearly claim success now." My bet is that establishments serving food are suffering, but would be interested to know whether there has been any effect on coffee? -A

askthecoffeeguy

business is definitely down all round I'd say even in a seemingly bullet-proof environment like the university - I think that's because consumer sentiment is down so punters are being naturally cautious with their spending 'just in case' even if there is no real 'perceived' need to do so most folks I know are cutting back on so-called luxury items, such as restaurant meals etc even if they personally haven't taking a sting in the hip pocket - but the coffee industry is and should be more resilient than most as those who are working lean towards longer hours and need the caffeine fuel to keep themselves going - much in the same way that a car wont go unless its got gas in it! cheers and keep the coffee coming, ACg

admin

HI guys - am pretty sure [if I remember the figures correctly] - the July figures for cafe and restaurant trade were up 8.5% - am interested to know if that pretty much reflects how cafe owners feel it's going out there? A

blanyon

After talking to some of my customers in retail (whitegoods and clothes) they are really noticing a slowdown since the election, everyone seems to be cautious until they know who is sitting in the big chair.  I am also noticing a softening of demand, people are still buying as much coffee as ever but the extras on top aren't selling so well. Who knows maybe this election will be decided and everyone will get back to business as usual.

askthecoffeeguy

my favourite cafes always seem to be doing a thriving trade - which is no doubt indicative of the quality of the product and services which they're providing - which just goes to show that there is always demand for those who are at the top of their game!