The economic impacts of 2020 and the novel coronavirus are still not yet fully understood, but it is clear that they are already changing life as consumers have known it for years across multiple industries.
In addition to decreased foot traffic and economic activity, brick-and-mortar stores of all types are being particularly hard hit not only by a fall in demand but also by new burdens added to their operational anxieties due to precautionary measures to protect themselves and their customers against COVID-19.
While demand for coffee as a commodity product has fared better than most others during this period of extraordinary economic pressure, it is not without segments that are facing and anticipating even more difficult times to come.
Among these are local cafes and shops that specialize in coffee-based products and that depend on regular footfall in their establishments in order to survive. While online vending of private-label products is one way these firms have tried to diversify before and during the pandemic, it is not nearly enough to sustain the business concept.
Disregarding the already fragmented niche culture surrounding “indie cafes” and the like, the idea that this premise can weather the current crisis is increasingly challenged by the new ways in which consumers are expected to behave after the pandemic has waned. It is expected that public establishments that thrive upon densely packed public spaces will face the most difficult challenges in this new era and those without the financial wherewithal of a Starbucks or a Peet’s Coffee will find themselves closing down unless trends reverse and soon.
Unlike many industries that are experiencing rapid rates of consolidation during this pandemic, it is not expected that cafes will join them as the business concept itself is coming under increasing pressure. In fact, the United States independent coffee shop market will shrink for the first time since 2011 according to the Seattle Times, falling by some 7.3%. The expected “winners” of this decline are the big-name chains including McDonald’s and Dunkin in addition to the aforementioned brands.
Utilizing both depths of balance sheet and economies of scale, larger brands are seizing the moment and making fast, convenient (and profitable) coffee a daily habit for more and more consumers that would have never considered this approach in the past.
Euromonitor beverages consultant Matthew Barry told the newspaper, “Coffee shops that succeed in this new climate will need to try to re-create as many of their popular pre-COVID-19 attributes as before while being in line with the new realities of social distancing...This will include moving many aspects online, where personal engagement is still possible without physical proximity.”
But not all large coffee retail locations are expected to survive the pandemic. A particular focus has shifted to locations within commercial buildings and in large office facilities.
Huge drivers of profit prior to the pandemic, these centers are finding themselves in decline as more and more people choose to work from home. Looking ahead, analysts in the Canadian market, an area experiencing similar declines to those in the United States, expect the recovery to come in 2023 with moderate growth projected for the major chains in that year.
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