coffee shop, coffee drinks

Coffee Shops Withstand Inflationary Headwinds

High Priority

As inflation puts the squeeze on Americans’ wallets, many people are trimming expenses to stretch their cash. Data from Earnest Research indicates that while restaurants seem to be a casualty of budget reprioritization, coffee shops have yet to get the ax. Spending at bakery cafes and coffee shops was up 1.9% in June, while revenues at the restaurants included in the study declined 3.1%.

Market observers believe the trend may be driven by people returning to work, as well as the tendency of people to indulge in small treats during times of economic hardship.

More than a Java Jolt

The coffee shop trip can serve to provide more than just a caffeine-lift. As inflation drives many Americans to sacrifice enjoyable activities in an effort to cut expenses, small indulgences can gain greater importance. They can serve as a social outlet or a relatively inexpensive destination for a family outing.

Still as the price of coffee rises, consumers may rethink where the cafe shop outing ranks in their budgets. For those that consider their cup of Joe a non-discretionary expense, the 20.3% increase in the price of beans over the past year won’t make a home-brewed cup especially cheap either.

Rising Revenue

Companies like Starbucks (SBUX) are benefiting from the upswing in coffee-shop popularity. It reported a 9% increase in same-store sales over 12 months, ending in July. The company’s CEO, Howard Schultz, recently noted “We are not currently seeing any measurable reduction in customer spending or any evidence of customers trading down.”

The National Coffee Association says the majority of Americans drink coffee and it seems the average coffee house charge of nearly $5 a cup is worth it for many of them, at least for now.

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James Flippin ABOUT James Flippin James Flippin is the son of a financial advisor who grew up hearing and learning about bond yields, interest rates, the stock market, and the ins and outs of Wall Street. After stints as a licensing and business broker for Marcus and Millichap in New York City, James moved into broadcasting and became a reporter and anchor. He covered crime, politics, finance, and tech at NBC News Radio while working part-time as a producer for SiriusXM. James graduated from the University of Delaware with a bachelor’s degree in political science and economics. He's also an accomplished podcaster with over 10-years of experience.

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