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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