More coffee chains could head into administration, says report

16th July 2009, 7:16am

Market intelligence provider, Key Note, has found that 42% of people said they would be less likely to visit a branded coffee or sandwich shop because of the recession.

Following the fate of coffee chain Coffee Republic, which recently announced that it has gone into administration, these survey results substantiate the assumption that branded chains are under threat from the current economic downturn.

"As relatively expensive locations for what are essentially quick meals and mid-morning or mid-afternoon snacks, it is not surprising that even the larger operators in the industry are under pressure as customers consider ways of reducing their day-to-day expenses," says the report.

While Key Note's survey results found that a large proportion of the sample had visited a branded coffee or sandwich shop in the three months prior to the survey, 29.8% had visited these outlets less in the last three months than previously.
The research results indicate further bad news for operators of the branded chains. 

Around 20% of survey respondents said that they tended to choose the major branded coffee or sandwich shops in preference to independents, and a much higher 37% said that they tended to visit the cafes at supermarkets, Marks & Spencer or department stores, rather than branded coffee or sandwich shops. 

"Recessions can support coffee and sandwich shops, owing to the fact that these outlets offer quick sit-down or takeaway lunch facilities for employees whose workloads have been increased by staff cutbacks," explains the report.

However, Key Note predicts that the principal effect of the recession, at least initially, will be to slow down the number of new openings by the larger operators. 

Profitability can also be expected to fall as operators are forced to offer lower prices in order to retain cost-conscious customers.

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