Coffee Shop Downturn?

Recently Starbucks announced a 97% drop. McDonalds is installing McCafe's. And Dunkin Donuts now has three locations in town as they are planning to grow even more in 2009 and 2010 in Fort Wayne.

But there's another competitor. It's name?
The Economy.

Coffeehouses may be Losing Grounds to Home Kitchens

Is the economy endangering the coffee run?

Caribou Coffee Inc. and Tim Hortons Inc. both cited less frequent visits by customers in explaining the dips they posted Friday in U.S. same-store sales for the third quarter. At the same time, Caribou Coffee indicated that sales of whole beans and ground coffees via various retail channels were strong, suggesting that coffeehouse fans may be brewing more at home during this recessionary time.

Starbucks Corp., the largest coffeehouse operator, already has said that year-to-year customer traffic continued to be negative in its latest quarter, and that same-store sales remained close to previous levels, which analysts had pegged at a decline between 6 percent and 7 percent.

At Tim Hortons, the Canadian-based company with a foothold in the northeast United States, officials said transactions were impacted because even loyal customers were visiting the fast-casual chain less than before. Same-store sales in the U.S. fell 0.6 percent for the third quarter. Even in Canada, where Tim Hortons enjoys a fanatical customer base that has made "Tims" part of the vocabulary, same-store sales were hurt by fading customer visits, the company said. Same-store sales in Canada still rose 3.8 percent.

"Maintaining transactions with this high level of loyalty in this environment can indeed be a challenge," Donald B. Schroeder, Tim Hortons' president and chief executive, said in a conference call with investors. "Our frequency of visits moderated in Canada, [but] our loyal customers are still coming to us."

To combat the downturn, Tim Hortons introduced a new combo program called Fresh Choice that pairs apples, hash browns, muffins or donuts with a hot breakfast sandwich. The chain also has introduced new and various value-priced options.

"We have sharpened our message and our focus on reinforcing the value we represent with U.S. consumers," Schroeder said. "We are building our reputation for price value in the U.S., and enhancing that message with U.S. consumers in tangible ways they can experience."

At Caribou, total coffeehouse sales fell 6 percent for the third quarter, which reflected a 4.7-percent decline in same-store sales.

"We are facing some headwinds, but nothing that we view as insurmountable," company president and chief executive Michael Tattersfield said in a statement.

In the commercial and franchise segments, sales were $6.2 million, an increase of 64 percent from a year ago. The increase was from higher sales to new and existing commercial customers, the company said, along with increased royalties and product sales from 39 additional franchised coffeehouses opened during last 12 months.

(Source: Nation's Restaurant News, 11/07/08)

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