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Recession grinds down coffee sales

Frugal customers buying fewer gourmet drinks

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Posted: Wednesday, January 21, 2009 12:00 am

Economic woes and penny-conscious customers are leaving Coastside coffee shops with the jitters, taking some of the steam out of the venti-sized business of providing gourmet beverages to caffeinated Coastsiders.

Coffee shop owners say customers are, by and large, being much more choosy, avoiding the higher-priced fare such as lattes, mochas and chai drinks and instead sticking to basics. And even for the Coastside’s selection of award-winning coffee houses, the recession has truly hit home.

Raman Bechar, the namesake owner of Raman’s Coffee & Chai on Main Street, says that his shop could pull in about $1,000 a day in past years, and sometimes much more if a special event was taking place. But since the downturn in the economy began late last year, he noticed sales suffered about a 30 percent drop from a slower stream of customers who were spending less.

“I could complain, but I consider myself very lucky,” Bechar said. “I get a lot of repeat customers and most of my business is local.”

Sitting down on a slow afternoon last week to chat with a customer, Bechar said that the mainstay of his business, his famous chai latte, is still popular among customers. And, almost on cue, a cheery customer waltzed in Raman’s shop, greeted the owner and asked for her daily chai.

“We’d all like to make more right now,” Bechar said. “People are just pulling back — I know I am. I used to eat out a lot more.”

Max Noyes, owner of M Coffee on Main Street, says that he has had to cut employee hours to hedge his losses.

“Business is down, significantly. I don’t even want to say how much,” Noyes said. “People who’d come in several times a week aren’t coming by as much now.”

Noyes says that his downtown shop still has its regular customers, but they are sticking to basics, many purchasing plain coffee, and altogether avoiding the selection of sandwiches and salads.

But there is a silver lining, he said. Sales of coffee beans at M Coffee have increased for customers planning on brewing their own coffee to save money. Also, the cafe got some relief recently from the warm weather, with ice cream sales giving the shop an unexpected boost.

San Francisco State economics Professor William Mason says the poor sales for neighborhood coffee shops is another sign of the disenchantment consumers are feeling from the financial pinch.

“People are hearing so much bad news about the bad state of the economy, and they’re psychologically responding by tightening their belts,” Mason said. “Even people who aren’t in danger of losing their wealth, they’re kind of stepping back.”

A former San Francisco cafe owner himself, Mason sympathized with locally owned coffee shops, saying they were one of the more unfortunate victims of the recession. Those businesses, he said, often are neighborhood fixtures and important social spaces for the community.

But Mason said he understands why customers were no longer shelling out cash for the most exquisite coffee drinks.

“I’m absolutely astounded that Starbucks was doing as well as it did,” he said. “I’m a conservative guy economically, but those prices are stupid — $4 to $5 for a latte! It doesn’t make sense why people would pay that.”

But while local shoppers have become frugal with their cup o’ joe, they haven’t been reluctant to splurge for another class of beverages — booze.

“Business is up a little bit from last year,” said Steve Erlich, owner of Ernie’s Wine and Liquor. “Money is tight and people are drinking more now, but they’re switching to less expensive stuff.”

Noticing that customers who were going for $40 bottles of whiskey were now drinking $10 vodka, Erlich said that he’s been stocking his store inventory with cheaper-priced liquor. As a result, his business has seen a 10 percent increase from last year, he said.

“When times are tough people want to forget their problems more,” Erlich said. “And with Christmas and New Year’s, when people have an opportunity to celebrate in bad times, they do it fully stocked.”

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