Are Third Wave Coffee Shops In Danger?

Systemic

Was in the centre of Manchester last week and dropped by Takk and Northern Tea Power only to find both have closed. Caffeine and Co which had a couple of cafes no longer operates in the centre instead has a thriving cafe in a park in the suburbs. Northern Tea Power was probably one of the earliest third wave coffee shops in the city so its loss is sad. Other shops have emerged but the question is long term viability. An example, Fort - a modest small new cafe. It doesn’t have many seats and most were occupied by customers busily engrossed on their laptops. Why is it third wave cafes have become de facto office space? I doubt Fort will last in the long run as I can’t see how they can pay the exorbitant business rates and other costs and compete with the likes of Starbucks et al and make a profit. I think third wave independent cafes will be driven to the margins like Caffeine and Co, i.e. the suburbs where set up and running costs will be lower. One has just opened close to where we live in south Manchester. Nothing has been spent on fittings and decor. It has decent coffee making kit and serves two choices of espresso both of which were excellent and served with a glass of water - choice of still or fizzy. How often do you see that?

This article makes for interesting reading
https://www.telegraph.co.uk/money/consumer-affairs/battle-italy-one-euro-espresso/

HarveyMushman

I think hospitality in general has been suffering hard for a while, probably since Covid.

My completely uneducated take is that it’s more of a correction than a complete wipeout. Certainly in the coffee space, SO many places jumped on the bandwagon and whilst you can ride the wave for a while, ultimately you need a decent differentiator to stay solvent. In some cases that’s as simple as being in an incredibly high traffic area next to a station or something but if you’re not on a busy thoroughfare then you need a reason to keep customers coming through the door.

Quality coffee alone is never going to be profitable enough because the sale price is low and the audience is (relatively) small. Food is where the profits are but then to do anything more than sandwiches or pastries you need a kitchen, waiting staff, chefs etc. It’s a whole different business.

A slightly controversial take is that I find the quality in a lot of establishments has nosedived. We don’t go out for food or coffee anywhere near as often these days and it’s not because of affordability, just because we’re usually disappointed. I don’t want to go and spend £100 on a meal for two if we can cook something tastier at home and the service is awful. Same goes for coffee, if your barista can’t make a decent cup for £3.20 then I’m going to make it at home.

Staff turnover is super high in hospitality, and it’s a low paying industry. Is an 18 year old student on minimum wage likely to take utmost care of a proper espresso extraction? Sadly probably not. I find the paradox of fine dining served by minimum wage staff interesting. Long gone are the days where everyone puts in the care attention to detail to customer service. But again, can you blame them when they’re probably doing a minimum wage job as a stop-gap. It’s a tough conundrum to solve.

I find the best places are the very small owner-run takeaway coffee shops where someone with a genuine passion for it has kept overheads low and can be in control of the product.

One of the best restaurants we’ve been to in recent years was a husband and wife who did a small set menu each night for about 8 tables. The husband was the chef and the wife ran front of house. Everything was fantastic, the food and the service.

They closed down after 18 months despite being fully booked every night citing ‘needing a break’. Go figure!

DavecUK

HarveyMushman My completely uneducated take is that it’s more of a correction than a complete wipeout. Certainly in the coffee space, SO many places jumped on the bandwagon and whilst you can ride the wave for a while, ultimately you need a decent differentiator to stay solvent. In some cases that’s as simple as being in an incredibly high traffic area next to a station or something but if you’re not on a busy thoroughfare then you need a reason to keep customers coming through the door.

The big problem is Coffee shops started in city centres as they had to, this caught the passing trade with people going shopping and needing a break and some lunch, or a snack. Then councils started to manage things badly, get greedy with parking and rates and forgot what they were really there for…which was not to become businesses and speculators (as happened in our council and many others).

This destroyed town centre shopping, which in turn had a dramatic effect on coffee shops (normally open during the day). Many of the town centres near me have become fast food outlets, nightclubs and evening/night time entertainment hubs. Coffee shops won’t/can’t thrive in this environment. As our town centres die, they will have more offices, flats and simple become evening entertainment hubs, councils trying to make up the shortfall in revenue from increased council tax (flats) and evening parking charges (probably killing off the evening trade as well).

So the coffee shops moved out of town and will continue to do so.

HarveyMushman Quality coffee alone is never going to be profitable enough because the sale price is low and the audience is (relatively) small. Food is where the profits are but then to do anything more than sandwiches or pastries you need a kitchen, waiting staff, chefs etc. It’s a whole different business.

Very true, this is why they cater to the day time trade

HarveyMushman Staff turnover is super high in hospitality, and it’s a low paying industry. Is an 18 year old student on minimum wage likely to take utmost care of a proper espresso extraction? Sadly probably not. I find the paradox of fine dining served by minimum wage staff interesting. Long gone are the days where everyone puts in the care attention to detail to customer service. But again, can you blame them when they’re probably doing a minimum wage job as a stop-gap. It’s a tough conundrum to solve.

It is, but to be honest, if VAT was removed or reduced on food served at restaurants, perhaps a proper tipping culture would come back and the businesses could survive? You hear of many going to the wall and more will follow after the budget.

Adrianmsmith

HarveyMushman we can cook something tastier at home and the service is awful

🤔🫣

Systemic

DavecUK You hear of many going to the wall and more will follow after the budget.

definitely

Systemic

This article sums up many of the points made above

https://www.manchestereveningnews.co.uk/whats-on/food-drink-news/northern-quarter-institution-serves-final-27130912

North Tea Power were innovative. They were the first coffee place to install an EK43. I remember talking to Wayne in 2104 about burr sets - the original coffee burrs just wouldn’t go fine enough for lighter roasts. NTP was always busy and finding a table indoors or out was a challenge. They served excellent food - wraps, sandwiches and cakes so their business model didn’t just rely on coffee sales.

This quote from the article above may well be part of the problem most third wave cafes face in respect of customers who use the place as an office.

"Businessman Danny Misell has used North Tea Power as his unofficial “office” and is devastated that it will close for good next week. He says: “Every meeting I’ve had, every work call, everything for me has been built from here.”

Systemic

And 15 months on, the unit NTP occupied is still empty.

Dusk

I used to use TAKK near the uni, it was just round the corner from Pret which always had a huge queue. I think although specialty shops often have similar prices to chains, they serve smaller drinks and less variation. A lot of people aren’t bothered about quality.

Systemic

Dusk A lot of people aren’t bothered about quality.

Isn’t that true. Whilst waiting for my car to be reshod with new tyres and having half an hour to burn, dropped by a Starbucks and ordered an espresso. Place was pretty busy. The espresso was beyond dire - bitter and no crema. I wasn’t expecting much but not expecting it to be that bad.

HarveyMushman

Dusk A lot of people aren’t bothered about quality.

Very true.

Same goes for concerts, art galleries, restaurants… these days people just want to take a photo for their Instagram / TikTok than appreciate something for themselves.

There’s a handful of trendy places near us that serve truly mediocre food and drink but are always full with queues outside.