STiR coffee and tea magazine

Volume 5, Number 3

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50 STiR tea & coffee industry international / Issue 3, 2016 (June/July) Most Ukranian coffee houses have expanded food menus during crisis Ukranian coffee houses sees sharp reduction in number of clients bly grow, as recession necessarily will be followed with a rise in spending. I hope it will not be more difficult than it is now. Starting a business during a recession is justified because the threshold of in- vestments in the business entry is lowered," said Inna Sosnovskay, co-owner of the coffee houses chain EspressamenteIlly. "Right now we see the time period of getting business to the payback point is increasing. At the moment [for coffee houses] it is almost impossible to earn. We believe that only the strongest compa- nies will get through the current challenges. Only those who will invest in services and products will survive. Those that do in two or three years will see a very good result," she added. Coffee shop to simple cafe Every company has its own recipe for dealing with the current crisis. One important trend is to ex- pand the menu, a technique employed by a large number of coffee houses. "A coffee house in a pure form is quite a risky format for Ukraine since its clients are mainly cof- fee gourmets and there are only 2% of them in the world. In the Ukraine this figure is even less. As the result, the client-base is being created rather slowly, while profitability of such business is only about 10% [even in better times]," Nasonova ex- plained. "After the beginning of the crisis we saw the steady decrease in profitability, by mid-2015 we were operating with losses. Approximate estima- tions show that we should go bankrupt within 6-8 months. As the result we expanded the menu, introducing a limited range of food, as most of our coffee houses didn't have large kitchens. This brought a good result and now we are at least managing to make both ends meet," reported a spokesperson for one coffee house chain who wished to not be named. Managers estimate that food sales generate up to 45% of the whole profit of these businesses and during the crisis this figure is growing. As the re- sult, most are adding more food to the menu. Still, some experts warn that this approach might bring negative impact to the long-term strategy, since coffee shops that operate as cafes risk losing their identity. "One of the most important marketing rules is the rule of brand positioning. Studies in this area show that the expansion of the product range of goods does not lead to an increase in the number of clients. Therefore, for the coffee brand, first of all, it is important to adhere to the standards set by the brand name, and not to turn the coffee shop at the simple café," says Olga Paly, owner of the Golden Ducat. Another challenge is the emergence of mobile kiosks and coffee bars on wheels (coffee carts). According to Alexandr Voevodin, owner of the MyCoffee chain of coffee bars, there has been a sharp jump in the number of orders for fran- chising mobile coffee carts in different regions of Ukraine. "I'm pretty sure that in the times of crisis large numbers of people are reducing activity saving money on advertisement and business promotion, so as the result competition in this period is sig- nificantly lower. Many businessmen are not open- ing anything new, trying to hold on during harsh period, while for others of them this is a period of opportunities, as people never stop drinking cof- fee," Alexandr Voevodin explained. With no rental fees, lower taxes, and the op- portunity to deliver quality coffee right to the of- fices and homes of the clients, rolling coffee bars lure a significant number of clients from coffee houses. Experts suggest that this trend may push segment further into recession, even after an over- all restoration of the country's economy.

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