Predictions of continued rapid growth in the branded coffee shop sector (see pgs 18-19) is at odds with falling disposable income levels, which will cause the market’s growth to stall, according to one analyst.
Speaking at Caffè Culture, PricewaterhouseCoopers’ coffee shop sector specialist Stephen Broome said the growth of about 10%, seen in 2008, would not be repeated in 2009, following a predicted drop in consumer confi- dence and spending. Capital expenditure (capex) was now only on a care-and-maintenance basis, rather than for store development, and he foresaw further rationalisation of non-profitable stores.
"Despite announcements about continued growth in store numbers, particularly from the big three or four, what we’re seeing is store openings stalling and capex being reduced," he said. "My view is we won’t see that exponential growth continuing - certainly not for the next couple of years. We will have a period of consolidation. If outlet growth stalls, and disposable income also stalls, I don’t see where the growth is coming from."
He urged operators to position for an upturn from 2011 by reducing operating costs and through greater flexibility with labour costs.