Inflation may be taking the buzz out of coffee sales

Higher prices for items such as gasoline and food may cause consumers to reduce their coffee shop visits.

According to Placer.ai, a data company that analyzes foot traffic to restaurants, retailers, and other businesses, this is the case. It noted in a report released last week that foot traffic to coffee chains nationwide slowed in June, likely as a result of rising inflation.

June foot traffic to coffee concepts was 5.5% lower than the baseline month of January 2020. Compared to the same month prior to the outbreak, quick-service restaurant foot traffic decreased 2.5%.

It was the first time all year, and the first time since May 2020, that coffee foot traffic was lower than fast food.

Placer.ai observed that Starbucks and Dunkin’, the two largest coffee chains in the United States, experienced a decline in monthly visits in June after remaining consistent for the majority of the year. The company reported that Starbucks’ traffic was 6.6% lower in June 2019 compared to June 2018. In contrast, Dunkin’ was flat but slower than it had been for the majority of the year.

The study also indicates a decrease in traffic at Dutch Bros, an Oregon-based coffee drive-through. Due to a combination of strong unit growth and overall same-store traffic growth during the pandemic, the overall number of visits to this chain was up 178 percent in June compared to June 2019 levels. In the past few years, Dutch Bros has been one of the most rapidly expanding chains in the United States, adding nearly 100 new locations in 2016 alone.

However, “visits per venue” decreased by 0.4% in June, following increases of 5.9% and 6.4% in April and May, respectively.

The data appears to validate some of the concerns expressed by Dutch Bros executives in May when arguing against excessive price increases.

This decision harmed the company’s profits and drove down its stock price. However, the company’s chief executive officer, Joth Ricci, stated that higher gas prices prevented its customers, many of whom are younger and have lower incomes, from visiting as frequently.

“Without claiming to be a macroeconomist, I can tell you that when gas prices spiked as dramatically as they did in mid-March, our daily sales immediately reversed,” he said. It was almost the exact date.

According to data released by the federal government last week, consumer prices increased by 9.1 percent in March. This was the highest rate in forty years, and soaring gas prices were largely to blame. While there is some evidence that some of these prices are falling (gas prices have been falling for the majority of the past month), consumer confidence has plummeted as a result.

In the aftermath of the pandemic, consumers used more drive-thrus and visited at different times of the day while working from home, allowing coffee chains to quickly recover their customer base. However, higher gas prices may discourage them from making some of these additional trips.

Read more • restaurantbusinessonline.com

Suggested Reading