How independent cafes can survive through tough times

Hospitality is an ever-changing industry, with some fearing it is more challenging than ever, and the independent cafe sector is no exception. A tough economic backdrop, from staffing to rising costs, sustainability concerns, and constantly changing consumer behaviour are just some of the forces shaping the indie cafe arena. And while the impact of many of those factors bring challenges, for many owners they also bring opportunities. 

For Steven Prime, founder of Coventry-based Baxter Baristas, price rises facing the industry are unlike anything he’s ever known. “Previously we would expect once a year for our suppliers to put up their prices,” he says. “We would then increase our prices very marginally. However this year it feels like every month prices have been going up and by significant amounts. 

“For example, one of my key suppliers last week put their prices up by 10-37% across all of their products. The knock-on effect is we are having to put our prices up in quite large jumps and more often. So far this year we have increased our prices twice. I am hoping that food inflation comes down and later this year we can go back to more predictability with price increases once a year.” 

Baxter has noticed the frequency of customers’ visits has dropped slightly. They’re spending the same amount each time they come, but are stopping by less often. “To counteract this we have been trying to offer a better range of food and beverages to entice customers to spend more when they do come in.”

Lydia Papaphilippopoulos-Snape, who owns three independent cafe-bakeries in Leamington Spa, Birmingham and Warwick, has seen the cost of some goods rise by as much as 50% - while a hike in energy bills has also had an impact. Like Baxter, she has had to put her prices up. “There is this difficult balance of trying to pass it on to the customer, but not so much that they then vote with their feet and stop coming in,” she told Speciality Food. 

“Because of the price increase, we haven’t really seen a change in average spend. But what we have seen is a change in items bought. So on average, a customer was buying something like 2.7 items per head and now it’s down to below 2.5. But the average spend is similar because of what we’ve done with our prices.” 

Her refusal to compromise on quality means profit margins are somewhat lower than they were a few years ago, but Papaphilippopoulos-Snape is optimistic there are still ways to make things work and to ensure customers are choose quality independent cafes - even if that’s less often.

Oliver Coysh, co-founder of south-west based The Exploding Bakery, is also optimistic that while consumers may be cutting their cloth according to the current cost-of-living crisis, it will be mid-market chains that lose out rather than independent cafes that offer plenty of added value, from the experience they provide, to the quality of their food. “Even when people don’t have much money, they still want to go out,” he says. “We offer quality products and while they might be more expensive, they’re still affordable for people when they do want to enjoy themselves. So we’re adding value in terms of that quality.”

While most independent businesses are no strangers to sustainability, the ongoing drive to be more sustainable amid the context of challenging times means it continues to be an important factor in the way the sector operates. For Papaphilippopoulos-Snape, finding sustainable suppliers has in some cases brought her closer to smaller, local suppliers. 

“For example, one of the things that has gone up massively in price is butter,” she explains. “Rather than going cheaper, or to a company that has a larger carbon footprint, we’ve come even closer to home to a smaller, more local supplier, who was like, ‘look, I cannot beat those prices, but these prices are going to stay where they are’. Therefore we have a lower carbon footprint working with this person and the money means more to the local economy. 

“Can we do that with absolutely everything? I wish we could. But all it means is that we have to spend more time challenging our suppliers, asking questions, holding them accountable. It takes more time, it takes more energy, but it’s not something that we’re willing to budge on.” 

Equally, Prime has noticed that it’s easier than ever to find good quality, sustainable packaging and overall prices are competitive, even with added sustainability requirements. “When we look at new suppliers, the first aspect that we consider is quality, then price, then sustainability. For us, these are our three pillars to ensure we are stocking great products from across our supply chain.”

Perhaps the biggest force shaping the indie cafe arena is its customers. Their decisions on where to eat, how much to spend, and how often to visit are directly linked to the success, failure and direction of independent cafes across the country. 

“We are lucky enough at all three of our sites that we have a great bunch of customers who get behind what we do,” says Papaphilippopoulos-Snape. 

“They completely understand that we are high quality, we don’t cut corners, and therefore we do cost a little bit more. So whilst I would say that, when I mentioned that people are buying fewer items, we have not noticed a difference in footfall.” What she has noticed is feedback from first-time customers on the price point, and admits it’s difficult to track how many people don’t come back because of that higher price. 

But she maintains that many customers stick with independent cafes like hers because they subscribe to similar values and respect a business that won’t sacrifice those values even when times are tough. 

“One of the decisions I made as a business owner early on was, ‘these are the values, these are the ethics of what we do. And these are the things that we are not going to waiver on no matter what happens’. At that time, I didn’t think ‘no matter what happens’ was going to be a pandemic, a massive cost-of-living crisis, and leaving the EU, but I have stuck to it, by hook or by crook. As I say, we aren’t hitting the profit margins that we were three years ago and that is something I’m trying to address all the time. But I am really trying to do it whilst holding on to those values. Because the footfall is still there, people are still coming in.”

While profit margins may be tighter for a small independent than a big chain, they also have the advantages of freedom and agility to cater to consumer trends and behaviour. “We can be competitive quite easily,” says Coysh. “If a big chain wanted to add kimchi to their menu it might be quite a convoluted process. For us, it’s a case of whipping up a new menu and getting it printed at the local printer. Recently, we had a surplus of fresh mint from one of the organic farms we buy from so we put fresh mint tea on the menu. But we can then take it off the next month. We can be quick on our feet.” 

Prime has definitely noticed a shift in consumer behaviour, with different customers coming in and also behaving differently. “We have seen a growth in customers working in store,” he said. “To meet this need we installed hot desks which on some days are fully used. I’ve come to the conclusion that the only way I can make my store financially sustainable for the future is to open up another one or two stores so that some of the costs are spread across a few sites.”

There’s no hiding from the fact there are myriad forces affecting the direction, development and future of the independent cafe sector - and not all positive. But for many owners, there’s plenty to be excited about, and ways to make things work, even though it might seem hard at times. “This is the business right now. This is how it is,” says Papaphilippopoulos-Snape. “And as the voices of this industry, I think we, as business owners, have a responsibility to still say and prove that it is a good business to be in. It’s tougher, it’s harder, profit margins are smaller, but there is a way of doing it. There is a way of carving out your place in this industry. And there is a way to inspire people to still want to be in it.”