South Africa’s coffee market is getting crowded, prices are rising, and Shoprite’s acquisition of Vida e Caffè could trigger an even more intense battle for our daily caffeine fix. For coffee lovers, that may mean more choice, more competition – and perhaps better prices – but the urban coffee map could be about to change again.
There have been times in my working life when I have realised just how important good coffee can be.
I’m sure that you have had moments at work, or shifts or meetings where the outcome would have been very different without some good coffee.
Despite my love of the stuff (or dependency if you prefer), I am always blown away by how many coffee places there are. Where I live, not a million miles from Sandton, before the pandemic you would have had to move suburbs to find really good coffee.
Then, as it became clear that working from home was going to be a thing (in my own view, it’s the beginning of the end of civilisation as we know it … a diatribe for another time perhaps...), one of the big chains opened an outlet in walking distance from us.
For those up to date with their urban geography (which includes most cyclists and dog-walkers), it was part of a much bigger dynamic - of that movement away from office centres where everyone went during the day, towards a more spread out model where we worked at home, or closer to it.
The chain, which may involve the name of a parent, was clearly moving to its market.
About a year ago another big chain, one you would have to insert your legs into boots to get to, opened across the road. To the joy of those stuck at the robots on their way to work every morning it’s provided some entertainment.
First, while the interloper was being built, the more established chain sent people out into the street with leaflets, putting them in through your window whether you wanted them or not. Then, when the new guy opened, they had a big special. If you got your coffee before eight in the morning, you’d get it for under R30.
Just around the corner is not one, but two more outlets, one named after a city in the US, the other after a Greek philosopher.
Clearly cappuccino drinkers are an easy mark…
This morning, as part of its results, Shoprite confirmed it’s buying another coffee chain, Vida e Caffè. Shoprite is a group that hasn’t put a major foot wrong in recent years, so they have clearly done their homework. They must believe there is still a lot of growth to come in this market.
And, obviously, they have the capital and the back-up to really propel the chain to greater heights.
But we are now at a point where a family can be driving through an area and all get their coffee from different places. In my own family there is one of us who really prefers her milky froth from an independent operator that is not far away, but isn’t close either.
Unfortunately, their americanos are rubbish, so I try to avoid it wherever possible.
Sometimes it can really seem that while americano drinkers are from Mars, cappuccino drinkers are from Venus…
One of the most interesting numbers in Shoprite’s results in recent years has been their in-store selling price inflation. In other words, the rate at which the prices of goods sold in their stores increased compared with the official inflation figures.
Once again, they’ve delivered. Inflation in your local Checkers branch was just 2% in their year to the end of June. But keeping a check on coffee prices might just be beyond the control of even that retail behemoth.
It has been of great regret to this americano drinker that coffee price inflation averaged around 10%. And in the months before that, it was even higher… And the reasons for that include bad weather conditions, poor coffee harvests and, of course, higher diesel costs.
Someone in the coffee trade, who is involved with a smaller independent outlet up the road from where those two chains are trading specials and leaflets, told me this morning that some of their customers have been incensed by the rising prices they’re facing.
Obviously, no matter who you are, whether you are a smaller outlet or Shoprite, at some point you have to increase your prices when your costs go up.
Even a loss-leader cannot go on forever.
However, coffee is something where you can go cheaper. The least I ever paid for coffee was R10 for a cup of instant Ricoffy at Park Station (sugar from a dish with a wet spoon was free). Not the best coffee I’ve ever had, but at the time it was greatly needed and thus hugely enjoyed.
We could all go downmarket. Or keep the premier brand coffee for payday or special occasions. However, with some luck, we lovers of the bean may be about to have some good times.
One of the bigger impacts of Shoprite over the past few years has been to drive prices down for its competitors. If you’re Pick n Pay, you can’t recover your market share if you don’t compete against Shoprite on pricing.
And all of the other coffee outlets, whether they be named after philosophers, cities, stellar money, footwear or Cupps&Legumes are going to have to compete hard against not just Vida, but all of Shoprite.
Which means that despite the thicket of coffee shops that may be around you now, your urban geography might be about to undergo even more changes… DM
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