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Columbia's coffee market affected in plunging economy

Wednesday, November 12, 2008 | 3:41 p.m. CST; updated 10:53 a.m. CST, Wednesday, February 11, 2009
Lee Eckel, roastmaster for Lakota Coffee, smells a sample of Ethiopia blend as it roasts on Friday. Before coming to Lakota eight years ago, Eckel worked as a roaster for four years in Monterey.

COLUMBIA —For three years, Jennifer Myles served loyal customers at The Coffee Ground in northeast Columbia. They sipped warm espresso drinks delivered by a friendly staff of baristas.

The Coffee Ground , a family-owned business at 2703 E. Broadway, opened in 2005. It was a place, Myles said, where "everybody knows your name."

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But when Starbucks Coffee moved a drive-thru nearby, business at The Coffee Ground began to decline. Profit margins significantly decreased and regular customers came less often, Myles said. 

On Oct. 18, the relentless competition drove her to close the shop for good.

"We were never going to be able to compete with a drive-thru corporate Starbucks next door," she said. "It turned out to be a poor location for us."

The closure of The Coffee Ground is one grave fallout from the downward-spiraling economy. Lakota Coffee, Kaldi's Coffee Roasting Co. and others are also experiencing the effects in their business and clientele.

Pressure from a corporate coffee chain is an issue independent coffee houses face in Columbia. Location, gas prices and disposable income are other factors that can influence success.

Last summer, after Starbucks closed 600 stores nationwide and gas prices reached a national average above $4 a gallon, Lakota owner Skip DuCharme said he witnessed shifting consumer habits. Fewer customers came through the door, and those who did often spent less money.

The trend continued as the business climate took a steeper fall in September and Starbucks announced that fourth-quarter profit margins dropped 97 percent. In a stressful economy, many coffee shop owners are asking themselves what they can do to make sure their businesses survive.

A ‘mom and pop’ industry

“For small businesses, it’s really hard,” Myles said. “Shortly after the minimum wage heightened, the new Starbucks went in next door. It just got worse.”

She said she entered a state of panic, seeking ways to dramatically improve her business. She settled on advertising.

“I think of millions of things I wish I could’ve done differently,” she said. “I feel like I wasted my money this summer when sales started dropping.”

She continued to invest family funds into the shop but never regained The Coffee Ground's momentum.

“We had a really loyal base of customers,” she said. “I don’t completely understand the corporate market, and I wish consumers were more loyal to their locally owned businesses.”

DuCharme said customer loyalty is important because the coffee industry is a "mom and pop" kind of business.

“Most of the world’s coffee is grown on 10- to 12-acre farms,” DuCharme said. “It shows you how important it is to take care of that farmer. You have to give back.”

One element of Lakota’s coffee that drives customer loyalty is the in-house roasting, coffee roaster Lee Eckel said. Lakota, which opened in 1992 at 24 S. Ninth St., roasts its beans Monday through Friday, often exposing the downtown business district to a rich coffee scent.

“We try and take it from A to Z and do the best that we can,” Eckel said. “You can count on a fresh cup of coffee here.”

The latte factor: changing consumer conduct

Amber Moodie-Dyer grew up drinking very strong coffee. She doesn’t plan to change that habit anytime soon. As a regular coffee drinker at Kaldi’s and a cafe barista at the Starbucks in Barnes & Noble, she said she’d rather give up clothes than dismiss a daily cup of coffee.

“I make a lot of sacrifices,” she said. “I don’t live on my own. I don’t buy clothes. I don’t go on trips. But I haven’t changed my coffee consumption because, to me, that’s not something I’m willing to sacrifice.”

On busy days, Moodie-Dyer brews coffee at home in the morning but will most likely buy a second cup in the afternoon. Although she buys a flavored latte only on occasion, she won't give up her drip coffee.

DuCharme said he has noticed a similar trend among his customers, who opt for a $1 cup instead of a $3.17 latte.  

“Slightly before the downfall, midsummer and on, we started to see what is the latte factor,” DuCharme said. “People were giving up their latte in the morning. I was having to sell three or four cups of coffee to make up for one latte.”

It wasn't the only change Lakota noticed among its regular customers. 

“We’re selling an awful lot of cups of (plain) coffee right now,” DuCharme said. “We’re selling quite a bit of our bulk coffee. That, to me, seems like people are making more of it at home.”

At Kaldi’s, which opened in fall 2007 at 29 S. Ninth St., assistant manager Eric Soete said he’s noticed a positive change in the shop’s customer base.

“People who were going out eating at nice restaurants two or three times a week can’t really afford that so much anymore, and they’re starting to tighten up,” he said. “All those people who maybe came in once a week have made it a daily routine.”

But for The Coffee Ground, the shift in daily visitor routines meant fewer visits.

Myles began to offer her customers frequent-buyer points, which could be cashed in for a free drink. As the economy worsened and gas prices inflated, she said she noticed customers saving their free drinks for “rainy days.”

“I saw my regular customers less frequently," she said. "Even more than that, I saw them cutting back on what they spend on their drink. I made a joke a few times to these customers that when they reached so many points, they were going to own the store.”

It’s more than just coffee

In addition to quality coffee, location and service, Myles believes in the notion of a "third place."

“People are looking for an alternative to the bars, and they need a social outlet before they go to work and before they go home,” she said.

Most owners agreed. Even if oil prices skyrocket and jobs disappear, people will still make room in their wallets and their daily routines for coffee.

“I think for the most part, it’s about people who really like the product and who are kind of treating themselves,” Soete said.

"This is their escape; this is their retreat. They do this because everyone wants to have a little relaxation in their life.”


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Comments

Ray Shapiro November 12, 2008 | 11:25 p.m.

The Myles family are good people. I always liked the way they had the store set up. Not enough "foot traffic" was my only concern for these hard-working folks. Columbia's getting too wide and spread-out to support Mom & Pop cottage industries.
Even McDonalds is giving Starbucks a run for the money.
Convenience has replaced quality.
Franchises win. If they have difficulties, they have a better chance at the government bailing them out than caring about small businesses and freeing up some assistance to these kind of ventures.

(Report Comment)
Ayn Rand November 13, 2008 | 6:35 a.m.

"I wish consumers were more loyal to their locally owned businesses.”

What about the ones that are part of a national chain but owned by a local franchisee? I wonder how many people lump all chains together and don't realize that some restaurants (e.g., McDonald's) are owned by local folks and not by a corporation hundreds or thousands of miles away.

(Report Comment)
Sara McCloud November 13, 2008 | 8:08 a.m.

Kaldi's is NOT a "mom and pop," locally owned business. It is a St. Louis-based corporation that put enormous monetary stress on its neighboring local coffee houses such as Lakota and the Artisan when it opened its doors this past year. Kaldi's is as responsible as McDonald's or Starbucks for the business decay of locally owned coffee shops, if not more so considering it used to supply the coffee for the Artisan and other local shops until the owners decided a smart business move would be to open shop next door to one of its largest customers. Do some research.

(Report Comment)
Nichole Wade November 13, 2008 | 3:25 p.m.

The Coffee Ground was THE perfect mix of a great latte and a place to relax or study.
I worked for Jenn and The Coffee Ground for over two years. Even now, after reading this article I am still incredibly emotional about the closing of this shop. Columbia, you don't know what you missed out on. It was so sad to watch people go for a name rather than great taste. We had many customers that stopped drinking starbucks and started coming to The Coffee Ground. WE knew what you wanted to drink in the morning, WE knew you wanted pumpkin muffins and sausage and cheddar scones. WE had nick names for our customers, WE could always pick up our conversation with a person from the day before.
These were the people that helped me live and survive as I tried, and am still trying, to pay my way through school. Our customers became encouragers, friends, therapists (on our few bad days) they were our cheerleaders and some became close friends.
It's not that all of our customers stopped coming in, it's the fact that starbucks purposefully placed their store not even a mile from the coffee shop. The new customers The Coffee Ground would have been welcoming, were instead going to the competition.

Don't you see Columbia, you're tricked by the name. The image that you portray when you carry that little white cup with the little green logo, its an act. They don't have good coffee. All of the money you spend at these corporations leaves Columbia and makes other areas of the country wealthy. These mom and pop shops, the local ones that REALLY care about their customers, that money stays right here in Columbia, improving the local economy and helping poor college students like myself survive.

I only have one regret from the Coffee Ground in the two years that I was there. I took it for granted.

(Report Comment)
Ayn Rand November 13, 2008 | 10:16 p.m.

I wonder if Coffee Ground would still be around if it had been downtown or another place with a lot of pedestrian traffic.

(Report Comment)
Timm Lynn November 13, 2008 | 11:02 p.m.

There once was an airline in Des Moines that flew people from the city to Chicago for a mere $99. One of the big airline companies decided to fly people for $89. This put the smaller company out of business, at which time the big company raised it's price back to $139 where it had always been. I wonder if the people who got took, ever gave a thought to the game that had been played on them and how much they themselves contributed to the corporate edge out.

(Report Comment)
Ronald Doolittle November 27, 2008 | 1:51 p.m.

Hats off to Miss Sara McCloud. Kaldis is NOT a 'mom and pop' coffeeshop. They are exactly like Starbucks. What they did to The Grind is the perfect example. The Grind sold Kaldis coffee before Kaldis decided to open ANOTHER store (they have a total of 6!). Next time do some research and just accept that Kaldis is corporate. Like Starbucks, they serve a great beverages:)

(Report Comment)
Ronald Doolittle November 27, 2008 | 1:56 p.m.

The Artisan not the Grind:)

(Report Comment)
Sara McCloud December 4, 2008 | 10:41 p.m.

Ronald,
Good to know there are still educated baristas out there. It seems the whole world has been taken over by the corporate machine. Maybe we could get together some time for a good olde fashioned cup 'o joe?

(Report Comment)

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