Columbia's coffee market affected in plunging economy

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."

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.”