What are the appropriate strategies for coffee shop acquisition in Indonesia? What are the opportunities of this industry in Indonesia?

Source: Barista Magazine Online

During the pandemic, social restrictions have been implemented to lessen the spread of the virus. This requires individuals to do their activities from home. Whether it is school or work, staying at home is a mandate from the government to help lessen the spread of the virus. When the spread of the virus has lightened, individuals have started to do their school or work outside of their houses to reduce the burnout and stress of their workload. Mostly, these people do their work in coffee shops to just get a new working environment to avoid being bored and tired of working from their home. With this, it increases the amount of coffee shops who operate in several areas. 

What do you think are the important strategies in the acquisition of coffee shops? How is the industry doing during the pandemic? What are some famous coffee shops around the world? How has the pandemic affected the industry and its performance overall? Read the article to find out!

Overview of the Coffee Shop Industry

The coffee shop industry reached 20,000 stores in the United States with a combined total revenue of about USD 11 billion. The industry is highly concentrated at the top and pretty fragmented at the bottom. This means that the top 50 companies have over 70% of industry sales. 

Considering that coffee is one of the largest commodities, the most common and committed coffee drinkers are mostly 25 to 45 years old. Specialty coffee appeals to a diverse adult demographic usually to college students and young adults. In Indonesia, domestic coffee consumption had almost quadrupled since 1990, reaching an estimate of 4.8 million 60 kg bags of coffee in 2019/2020. 

Areas with great access for pedestrians and drivers often have the best customer traffic, thus makes coffee shops depending on them. Typical locations usually include downtown or suburban retail centers, shopping malls, office buildings, and university campuses. 

Retail prices for coffee shop beverages usually are varied. Due to the cost volatility of coffee and dairy, retail prices often fluctuate. In addition, a coffee shop may depend highly on part-time employees, and most workers require few skills. Many employees make just above the minimum wage, and pay can be significantly below the average. 

Sales in coffee shops are usually seasonal, with peaks during the fourth quarter, driven by the winter holiday. Poor weather could also affect sales by decreasing store traffic. For large companies, inventory amounts to between 40-80 day sales while accounts receivable runs between 20-30 day sales, mainly due to commercial customers. 

Barriers to Entry for Coffee Shops

When trying to expand a coffee shop, there are several barriers to entering the market. However, having a small single cafe would give us a lower entry barrier to the market due to its practicality and efficiency since its scale isn’t as big as other coffee giants. 

However, there are high entry barriers for the specialty level or big league/chain players due to the high industry concentration on top. Among them are:

1. High investment needed to grow significantly
2. Strong brand recognition
3. Economies of scale 

Driving Factors that Cause the Industry’s Structure to Change

1. Product and Service Innovation

Product and service innovation are necessary in order to stay competitive in the market and also attract existing customers successfully. Many customers focus on the special atmosphere that is characterized by the location, interior design, seating, or whether internet access is provided. With that, it is important to not to just sell the beverages but also the whole experience of the coffee shop. 

2. Education About Coffee

Coffee shop companies should also start to educate the consumers about coffee, its ingredients, quality differences, and about the movements in the market, such as “Fair Trade” or “Organic Coffee”. This could be beneficial for developing a relationship with the customers which could lead to greater brand loyalty. 

3. Quality Control 

Besides cooperation with other partners in the industry, the coffee shop companies have to ensure the quality of products and services that they cater to the customers. Cleanliness of the location should be consistent from different branches so that customers could build trust in the brand. The role of the barista shouldn’t be undermined as it requires a great commitment and responsibility thus they should be recognized and rewarded, since they are the representative of the specialty coffee supply chain to the consumer. 

4. Technology

It is important to have an adequate amount of technology in the shop in order to serve high quality and differentiated products. Technology allows coffee shops to help shorten waiting times for the customers and also help create a variety of fresh, new and unique flavors. 

Popular International Coffee Shop Chains in Indonesia

1. Starbucks
2. Dunkin’ Donuts
3. Coffee Bean & Tea Leaf

How Can Coffee Shops Attract Customers Back After Covid-19 Pandemic? 

When the covid-19 pandemic took hold around the world in early 2020, many countries around the world announced limitations for non-essential businesses. With these restrictions, many customers were unable to visit local coffee shops. With the lessening number of COVID-19 cases worldwide, here are some strategies that coffee shops could implement to gather back customers.

1. Spread the word

Being prepared for customers is a very good start. Aside from that, making the coffee shop have a social media presence would help in reopening the coffee shop and help spread the word to attract customers. 

2. Plan ahead

By planning a strategy, it would be more effective for the business to reopen rather than waiting for the pandemic to die down. Coffee shops could use this time to evaluate their business and reflect on what they have achieved so far. 

3. Provide a good experience

Overall, the experience of a customer starts when the customer walks in the cafe and leaves. With this, it is very crucial for the coffee shop to create a good relationship with the customers in order to make them want to repeat their order. 

4. Prioritize Safety and hygiene protocols

One important aspect to gain the customer’s trust is to prioritize hygiene protocols, especially during the pandemic. Providing a good experience would help customers feel safe and relaxed. Outdoor seating would be valuable and restrictions should still be implemented in the long run, like social distancing, face masks, and hand sanitizers. 

Enter Indonesia’s Coffee Shop Industry with BRIGHT Indonesia 

BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:

1. Assist you in expanding and developing your business by identification of potential partners.
2. Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arranging business meetings, and acting as a liaison.
3. Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
4. Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.

For more information, email info@brightindonesia.net.