Wednesday, July 2, 2008

Where Can we Go for our Cup-a-Joe?

Starbucks to close 600 stores in response to world wide slow down.

This is not new news, but pretty big news, especially if you are like me and work in the business. The thing is-- when people start worrying about gas prices and even worse home foreclosures-- one of the first things to go when tightening the belt is discretionary food and beverage spending. That $4.00 cup of coffee starts to look a bit too needlessly extravagant. This slow down in F&B has been world wide and started to really take root just after Feb. 1st as the depth and breadth of the subprime market crisis started to become more clear.

Sadly people who work in and run most food and beverage establishments are among the hardest working, lowest paid people you are going to find. Many people were probably working part time jobs in these Starbucks outlets to pay their rent or go to school. This 600 store closure is going to be equal to approximately 12,000 jobs minimum. And industry analysts say we are just beginning to see the slow down. It will get far worse before it gets better. No restaurants or cafe owners will be spared.

On top of fewer customers basic food costs are going up. Most estimates put the rise in food costs for basic ingredients between 20-40% in the last 18 mons. Base costs rising, customer count falling... going to be a bumpy ride, mostly downhill.