Australian cafes


28th July, 2020

Long road to recovery for Australian cafés

Cafés have been among the hardest hit during the COVID-19 pandemic. But what’s the future look like for our caffeine makers?

Café owners have taken a financial hammering this year after the pandemic impacted trade, but given our collective caffeine addiction, pundits predict that it’s only a matter of time before they financially recover.

Coffee culture is usually vibrant across Australia and New Zealand and has grown year-on-year, with $5 billion in 2019/20 in Australia alone.

But once COVID-19 was declared a pandemic, the Federal Government announced the closure of cafés and coffee shops on 23 March, except for those offering takeaway services. Many cafés and coffee shops temporarily closed, limiting revenue from premium dine-in food options.

Since then, many operators have been limping along on JobKeeper support to pay baristas in the hope that things will return to normal before too much longer.

And while some cafes have offset the loss of dine-in revenue by pivoting to takeaway options, that hasn’t been an option for all operators. Cafes in CBD areas that normally cater to office workers have been particularly hard hit.

Trouble brewing

In a stark sign that things are tough are revealed in the Australian Bureau of Statistics data, which reveals that more than a third of Australia’s accommodation and food services employees lost work between March and April. In a further blow, Treasury estimates released in May projected that 441,000 jobs would be lost in the hospitality sector due to the pandemic.

The Harris Café Report reveals that 70 percent of consumers are worried that cafes will never be the same as they were pre-COVID-19.

Commissioned by coffee roaster Harris Coffee, the research reveals that just under 10 million Australians see their local café as the centre of the community, ahead of other amenities including the post office.

It also reveals that:

  • 70% of Australians travel to regional areas around the country just for a new and unique café experience
  • Two thirds of small business owners in hospitality (the majority of which are café owners) are worried that Australia’s next generation will be too scared to work in cafes as a result of the recent disruption to the industry
  • 80% said won’t be able to recover from recent hardships without third party support
  • 43% said that without third party support, they wouldn’t be able to stay open for longer than six months from now

Almost nine in 10 café owners are concerned that the decline in regional tourism resulting from the COVID-19 lockdown travel restrictions will be ongoing and negatively impact the number of customers who visit their regional businesses as lockdown restrictions ease.

Harris is encouraging consumers to support their local café by buying a coffee, and if your local is doing it tough, encourage them to apply for the Harris Café Recovery Project. This project encourages eligible café owners to apply to receive a share of the $1 million stimulus package.

Barista brews

The Harris report highlights the need for additional support and in some cases, compensation for cafes, Australian Small Business and Family Enterprise Ombudsman Kate Carnell says.

“Between the bushfires and Covid-19, cafes have been hard hit in recent months, particularly in Australia. It has become clear how important cafes are to our communities,

“It’s incredibly tough to be in small business right now, and particularly if you happen to own a café,” said Carnell.

“More than 40 percent of respondents to this survey said they don’t expect to be able to stay open for longer than six months without additional support, and over half say they’ve lost 50 percent or more of their revenue over the past few months.”

And that means there will likely be a prolonged period before these small business owners are back on their feet.

“Although we know that outbreaks will happen and that will impact small businesses in those areas, it’s actually impossible for a café owner to plan for that.

“They will lose stock, and for small businesses that are already cash-strapped, there’s a real risk an event like this could break them,” she said.

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Recovery on horizon

Cafés will truly begin recovering once borders open next year, according to the chief executive of peak industry body, Restaurant Catering Australia, Wes Lambert.

But it could take some time. An IBISWorld report published in April suggests that the cafes and coffee shops will recover over the five years to 2025, with consumer demand for high-quality coffee and convenient food products anticipated to support revenue growth long-term.

For many café operators, making the most of available stimulus funding and takeaway trade may be as good as it gets for the time being. But you may also find other ways to pivot your business and develop new revenue streams. Find out how other MYOB customers are doing just that in our new series, Powering Forward.