How many coffee shops can sell just coffee and remain profitable? Not many. For most café owners, diversifying your menu is the key to increased revenue, greater foot traffic, and satisfied customers.
But what should you be offering customers? How do you select the types of products that will help you to stand out – and also allow you to keep quality high and cement your brand? Should you partner with other businesses or do it all alone?
To find out the answers to all this and more, I spoke to Erika Lowery and Bryan Reynolds. Erika is the Show Director at Coffee Fest, a leading US B2B coffee trade show with a strong focus on education. The next Coffee Fest – and the final one of 2018 – will be in LA from August 19th to 21st. And Bryan is the founder of Anthem Coffee Company and leader of the CoffeePreneur one-day intensive seminar on how to profitably run a coffee business, which will be taking place at Coffee Fest.
Here’s what I learned from Erika and Bryan.
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Specialty coffee professionals attend a workshop on changing consumer coffee preferences at Coffee Fest Denver 2018. Credit: Daniel Mendoza
Why You Need to Diversify Your Shop Income
As Bryan says, “If you don’t innovate, you die.” Diversifying allows you to attract new customers, offer something extra to existing ones, and increase your revenue stream (sometimes with even more profitable items).
After all, why sell just a coffee when you can sell a coffee and a cake? Or even a coffee and a piece of artwork, handmade jewelry, or comedy club experience?
Any chance you have to increase your income per transaction is a good thing. Coffee shops can have reasonable profit margins, but few are so successful that they can afford to only sell coffee – even in the specialty industry.
The extra income from food, other beverages, experiences, and products can bolster the shop’s profitability, giving you more money to invest in your business, pay staff, and – ultimately – pay your own wages.
So, let’s look at how to do this.
Attendees review notes during practical workshops at Coffee Fest. Learning about new trends, methods, and technologies will help you grow into the future. Credit: Daniel Mendoza
How Can a Café Diversify?
The go-to café menu add-on has always been food and other drinks. Cakes, sandwiches, cookies… all the little things that pair so well with coffee.
Yet don’t limit yourself to just the standard items. As Bryan says, “anything pairs with coffee: sweet dishes, savory dishes, avocado toast.”
You could serve up hot food, with a special lunch or evening menu, or provide savory snacks. There’s no shortage of options. “In every show, different companies come out with new flavors, not just the basic sweet items,” Erika stresses.
Then there are the other beverages, which Erika tells me can either complement or replace coffee later in the day. This is why they invite companies producing kombucha, fresh juice, specialty tea, and more to exhibit at Coffee Fest. Café owners have the ability to not just attend workshops, buy new equipment, and source great roasted coffee, but also expand their non-coffee menu.
Gundalow Juice, one of the other products exhibiting at Coffee Fest. Providing other beverage options is one of several ways to expand your café’s menu. Credit: Coffee Fest
She also reminds me of the importance of considering diversity within your coffee menu, listing cold brew and alternative milks as important offerings for many customers. In fact, she tells me that the alternative milk trend is “exploding.”
A little creativity can also lead to an exciting coffee cocktail/mocktail menu, complete with seasonal drinks that customers will feel they just can’t miss out on.
For those with the capacity to do so, other products and events can also be a good way to draw in more customers. From live music and film screenings on Friday nights to stands of local handicrafts or independently published books, there are many ways to increase sales – if you have the know-how to branch into this additional industry.
But no matter how you choose to diversify, there are several things to keep in mind…
Pacific non-dairy barista milks being showcased at Coffee Fest Denver. Credit: Coffee Fest
1. Find Your Niche
Choose your extra offerings carefully. You want to diversify, not dilute your brand. If you’re known for high-quality, sustainable coffees and great atmosphere, then all of your other offerings must also be high-quality, sustainable, and conducive to a great atmosphere.
In other words, you want to find a way to both provide customers with the staple products they expect while also crafting and consolidating your identity.
For example, perhaps your brand is all about being environmentally sustainable: you may decide to serve homemade, organic desserts made with locally farmed ingredients, and skip the plastic packaging. Or perhaps you’re interested in sharing the stories of the communities behind the coffee. In that case, traditional foods from those coffee-producing communities could make for a memorable lunch menu.
As Bryan says, “If you are a café owner starting a food program… you have to create your authentic expression of your own tastes and likes.”
Attendees gather for a Campfire Cafe session about coffee trends at Coffee Fest; Campfire Cafe is one of the many forms of education at the event. Credit: Coffee Fest
2. Stay Up to Date
Erika emphasizes that all café owners need to understand two things: what the consumer wants and how trends are changing. The first will allow you to be profitable today. The second will allow you to be profitable in the future.
It’s important to be aware of growing interest in new products, changing technology, and more. If you have the opportunity, speak to people across the industry and attend presentations and workshops. The insights gained can be invaluable.
Training will also enable you to take full advantage of new trends, allowing you to not just keep up but also stand out from other cafés, increasing your competitiveness.
The Coffee Business Start Up seminar: a workshop at Coffee Fest Denver 2018. Credit: Daniel Mendoza
At Coffee Fest, Erika tells me, “We focus on education all three days, primarily in the morning, providing all kinds of classes and workshops to business owners to develop their skills, their knowledge.”
Ticket-holders have access to over 60 educational events for free. The CoffeePreneur One-Day Intensive, led by Bryan, covers everything from hiring and training the right staff to profitability. The Drink Innovations Lab looks at coffee and tea brewing, how to make homemade lemonade and soda, frappes, and more. Cupping, nitro cold brew, customer service, food, coffee production… all of this is explored at the 2018 LA version of Coffee Fest (August 19th–21st).
And Erika tells me that this is because knowing all this gives café owners “the tools to stay relevant.”
One trend that she highlights as particularly important is cold brew. Roasters and café owners, she stresses, are increasingly seeing a demand for this – but not all of them are aware of how to produce it or the equipment they need. And in the near future, they may find themselves losing out on sales because of this, especially in the hot summer months.
It’s not enough to run a successful café today. You need to look to the future and plan to still be successful then.
Klean Kanteen won Best New Product: Non-Consumable at Coffee Fest Denver, reflecting an increased interest in environmentally friendly coffee products. Credit: Coffee Fest
3. Collaborate With Your Community
You’re a coffee expert. Perhaps you’re also a tea brewing expert, or a great baker, or an excellent manager. But you’re probably not an expert at everything.
Sometimes, if you want to diversify, it pays to collaborate with other people – people who can bring expertise in new areas as well as their own loyal customers, greater marketing reach, and different resources. People with whom, by working together, you can create unique offerings.
Bryan stresses the value of this collaboration. “As café owners, we have to do something very unique that helps create memories for people,” he says.
You might work within your community to set up a temporary coffee stall at a music festival or even hold early morning yoga classes in your café. Just remember, if you’re collaborating on events, to make sure that you don’t end up pushing loyal regulars away as you give up space and change the coffee shop ambience.
After all, your yoga-lovers may stop for coffee and breakfast after their 7 am Saturday session, and the book club may sip on lattes while discussing the latest novel… but not all hobbies are so conducive to sales. Consider the event carefully. And then, pick a quiet slot in the week, make sure it won’t disturb regular customers, and know how many extra sales you’ll need to see to justify its continuance.
But it’s not just about events: you can also collaborate within the food and beverage industry. Want to add craft beer to your menu? Work with a brewer. Freshly made cakes? Search for a baker. Lemonade and sodas? Partner with a like-minded supplier.
Find the right people, whether through word of mouth or events like Coffee Fest, to partner with. Make sure they match your vision. And collaborate, so that you both benefit.
Connecting with players across the coffee industry at Coffee Fest. Credit: Coffee Fest
Running a coffee shop is a labor of love. You do it out of passion, but boy do you labor. Achieving profitability requires hard work, persistence, market awareness, and a unique offering for consumers.
And diversifying your shop income? That’s just common sense.
It increases revenue per transaction. It gives consumers another reason to walk through your door and make that purchase. And it future-proofs your business, ensuring that it stays competitive even as customers’ expectations change.
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Written by Angie Molina.
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