Philippine Coffee Shop Owner MISTAKES that STOP them from being PROFITABLE
There are a lot of things that make a coffee shop profitable. There are also a lot of things that make it lose money. This is for those who want the profit.
The Philippine coffee shop industry explosion happened after COVID.
In 2023, the local coffee market was valued at around $1.8 billion, and projections had it growing past $2.4 billion by 2028.
New coffee shops were opening everywhere, and for a good reason: the barrier to entry is low. You buy an espresso machine, find a cheap space, slap a minimalist logo on the wall, and voila welcome to the business world!
But the boom is done. The hype has settled.
What’s left behind is a graveyard of coffee shops that looked great on Instagram but couldn’t survive past their first year.
If you’re reading this, you either already have a coffee shop that isn’t making the money you expected OR you have one that’s doing okay but you know it can do better.
There are a lot of things that make a coffee shop profitable. There are also a lot of things that make it lose money.
If you the profit part, proceed.
TASTE TRAP
Here is the first mistake most coffee shop owners fall into: they spend too much time obsessing over their coffee.
You keep tweaking your roast profile. You source a more expensive single-origin bean. You dial in your espresso extraction to the last second. Most of the time going from 90% to 99% on coffee quality does not move the needle on your profit.
This is a friendly reminder that most of your customers are casual coffee drinkers. They cannot tell the difference between an espresso shot extracted for 24 seconds and one extracted for 22 seconds.
They just want something that tastes good, doesn’t taste like soil, and maybe a cup that looks good on their feed.
Now, there is one exception.
If your coffee shop niche is built specifically for high-brow coffee purists. The kind of crowd that talks about notes, origins, and brew ratio practices then yes, that last percentage might matter.
(I highly doubt that)
Anyways, speaking of niche…
GENERIC IS FOR PHARMACIES NOT FOR CAFES
If people want a generic coffee shop experience, they will go to Starbucks.
Starbucks is safe, consistent, and everywhere. You know exactly what you are getting every single time (maybe most of the time).
Sorry but you are not Starbucks.
You do not have their budget.
Your supply chain is laughable.
Most of all, you don’t have 30 years of brand equity.
If you are trying to compete by being another “chill place with good coffee and a nice vibe,” you are already losing.
The coffee shops that are winning right now are the ones that planted a flag in a smaller moon.
A K-pop cafe that turns into a fan meeting venue.
A cycling cafe where riders stop after a morning ride.
A cat cafe for cat lovers (and stray cats).
In short: pick a lane.
Pick one that you actually care about because it will show if you do not. The niche does not have to be weird or complicated. It just has to mean something to a specific group of people.
Sometimes the best way to stand out is by standing alone.
LOOK AT THOSE PSPs.
Let me drop this real quick: Your coffee is probably not your most profitable item.
Coffee margins are decent at best. The moment you start sourcing high quality beans, your COGS go to the moon! And unless you are charging premium prices that your market is willing to pay, your margins go bye-bye.
Don’t sleep on the PSPs! (pastries, sandwiches, pasta)
A simple ham and cheese croissant that costs you ₱40 to make can sell for ₱150. A slice of cake you sourced from a home baker for ₱60 moves at ₱180 on your counter. Studies on the food service industry consistently show that food items in cafes can carry margins between 60% to 75%!!
If your food menu right now is just a sad rack of 3-day old cookies, and a soggy sandwich, then you’re literally leaving money on the table.
Bonus: Build a food menu that fits your niche.
A cycling cafe sells energy bowls and sandwiches.
A K-pop cafe sells Korean street food and themed rice meals.
You get the idea. Your niche and your food menu should be telling the same story.
MAYBE ITS NOT THE MOUTH, IT’S THE EYES!
This one is for the coffee shop owners who already have their act together. Good coffee. Clear niche. Solid food menu. BUT STILL WANT MORE!
You are probably too focused on your product and not focused enough on getting more people to see it.
Every time you hit a slow month, you react like this:
Let’s launch a limited edition ube latte. WRONG.
Let’s do a seasonal Christmas blend. WRONG
Maybe a new pasta dish. WRONG AGAIN!
You might have one of the most deadly entrepreneur virus..
The virus of fixing things until it breaks.
MAYBE your customers are already happy. At some point, improving your product stops being the growth lever. Getting your product in front of more people becomes the job.
More foot traffic.
More online orders.
More people posting your cafe on their feed.
More reviews.
If your coffee is already good and your regulars love it, the next question is not “what do I add to the menu?” The question is “how do I get 50 more people through the door this month?”.
Aka MARKETING!!!
PRODUCT OR MARKETING TEST (DO THIS TODAY!)
Most business owners either have a product problem or a marketing problem.
Very few can tell which one it is. Don’t worry I made a test just for you!
So here is a simple test.
Step 1: Make a basic 10-stamp loyalty card. On the 10th purchase, the customer gets a free drink.
Step 2: Print 100 stamps.
Step 3: Hand them out to each and every customer.
Step 4: Give yourself 30 days.
After 30 days, count how many cards made it to stamp number 10.
If less than 70 cards completed: you have a product problem. Your customers are not coming back. Something about the experience is not good enough to pull them in again. Fix that first before spending a single peso on marketing.
If 70 or more cards completed: Congratulations.
Your product is doing its job. Your customers like what you are serving. Your problem is not the coffee, the food, or the vibe. Your problem is that not enough people know about you yet. That is a marketing problem.
“How do I market effectively” you ask?
That’s another article for me to answer.