The supply/demand contradiction

Like many people I enjoy Malcolm Gladwell’s writing though he does drive me insane from time to time when he tries to back up an argument by disagreeing with himself. (see ‘Blink’ where he suggests that we should trust our immediate reactions except, of course, when they’re wrong…)

The reason I bring this up is because I am about to commit the same annoying crime against reason and suggest that it is important for coffee businesses to think about the needs of the market, except when it’s not. I’d had these two different thoughts that I wanted to post and I realised that they contradicted each other so it made sense in my head to post then together. This is perhaps somewhat connected to what I spoke about at SCAA symposium… 1

LOOKING TO THE MARKET

There is an idea that was posted by Kevin Kelly back in 2008 that I love and talk about a lot, but I realised that I’ve never written about it on here. It is called 1000 True Fans. I’d strongly recommend taking a break from this post an going to read it, as my very quick summary won’t do it justice and it is a great idea.  Obviously this was an idea targeted initially at artists, and focusing on how to do what they love in an ongoing and profitable way. Regardless, it has been incredibly influential on my thinking and makes everything seem so much possible, and exciting.

What I take away from it is this: you don’t need to appeal to everybody. In fact you don’t even need to appeal to a particularly large number.

From a cafe perspective having 1000 regulars would make for a very successful business. Not many cafes are actually able to deal with that much volume do their requirements are a little lower.  The point isn’t the number itself, it is thinking about how many customers you actually need. Coffee is wonderfully varied and no aspect of it is universally appealing. For the coffee experience you want to sell – how many customers do you need?

Within your business catchment area – do you believe that there are that many people who would love what you do?

Perhaps a more important question: if you work your prices out backwards, starting with the number of drinks you want to sell, work in your costs of goods and overheads, and some profit – how much should things cost?

When you have that number the last question is: are you able to deliver product where the value and price match up?  If the answer is no then a piece of the business puzzle is wrong. Wrong place, wrong offer or just not a viable idea.

Looking at things this way we can start to assess ideas for other ways to retail and present coffees. If I wanted to do fine dining coffee, maybe 50 covers a day, short hours and meticulously prepared drinks and food – how much would in the average cheque have to be? If the answer is £30 a head then we have to decide if we can make a coffee experience worth that.

Looking at the pool of consumers we can ask whether there are enough people who would love this. This brings me to my contradictory point:

IGNORING THE MARKET

Traditionally we determine the preferences of a market by observing its habits. This makes sense; lots of people are buying product x so that must be what they like, and this must be the best product available.

The problem here is that the market is working with very limited data. This is mostly out of necessity; it is impossible to be deeply knowledgeable about every product category that you have to make a decision about.

I firmly believe that people buy based on quality and accessibility. In many cases people don’t buy better because they don’t know that better is available, or it is too difficult to buy (be it price, convenience or intimidation around the experience).

I don’t see people sending steaks back to the kitchen because they’re not sweet enough.  We don’t expect steaks to be sweet, because the world has given us no reason to expect such a thing.  As an industry we often get angry with the consumer for not rejecting bitter, poor quality coffee.  When life has taught them that this is how coffee tastes, why should they reject it.  Great coffee is still barely available – and I mean truly great coffee.  The fact that they are not asking for it does not mean they wouldn’t enjoy or prefer it.

If I had looked at the market when it came time to open a roastery, then we should have abandoned the idea of focusing on coffee quality because the market for it in London (a city of 8 to 12 million people).  The smart business choice would have been to focus on soluble coffee – because that is what everyone drank, or maybe dark roasted coffee , or perhaps coffee imported from Italy.  The market showed no apparent demand for light roasted, characterful coffees.

I maintain my mantra of “people like nice things”.  Of course there is preference, but then (as I said before) we’re not trying to capture everyone’s attention.  We believed enough people would be interested to create a viable business.  We still hope to be right….

 

  1. My excuse is that Niels Bohr said this was ok, and perhaps even helpful so I am going to go with it.

    If you hold opposites together in your mind, you will suspend your normal thinking process and allow an intelligence beyond rational thought to create a new form.

    I should add that I just like Niels Bohr quotes and I am not going to claim to create a new form here…  ↩︎