SA’S thirst for coffee has moved into sharp focus as the Goliath of all coffee brands, Starbucks, opens its first store this week.
For the incumbent independent coffee chains in SA — like Vida e Caffè and the Seattle Coffee Company — Starbucks’ arrival means they’ll need to sharpen their strategies.
As it turns out, both are already thinking creatively about their market.
Take Muizenberg beach, one of Cape Town’s hot spots for surfers. On a strip of shops around “Surfers Corner”, where teenagers flock for surfing lessons and to buy gear from Roxy’s Surf Shop, coffee is suddenly a big drawcard.
On one side of the surf shop is a Vida e Caffè counter — one of the newer formats used by Vida — and it’s doing a thriving trade. It illustrates how Vida has already adopted a more flexible approach to how it operates. The store itself, for instance, is half-owned by Roxy’s and half by Vida.
“We love that Muizenberg store with the flow of locals and tourists; people coming off the beach who want a great coffee and a muffin,” says Vida CEO Darren Levy. That format has a different look and feel — smaller, less conspicuous, without the “obrigado” welcome for which the standalone stores are famous.
From small beginnings — 15 years ago in Kloof Road in Cape Town — the Vida chain has grown into one of the largest speciality shops in the country. Today Vida has more than 200 stores, with about half linked to Shell garages where they’re franchised.
Of those that aren’t part of a Shell garage, 65% are franchised. At Shell forecourts, some of these are sold under its brand, and some through Torrador Vida e Caffè. Where once shopping centres and high streets were the locations of choice for Vida, this has changed. Office parks, for example, are now a lucrative market, says Levy. Vida has stores in Old Mutual, The Foschini Group, Ernst & Young and Vodacom buildings.
But it’s not just the format that’s changing. Levy says Vida will continue to offer muffins and confectionery food, but last October they added a “to go” food offering where people can grab a wrap or salad.
“It’s an evolution, as any good retail business needs to be open.
“I’m paranoid about competition and staying ahead of the competition and continuously staying abreast of customer expectations,” he says.
But as Starbucks’ entry illustrates, the market is becoming increasingly competitive. Besides the specialised chains, even fast food outlets like Wimpy and McDonald’s have added coffee options to their menus. At the big retailers like Checkers, Pick n Pay and Woolworths, speciality coffee is now being sold for the home “barista” market. And artisanal coffee shops continue to pop up in neighbourhoods.
Starbucks opens its first store in Rosebank this week — near the Gautrain and, ironically, across the road from where Vida closed shop last year after an unsuccessful lease negotiation. But Levy says they’re keen to get back into Rosebank.
“We welcome (competition). It will introduce people to the coffee category to give them more choice,” he says. “People like to spend more time in coffee shops. We need to be conscious of that in terms of look and feel and overall experience.”
Levy took over at Vida three years ago when founder Grant Dutton sold out to Athena Capital. At the time, the chain had decided to sell its two stores in London.
Now when they talk international, they’re thinking of expanding on the continent: Ghana, Botswana, Namibia, Kenya and Mauritius. As it stands, there are 17 stores outside SA, and within the next few months there will be 21.
Still, Vida’s market share of the coffee category has dropped in recent years, as it has for every operator apart from McCafé (McDonald’s coffee store).
Another coffee chain set to feel the competitive heat is the Seattle Coffee Company, which started in the UK in 1994 and opened in SA in 1997.
In 1998, Seattle UK was bought out by Starbucks, so the local version is now entirely owned by an SA family, and has 110 stores. They work with a few hand-picked joint venture partners and do not offer individual franchises.
Seattle has big plans to expand soon in Foods Lover’s Markets across the region but, at the moment, about two-thirds of their espresso bars are attached to Caltex garages.
“All of our coffee is direct-trade premium-grade Arabica, hand-roasted in Cape Town. We pay our farmers at least 25% above fair trade prices,” says Taryn Scholtz, Seattle’s brand manager.
She says South Africans pay a relatively low price for gourmet coffee. “SA has a thriving coffee industry. However, with the depreciating rand, we are interested to see how Starbucks will price their beverages. We’re not worried,” she says.
Scholtz says that just because a big burger chain opens in a neighbourhood it doesn’t necessarily mean the small gourmet spot will lose trade. “People will always try new things and then stick with what they love. There’s enough space in the pond for all the fish.”