The coffee chain’s CEO expects the established coffee segment to have less players in the long run.
For James Wilkinson, Merlo Coffee’s fairly recent investment in a new website, app and online platform was a stroke of good luck.
Like any chain looking to strengthen their digital presence, they needed the upgrade to handle an increase in online sales. But the executive himself and his team were surprised at how much the increase in bean sales in-store and online was.
“We have tripled in online sales and we are currently moving our distribution centre for online sales to a different building, in order to fulfil our increased demand more effectively and efficiently,” he told QSR Media in an exclusive interview.
Months ago, it was a different story for the Queensland-based coffee brand. The April and May months were particularly tough for Merlo Coffee, having been forced to do takeaway only in all cafes. Their sales team doubled as delivery drivers. Machinery, vehicles and equipment that weren’t used for six months were sold.
Busy stores, meanwhile, took the staff from their CBD and university stores which were suffering from a massive reduction in turnover.
Come May, however, things slowly began to improve and all stores eventually reopened. Food and wet coffee sales started to bounce back as well.
“The coffee industry is robust to most things but COVID has certainly pushed the industry to the limits, especially in Victoria,” Wilkinson said.
“With the support of JobKeeper and JobSeeker, the industry has certainly been helped in the short term. However, in the long term we will have to wait and see the impact. The present financial assistance finishes March 2021, and as to what the hospitality industry looks like after that, is a guessing game.”
With outlets near airports, universities and CBDs drawing less footfall, Wilkinson said the chain’s suburb stores are leading the way as more Aussies work from home.
“Shopping centre numbers are slowly increasing but the real winner in shopping habits appears to be supermarkets and suburban shops. Many suburb cafes have actually increased in revenue as they are closer to people’s new workplace, home! These places are seen as a lower risk shopping destination,” he said.
“Our only increase in revenue for retail has been coffee beans; our suburb stores are selling considerably more take-home whole beans or freshly ground coffee than ever before.”
Personalised coffee offerings seen in wholesale, online lines
Now armed with a steady sales stream and much-needed digital experience, Wilkinson said they are looking to introduce “more personalised coffee offerings” in both wholesale and online revenue lines. Plans to open the business up for contract roasting is in the pipeline, with the arrival of their 360kg Brambati roaster and other equipment early next year.
“Moving our production and distribution for online will allow us to continue our online expansion where we are also wanting to introduce a SCCA (Shopping Centre Council of Australia)
approved cupping room for our panel of roasters and cupping experts,” he said, adding they have seen as “massive increase” in the interest of their Friend of Merlo subscription service including free delivery.
Whilst hoping for a “massive improvement” for Melbourne, which just eased restrictions, Wilkinson expects the hospitality industry to “react as necessary” to tightening and loosening of restrictions. 2021, he said, will be tough for the whole industry, including the coffee segment.
“Coffee supply should be fine but the main issue is shipping and how long shipments will take, we will see certain delays in coffee landing in Australia,” he said.
“Reduced government support and increasing rents and labour costs will make all businesses look at their model and make changes to their offering and structure to allow them to survive this extremely tough time. The coffee industry in Australia is well established and we will come through this eventually, but the number of players involved will probably be smaller than there are now.”
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