Want to be a Successful Coffee House? Then Forget the Paper Cups

They say half of all new businesses fail within the first year.  They also say half of those remaining fail within the second year.  By the third year, any business owner still around undoubtedly knows how to play the game.

It’s easy to tell if a coffee house is run by one of these vetted business intellects.  The tell tale signs are visible almost immediately upon entering the store; ceramic mugs by the espresso machine, or signs urging customers to bring their own coffee cup by the register.  By the time I pay for a coffee, the message is clear –this coffee shop thinks disposable cups are bad for business.  Being a thrifty consumer, that small discount I earn when I BYOC always puts a smile on my face.  But the smile of the coffee shop owner must be in a class all of its own.  Thanks for the discount, I think to myself.  No, thank you, the coffee shop owner chuckles back.

How are disposable cups bad for business?  Truth be told, it’s all because of the bottom line.  Disposable cups cost money, and high overhead costs can be fatal to a business.  Even more so, offering disposable cups does nothing to enhance customer appreciation, nor does it help a coffee house attract new customers.  The coffee industry is already oversaturated with competition – and it’s becoming more important to stand out from the crowd.

These conclusions are illustrated in a study published by Starbucks and the Environmental Defense Fund.  The two organizations teamed up in April of 2000 to develop a set of strategies to reduce the environmental impact of serving coffee.   In so doing, the group also found that reducing their environmental impact contributed toward better finances in three specific ways:

First, let’s examine the claim that the supporting reusable cups saves coffee houses money. At its heart, it’s a logical claim.  After all, when customers BYOC, coffee houses don’t have to pay to purchase disposable cups.  This might seem like small savings, but the table below (reproduced from the Starbucks/EDF report) illustrates just how quickly it can add up:

Researchers concluded that Starbucks could save hundreds of dollars a day just by offering reusable coffee cups.  Depending on the size of a coffee house’s customer base, the potential savings are impressive.

The second claim - that reusable cups increase customer satisfaction - originates from market research studies published in the same Starbucks/EDF report.  Researchers found that 82% of customers surveyed favored reusable coffee cups.  These customer noted that reusable cups “insulated coffee well, were attractive, and prevented waste” - all very good reasons.  59% of those surveyed cited environmental concerns as their primary reason for supporting reusable coffee cups.  Interestingly, this survey took place in 2000, before global warming became a main-stream issue in the public eye.  Chances are that even more customers favor reusable coffee cups in a “post-An Inconvenient Truth” world.

The final claim is that reusable cups can help a coffee business develop an identity to which customers can relate.  Marketing people call this “developing brand equity”.  Customers may think, I can buy my coffee anywhere, so why should I buy it at this coffee house?  The answer is in a company’s brand.  For example, drinking a Starbucks coffee has always been more than just coffee.  Beginning in the 90’s, that white cup and green logo became part of an image, even part of a lifestyle.  Right now, McDonald’s is working to brand its new espresso products as the antithesis of Starbucks.  Billboards that state “Espresso served cold, not snobby” are hoping to capitalize on consumers who like their espresso, but don’t identify with the Starbucks image.

So how do reusable cups factor into positive brand equity?  Remember that more than half of surveyed coffee drinkers care about the environment, and those same coffee drinkers are looking for businesses with which they can identify.  A coffee house which displays support for reusable coffee cups is also branding itself as an environmentally aware and socially conscious business - something which is important to more than half of all coffee drinkers!

Regardless of the environmental implications, it’s hard to ignore the positive financial benefits reusable coffee cups offer.  Sustainability Is Sexy offers programs which help businesses transform the potential of reusable coffee cups into real results.  More information about these programs can be found at www.SustainabilityIsSexy.com/Join.html.

To steal from conventional investing wisdom – why should a business work to pay for coffee cups, when those coffee cups could be working to pay the business?

This entry was posted on Tuesday, July 22nd, 2008 at 5:02 pm and is filed under Commentary.You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.