I lost count at about a dozen. There have been an abnormally high number of coffee shops closing recently. Just this morning reading the comments on Arizona Coffee I learned that Areopagus Coffee has closed its store and decided to focus efforts on coffee roasting.

Its made me ponder the future of coffee shops in Arizona, and quite a bit of the discussion on this site has been about that as well lately. Warren Buffett often talks about diversification. He has been wildly successful because of his ability to invest in many different business types.

Is it time for coffee shops to diversify? To break out into new areas? Can a coffee shop just serve coffee and really be successful in Arizona in the summertime?

Coffee shops have tried everything from serving a full food menu, to operating a gelato lounge on the side. In a few cases we have wine bars and live music events. Scottsdale based Intatto Coffee even serves pizza and I hear it is quite popular.

I don’t have the answers, but it’s an interesting discussion topic. Should coffee shops in Arizona diversify?

Arizona Coffee

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  1. Todd

    I think there is a fine line you have to draw when adding extra services to a coffee shop. Personally, as a consumer, I like the idea of being able to get food as well as coffee from my shop as long as the food is done well. Too many times I have visited a shop that wasn’t balanced – the food was great, but the coffee sucked or the other way around. I think the most successful shops add things that tie in well with their primary business – pastries in the morning, sandwiches in the afternoon.
    I have learned that Arizona is not a huge coffee loving area and that owning a coffee shop is a very difficult thing. Add to that the issues the economy is facing and I think that any independent coffee shop HAS to offer something in addition to great coffee just to keep its head above water.

  2. I’m sorry to hear that so many are closing their doors. There were several that I was hoping to try if/when I get to AZ.

    Good luck to those that are still battling! Stay strong..

  3. hb

    I can see that part on coffee shops to diversify, but at the same time you don’t want to be at a shop and smell like pizza or tuna melt.
    Part of the problem is that some shops don’t want to advertise, they need to hit the blogs and or promote their shop.

  4. Pierce/Bear

    One thing that has struck me is that oftentimes there are NO coffeehouses at all in many smaller Arizona towns.

    Read that places that offer live music, poetry, etc.

    I am not a ‘bar’ person.

    Starbucks does not count, obviously.

  5. Phoenix Native

    Two words: CUSTOMER SERVICE. I haven’t always been in the best mood when I stop by some coffee places (stressful job, etc.), and the difference really does come down to how the customer is treated. That’s why I will go out of my way to stop by a place like Intatto or Beans Books Barks…

  6. I’m not an expert, but our coffeehouse strives to be just that, a coffeehouse. We offer fewer food items, but that allows us to prepare them fresh more frequently.

    The list of restaurant chains that try to please all the people all of the time is long and unimpressive. I was talking to a customer yesterday about how average the food is at so many places that “Olive Garden” can win the readers choice “Best of Phoenix” (yes it happenned, but it was a while ago…).

    I always look to In-N-Out Burger. They have three things on the menu: burgers, fries and shakes (okay, 4 if you count sodas). Don’t want a burger today? That’s fine. Go get something somewhere else, but please come back tomorrow when you do want a burger. They do one thing, and do it well…

  7. I don’t think a place HAS to offer anything else, nor do I agree with HB that the place to advertise is online. A coffee shop needs to be a part of the community as often as possible. Local book clubs, mom’s groups, bible studies, etc. If you had a single group come in every single night and you made it feel good for them without catering specifically to them, you could find a lot more people coming in in the daytime.

    I do agree that coffee shops don’t think about advertising nearly enough, but it is mostly word of mouth that gets people in.

    And to B&G’s point, the best shops i have been to offer the least amount of variety. (but that is me liking great cappuccinos, not caramel macchiato.

  8. Pierce/Bear

    Bill and Ginger:

    You notice that as well re: In N Out Burger? I swear my age is showing here———-they strongly remind me of McDonalds of ca. 40 years ago ago. Very basic menu, carryout only, etc. Less was more.

    Austin: you stated getting the word out to more so-called ‘conservative’ groups along the lines of the Red Hat Society and so on……….although, Globe being a small town you do have a ‘captive audience’ admittedly. 🙂

  9. Should AZ coffee shops diversify? It depends on what staying in business is worth to the ownership.

    AZ is obviously a tough coffee market. High temps and Starbucks are some formidable threats to business.

    That said, I expect a cafe to sell what a cafe sells: coffee (cafe), and light fare to go with the coffee. Don’t diversify, because Phoenix doesn’t need another CoCo’s.

  10. I say businesses should do what fits them.

    Some diversification is probably good – and I really like the concept Ground Control in the West Valley has put together – nice place.

    But, that’s not for everyone and I really like walking into a coffeehouse knowing that they’re so particular about their coffee that they only serve French Press. I happen to be a purist with coffee but being a purist doesn’t always pay the bills if you know what I mean. 🙂

    One other thing Phoenix really lacks is a fair share of high quality tea houses. In my view, that very well may be the next big market and putting in high quality loose leaf tea is a great way to attract discerning clients.

  11. I agree with keeping the focus on coffee and minimizing food items that have a high waste factor. There are many things that a coffee house should do and sell in order to keep healthy throughout the year and to sell coffee should be a priority. When we had the coffee house I made each one of our employees solicit our customers to buy Cortez Coffee (at least while I was around) in a whole bean or we will grind it for them. We also had a sign right at the register that said “free drink with the purchase of 2 bags of fresh coffee”. If we see 150 customers in a week we have a potential to sell 150 lbs of coffee that otherwise will be purchased in a supermarket (our customers go to supermarkets once a week). If you pay about $6 per pound (local wholesale price) you should resale them for $10 or $9.99 (in 8 ounce bags this means 150 x $12 mark up=$1800). The key is to have better coffee than the supermarkets with the advantage of them tasting coffee at your place. See, there are many things that you can do to stay focus in coffee. Most of us wholesalers will even provide the re-sealable bags free of charge.

  12. Goro

    Expansion v Focus is a problem not only with the Coffee industry, but with all restaurants. Notice in the past that there have often been expansion/contraction pairs; the latest being the rapid expansion of Krispy Kreme and the sudden demise of so many. This also happened with Boston Chicken/Market and quite a few other fast food chains.

    Additionally, even the big brand chains like McDonalds and Burger King have experienced the woes of growth. In the past, they have reduced their menu, stating that they wish to get back to the “Core focus.” And then they start adding items again.

    It’s no easy thing balancing the two. Not sure what the perfect combination is, but expect that it does have quite a bit to do with the community and what THEY expect from a coffee place and what their views on coffee are.

    btw, i don’t believe Warren Buffet is the best person to quote in support of wide diversification since he’s often viewed as the antithesis of that, espousing a far more narrow focus of investments than is widely recommended. IIRC, one of this famous quotes is “Diversification is only for people that don’t know how to invest.”