In coffee obsessed Hong Kong, independent shops are fighting for their slice of the cake

With some 250 independent coffee shops in the city, many are struggling to keep pace with competition and rising rents

PUBLISHED : Saturday, 12 August, 2017, 7:23pm
UPDATED : Saturday, 12 August, 2017, 11:39pm

Walking into Brew Bros Coffee in the gentrifying neighbourhood of Sheung Wan, you immediately recognise you are in a “hipster” cafe.

You are greeted by few seats, minimalist decor, and the sound of steam venting from a large coffee machine, churning out macchiatos and flat whites.

The shop, tucked away at end of a cul-de-sac, is the entrepreneurial dream of co-owners Louie Chan Lo-yi and her husband. But now they are questioning whether their business will still be there in a few years.

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“[We picked up the option] to renew our contract for another two years and our rent went up 15 per cent. But in another two years we think it will go up 30 to 50 per cent, which is really hard to afford,” Chan, 33, said.

“We may have to move or expand our business.”

In the last decade, speciality coffee shops have become a common sight in certain districts in Hong Kong. Coffee culture exploded after young university students returned from studying overseas and wanted to emulate the western cafe experience.

According to the Hong Kong Professional Coffee Association, there are around 250 speciality coffee shops, that are not part of major chains, in Hong Kong.

But some are struggling to stay afloat against rising competition and rents.

Coffee and logistics costs are also a concern for Chan. She imports coffee beans from Melbourne every week and has seen costs rise by 10 per cent annually.

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The struggle to stay in business has pushed cafe owners to think creatively.

With rapid gentrification in areas such as Sheung Wan, Kennedy Town, and Tai Kok Tsui, a flood of hipster coffee shops followed, serving drinks made from beans sourced directly from coffee farms.

Some shop owners fly to these farms to personally inspect the quality of the coffee beans.

For Brew Job Coffee owner Alvin Leung Kam-kwun, 27, this is what he is doing to stay ahead of the competition and serve clientele who increasingly demand better quality coffee.

“You have to be innovative just to survive; you have to take care of a lot of aspects just to make sure a customer comes back,” Leung, who graduated with an economics degree, said.

Two years after opening his coffee shop in Tai Kok Tsui, Leung began to roast his own coffee beans – creating unique blends for his own business and selling to other shops across Hong Kong.

Speciality coffee mini-chain, The Coffee Academics, with 10 locations in Hong Kong, also sources its own beans, roasts its own coffee and, creates exclusive blends for corporate customers.

“We do direct trading with the farms, that actually helps us control a lot of the back end costs. That is important because sometimes rent is uncontrollable, but we can control the back end,” The Coffee Academics owner Jennifer Liu said.

“Rent and labour costs are more than 50 per cent of our sales. Most people stay [at most] one year,” Chan said, highlighting some of her major concerns.

After learning how to make speciality coffees, some have gone on to “fulfil their dream” of opening their own cafes.

Minimal decor is part of the hipster cafe style – which also translates to minimal costs. The most significant cost is the commercial coffee machine and the low barrier to entry makes opening this type of cafe attractive for budding entrepreneurs.

With more coffee shops opening in Hong Kong, there was a risk of over saturation. Some landlords are seeking coffee shops as a tool to entice other higher-end stores to set up in the same street.

But Liu was not worried about a collapse of the industry any time soon: “The demand for good coffee is escalating ... [Millennials are] drinking coffee like we were drinking Coke back when we were teenagers.”