Over the past two decades, Australia’s café scene has witnessed a remarkable expansion, yet the surge in establishments has not translated into widespread success.
When I relocated to Melbourne’s Ashburton area in 2006, the local High Street boasted a modest four cafés. Fast forward 18 years, and that number has ballooned to over a dozen. Despite the proliferation, most of these cafés remain eerily empty throughout the day.
This pattern is not unique to Ashburton but is evident across Melbourne and indeed Australia as a whole. While a select few cafés attract a steady stream of patrons, the majority grapple with financial sustainability.
The oversaturation of cafés, coupled with escalating living expenses, has led to a market where $5 coffees and $20 avocado toasts seem increasingly out of reach for many Australians. With skyrocketing mortgage payments and rental costs, the affordability of such luxuries is in question.
Recent data from The Australian highlights a troubling trend: insolvencies among hospitality businesses have doubled compared to a decade ago. ASIC reports reveal that over 1,600 firms in the accommodation and food services sector faced insolvency in the 2023-24 financial year. This surge follows a 30% rise in average food costs over the past three years and escalating energy bills.
Richard Forbes, Chief Executive of Independent Food Distributors Australia, predicts that the number of food service businesses facing bankruptcy will persist, with the possibility of $10 cappuccinos and $100 steak dinners on the horizon.
Westpac’s latest card tracker underscores the shift in consumer behavior, showing a significant decline in spending on hospitality services despite ongoing inflation (4.0%) and population growth (2.5%).
The anticipated shakeout in the café industry might, paradoxically, benefit the nation. It could free up resources and labor for more productive ventures, signaling a necessary adjustment in the market.