Newcomers to the Thai coffee business face steep challenges as banks tighten their lending approvals, says a supplier, manufacturer and distributor of coffee beans and equipment for coffee shops.
Thongtham Wechayachai, managing director of Peaberry Thai, a subsidiary of PTT Oil and Retail Business Plc (OR), said it has been particularly difficult for new entrants in the Thai coffee shop market this year.
"As banks are more cautious with loan approvals for new businesses, entrepreneurs are finding it harder to open their first coffee shops," he said.
Despite this hurdle, Mr Thongtham said opening a coffee shop remains one of the most appealing options for individuals looking to enter the food and beverage industry.
He said as central banks worldwide gradually lower their interest rates, local banks are likely to ease their loan approvals, which will enhance opportunities for new entrants in the market.
"The decline in loan approvals from Thai banks for coffee entrepreneurs has reduced the number of small coffee shops launching this year," said Mr Thongtham.
While small businesses struggle, larger coffee chains continue to expand thanks to their financial stability.
"With robust capital resources, bigger chains can expand their businesses and we anticipate same-store sales growth for this segment in the single digits this year," he said.
For smaller entrepreneurs, launching a new coffee shop without substantial personal investment is becoming more challenging.
Mr Thongtham said the slowdown in new shop openings may have a minor effect on Peaberry Thai's performance, as the company generates revenue from providing coffee business solutions, including selling coffee machines.
Peaberry Thai supports businesses of all sizes.
Pacamara Coffee Roasters, Peaberry Thai's coffee shop operation, accounts for roughly 50% of the company's total revenue.
The company operates 29 shops and plans to open another by year-end.
He said the company plans to open 8-10 new shops next year, the same growth rate as in previous years.
"The new shops will primarily be located in Bangkok and its outskirts, as well as other major cities and tourist destinations," said Mr Thongtham.
Peaberry Thai anticipates double-digit revenue growth next year, driven by continued expansion in the coffee business.