Many small cafes, coffee shops in particular, are registering double-digit profits and are opening new shops

Steam releases in a long psssssssssss. Coffee drips and glasses clink. Coffee lovers in the hotel lobby closely watch baristas prepare their crafts: espressos and cappuccinos that can win them the title of best coffee maker on the East Coast.

While business owners large and small lay off workers, cut costs and freeze expansions in a bid to survive the worst recession in decades, many small cafes are enjoying double-digit profits, opening new shops and spending time and money to boost their images in competitions like this one recently held outside of Pittsburgh.

Economists are baffled by the phenomenon. They say it could be part of a backlash against large corporations — such as Starbucks — and a move by consumers to carefully choose where to spend each dollar and opt for what they perceive to be a high-quality cup of coffee made by a well-trained barista.

Starbucks turned a luxury into a necessity and everybody needs their coffee, said Constantine Stavropoulos, owner of Tryst coffee shop in Washington, D.C.

"Now they're saying if I still need it why would I go to Starbucks when I have this alternative," he added. "People are really beginning to re-recognize the neighborhood coffee shop," he added.

Small coffee shop owners are doing everything to maintain their loyal clientele and attract new customers, especially those disillusioned by Starbucks and other chain coffee shops.

Cafe owners are pulling out the stops: They're blogging; diligently selecting roasters; upgrading and changing menus frequently; chatting with customers in an effort to foster relationships; training baristas for months; and ultimately trying to provide a unique atmosphere.

Tryst has a message board on its Web site where people who exchanged smiles or sly glances over a latte can try to reconnect in a 21st-century forum. Stavropoulos calls Tryst calls the sought after "third place," not home and not work, and says it stands "in stark contrast to the suburban culture and coffee chains that proliferate the country."

Starbucks, meanwhile, has reported a 10-percent drop in same-store sales, is closing nearly 1,000 shops and cutting at least 7,000 jobs. The chain's profits in its most recent quarter were down 69 percent.

On the other hand, Stavropoulos said his coffee shop enjoyed a 4 percent increase in sales in 2008, although he did see it slowdown a bit in the last three months of the year. Still, he said, he is plowing ahead with plans to open another cafe later this year.

Ken Zeff, owner of Crazy Mocha, a 9-year-old chain of coffee shops in Pittsburgh, says his comparative sales were up 12 percent year-over-year in 2008 and he is planning to open his 21st shop in the first quarter of this year. He is also looking at three or four other potential sites to launch later in the year.

Kiva Han Coffee, a gourmet roaster that supplies coffee to retailers in western Pennsylvania, eastern Ohio and parts of West Virginia, grew 40 percent in 2008, and about 90 percent of its business comes from small coffee shops, president and owner Ed Wethli said.

All told, Wethli said he helped 30 new cafes open their doors in 2008, supplying them with everything from cups and equipment to the syrup used in the drinks.

"There's a real local initiative with people to buy from people in their community and ... coffee bars represent one area where you can definitely walk with your feet and support somebody local," Wethli said. "All of us feel a little betrayed by the big corporations that have really put us in a tailspin here."

Economists say the trend contradicts expectations in a slow economy. Typically the weakest competitors — often the smallest business owners — are weeded out, failing first and fast.

But Esther Gal-Or, a professor in the University of Pittsburgh's Katz Graduate School of Business, said it may be small cafes are succeeding because they have the flexibility to adapt to a failing economy.

Jeffrey Inman, a marketing professor at the University of Pittsburgh, said part of the shift away from Starbucks could be "a backlash against some of the corporate greed we've seen."

"If I have a relationship with the baristas and they know who I am and they know what I usually get that drives it too," Inman said. "And the small guys tend to be better at doing that then the big guys. I would call that the 'Cheers' effect, where everybody knows your name."

At the recent Northeast, Mid-Atlantic Region Barista Competition, Luke Shaffer was moved to tears to see some of his regulars at the 21st Street Coffee and Tea drove 30 minutes from Pittsburgh to see him perform.

For cafe owners like Shaffer, the competition was an opportunity to learn as well as a chance to market themselves — key to businesses that do little to no advertising.

"Customers are kind of callous toward advertising," Shaffer said, noting that even without it he enjoyed monthly sales growth in 2008 of 20 percent to 50 percent. "I would rather focus my resources and my time on just improving our product and word of mouth has brought us a lot of wonderful press."

On his lunch break at the Crazy Mocha in downtown Pittsburgh, Nathan Eber, a 32-year-old ombudsman with Allegheny Health Choices, is reading a book and listening to his iPod while sipping coffee. The earth-tone orange walls, the comfy chair and the relaxing music all play into his decision to buy his coffee every day at this local coffee shop rather than at the Starbucks down the block.

Even when he goes home, he chooses to frequent the local coffee shops in his neighborhood, and has been doing this for quite some time.

"I do work hard for my money," Eber said, "and I choose to put money in businesses where I know it's going to come right back into the community."