Coffee Shop Industry Analysis – Executive Summary
Coffee is one of the widely consumed beverages in the world and in the U.S, however, the plant of the coffee contains caffeine, Brazil was the world’s largest coffee production country, in 2012. People across the countries are becoming addicted to coffee; coffee is in business from past several years and coffee chains are becoming popular among the people of different age group, where people can go and enjoy coffee.
American drink coffee every day’s, coffee shops are becoming popular in the countries; my business idea is to open the coffee shop of my own. The coffee shop will be in different regions, I will try to provide best services, including best quality at the best prices to my customers. However, the coffee shop will also have the small library, where the people can come enjoy newspapers and other literature with the coffee. A coffee shop will also have wifi facilities, so the people could come and enjoy for long hours with friends. The company tries to provide various facilities to the customers, so they can get the best experience, with the variety or wide range of coffee and snakes.
“Coffee shop provides the friendly and comfortable environment to the customers, where customers can get quality food and coffee; the efforts are there to provide the entertainment and best services at the reasonable prices, to all the stakeholders,
The company has the most inviting stores, friendly staff and the best values that can make the customers happy, the coffee shop is focused on providing the extraordinary coffee experiences so that company serves better than anyone else.”
Industry Analysis and Trends
In the eatery or coffee shops industry; coffee shops are the rising star, there are different types of the coffee offering by the companies, including lattes, espresso, cappuccino etc. In my coffee shop there will also all types of the coffee, and all the specialties will be provided on high quality. However, there is 12% increase in the coffee shops, according to the survey of 2013. Coffee is in trend; around 30 million of the Americans are drinking coffee on the daily basis. There are expected increases in the coffee prices (Morningstar, 2016).
Size and Growth
Companies are offering the varieties, so that the consumers may be attracted, however, coffee consumption is about 70% in United State; it is the fastest growing segment because the annual growth rate is 7% and the total market capitalization, for coffee industry is 3,693 (Morningstar, 2016).
The industry also faces the slowdown in the past few years, especially in 2009, when there was the economic recession. The sales also depend on the consumers’ taste and preferences, consumers may prefer to eat something while spending more on the coffee or beverages. In the below-given graph, U.S and Western Europe sales of fresh coffee are mentioned, from the year 2011-2016, however, revenue per year is also given.
Maturity and Trends
In the coffee industry, there is the considerable market power; the industry is at the maturity stage, there are many competitors in the market, including, Starbucks and Dunkin donuts, they are getting about 60% of the market share in the coffee industry. People in the US prefer the coffee consumptions, people are shifting towards the healthy eating, and therefore, per capita, coffee consumption is expected to increase in future (Grant, 2016).
There are a lot of environmental issues that can relate with the consumption of coffee, however, coffee naturally grows, but deforestation is taking places, as the trees are affected, water pollution is also there, there are serious environmental threats taking place. River pollution is there due to the discharge from the coffee processing. The soil quality is affected, agrochemical usage and the waste from the coffee products, can also affect the environment and the health of the people (Sustainablebusinesstoolkit, 2016).
Climate changing can impact on the industry, there are the warnings by the world’s biggest coffee producers that climate changing can result in the severe risks to the industry, however, in some reports it is analyzed that climate change has already impacted on the crops of the coffee across the countries (Slezak, 2016).
Vulnerability to the Economic Factors
Coffee production is related to the climate variables so, economic factors include the ecological damages, which can relate to the coffee industry, according to the farmer’s survey, the climatic events may result in the vulnerability of the economic factors, example, droughts, heat waves, forest, strong wind, worrisome climatic events etc. Such factors may result in affecting the economy (Leary, Conde, & Kulkarni, 2009).
There can be many risks associated with the coffee industry, the business, in this case, need to identify the priorities. There is the need to identify the resources and retailers form that the company can buy the coffee at the good cost, however, if the coffee shop does not understand the proactive risk related to the consumer choices, taste, and preferences, then there could be long-term issues and financial losses.
There are the seasonal factors of the coffee that can affect the industry as well as the coffee shops; however, it is needed to know that how coffee is dried, shipped and packaged, otherwise, there can be problems; coffee may lose moisture with the time. There is a need to consider the coffee as a seasonal produce, as in summers very few people drink coffee. Coffee beans should be roasted otherwise should be used with 4-6 months.
Barriers to Entry
For the coffee shop, there are the barriers to entry in the market, however, there are many other recognizable brands of the coffee in the industry, there is need of the marketing for the new brand or major players, people may not have the brand awareness, people or customers concentration on the major brands (Musso, 2014).
There are the technological factors that are affecting the industry, as people are buying sophisticated home brewing machines and making the coffee at home, however, companies like Starbucks, have increased the customer efficiency by using automatic espresso machines, the coffee is given in 3 minutes.
There are the strict regulations on the coffee industry, as there are the new organic rules, coffee shop now has to cooperate with the suppliers, so that there could be the fair trade, regarding ethical reasons, in the value chain, the advertisements and location should be effectual and there should be positive public relations (Mplans, 2016).
Supply and Distribution
The supply of the coffee is based on the frequency of the customers purchases the coffee, however, the customers have the power, coffee shop chains need to secure the price stability as there are the dairy products, the suppliers need to meet the differentiate demands, from the customers, consequently suppliers need to maintain the quality.
- Grant, R. M. (2016). Contemporary Strategy Analysis: Text and Cases Edition. John Wiley & Sons.
- Leary, N., Conde, C., & Kulkarni, J. (2009). Climate Change and Vulnerability. Routledge.
- Morningstar. (2016). Industry Peers. Retrieved October 28, 2016, from http://financials.morningstar.com/competitors/industry-peer.action?t=SBUX®ion=USA&culture=en_US
- Mplans. (2016). Coffee Bar Marketing Plan. Retrieved October 28, 2016, from http://www.mplans.com/coffee_bar_marketing_plan/situation_analysis_fc.php
- Musso, F. (2014). Handbook of Research on Retailer-Consumer Relationship Development. IGI Global.
- Slezak, M. (2016, August 29). Climate change predicted to halve coffee-growing area that supports 120m people. Retrieved October 28, 2016, from https://www.theguardian.com/environment/2016/aug/29/climate-change-predicted-to-halve-coffee-growing-area-that-supports-120m-people
- Sustainablebusinesstoolkit. (2016). What’s your coffee costing the planet? – Environmental impact of the coffee trade. Retrieved October 28, 2016, from https://www.sustainablebusinesstoolkit.com/environmental-impact-coffee-trade/