Industry and Market Overview

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Industry Market and Market Analysis

Industry Description

Coffeehouses come in various forms, but traditionally, they sell prepared coffee, tea, and other hot beverages. More recently, many coffeehouses competed with other limited-service restaurants by serving baked goods, sandwiches, salads, and other snack items. In 2020/21, consumers worldwide drank more than 157.38 million 60kg bags of coffee.

Major products sold by coffee shops include beverages and complimentary food items. Beverages include brewed coffee and tea; espresso drinks (cappuccinos, cafe lattes); cold blended drinks; bottled water; soft drinks, and juices. Food products include pastries, bakery items, desserts, sandwiches, and candy.

Industry Forces

Expansion/Growth

A significant driver in the coffee shop industry is growing domestic and international expansion. The critical channel of distribution in this industry is "company-operated stores located in high-traffic, high visibility centers," Industry competition is structured around vying for market share by opening new retail shops in cities around the world.

Product/Service Innovation

A second driving force in this industry is tied to product innovation. Serious coffee shop contenders now offer a product selection broader than the traditional cup of coffee. National chains and even local coffee shops boast menus, including coffees, teas, hot chocolate, pastries, bottled water, and even sandwiches.

Collaboration/Partnership

A further critical driver, which ties into the industry's focus on growth and product/service innovation, has been collaboration and partnership. Starbucks was the first to realize the benefits of partnering when it reached out to powerhouse brands like Pepsi, Barnes and Noble, Nordstrom, Kraft, and United Airlines to create new products, reach new customers and enter new distribution channels like grocery, cruise lines, and the airline industry.

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Image/Lifestyle

Additionally, consumers' perception of what a brand stands for is increasingly impacted by this industry. When Starbucks was first created, its CEO's vision was to create a "third place" for Americans. Americans already spent considerable time at home and work. His vision was to provide a third place for Americans to drink coffee and invest significant personal time. For this reason, industry marketing efforts are closely tied to the image/lifestyle projected by the chain.

Technology

A further driving force is the role of technology. Line management is a significant issue for coffee houses as often the demand is concentrated in the early mornings. For example, Starbucks has improved customer service by introducing automatic espresso machines. According to Michelle Gass, Chief Merchant of Global Products at Starbucks, efficiency is a critical driver in customer satisfaction as customers "want their beverage in under three minutes.

Industry Trends

• Consumer preference for premium specialty coffee is fueling growth in the specialty coffee shops market

• Coffee shops are revamping themselves to become socialization hubs which are spurring industry growth

• Coffee shops are the new workplaces for digital nomads

• Member-only coffee shops are beginning to emerge in the market

• Generation Z is evolving as a significant customer group for coffee shops, even though many are too young to work

• Coffee shops are focusing on foam art as a way to delight customers

• Coffee houses are striving for competitive gains by going digital

• Coffee shops are focusing on waste reduction strategies to earn customer loyalty

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Key Industry Players

The following companies hold the largest market share in the US.

• Starbucks

• Dunkin Donuts

• Coffee & Bagel Brands

• Caribou Coffee

• Coffee Bean and Tea Leaf

• Peet's Coffee

Market Analysis

Market Value

• In 2021 the Coffee Shop Industry was valued at over $47 billion

Market Size

• In 2021, the Coffee Shop Industry had over 80,760 businesses in the US

Market Growth

• During the forecast period of 2020 - 2025, the Coffee Shop Industry is expected to grow by a CAGR of 4.8%