April 2015
72221b - Coffee and Snack Shops in the US
72221b - Coffee and Snack
Shops in the US
iExpert
Market Share
Starbucks Corporation
35.0%
Dunkin' Brands Inc.
19.8%
Key External Drivers
Consumer spending
Healthy eating index
Consumer Confidence Index
Per capita coffee
consumption
Life Cycle Stage
Revenue Volatility
Capital Intensity
Industry Assistance
Concentration Level
Mature
Low
Medium
None
Medium
Regulation Level
Technology Change
Barriers to Entry
Industry Globalization
Competition Level
Medium
Medium
Low
Low
High
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72221b - Coffee and Snack Shops in the US
This chart shows the size of the markets
that buy the industry’s products or use its
services.
April 2015 – IBISWorld iExpert
It is based on the proportion of revenue each
buying segment contributes to total industry
revenue.
This chart represents the latest cost structure
of the industry. It shows the proportion of
revenue each cost item absorbs, with the
remainder representing profit.
The comparison to all other industries in the
sector provides a benchmark that shows how
the industry differs from its peers.
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72221b - Coffee and Snack Shops in the US
April 2015 – IBISWorld iExpert
Over the past five years, the Coffee and
Snack Shops industry has been buoyed by
increased consumer spending, driven by
higher disposable incomes and greater
confidence in the economic outlook.
Demand for coffee and snack shops has
increased at a faster rate than most
segments of the food-service sector, as
consumers increasingly seek convenience
at an affordable price. The industry has
been given a boost by rebounds in
consumer spending and the Consumer
Confidence Index over the five years to
2015, which have increased at annualized
rates of 2.4% and 11.6%, respectively. In
the five years to 2015, industry revenue is
expected to increase an annualized 3.0% to
$41.2 billion, including a 3.7% increase in
2015.
The industry has had to adapt to
changing consumer preferences over the
past five years, especially those relating to
health and diet. Consumers have become
increasingly health conscious and are
avoiding foods that are high in fat and salt
content. Some operators have responded
to this trend by expanding the number of
healthy options on their menus. Many
operators selling unhealthy food have lost
business to operators that promote more
nutritious, wholesome options.
Major operators such as Starbucks
and Dunkin' Donuts are expected to
expand their menus in the five years to
2020 to increase sales and profit margins.
This includes expanding their offerings of
nontraditional, high-margin menu items
such as iced coffee drinks, breakfast items
and wraps. Both Starbucks and Dunkin'
Donuts plan on rolling out hundreds of
new stores over the next five years, making
up ground they lost during the recession.
Dunkin' Donuts, which is highly
concentrated in the east, is aiming to
expand westward to steal market share
from local competitors. The major chains
are also expected to further invest in
international growth as part of their longterm strategy, because many larger players
view emerging economies as markets with
huge potential for growth and long-term
profitability. This international move is
being made as the domestic industry
approaches maturity. In the five years to
2020, revenue is forecast to grow at an
annualized rate of 2.6%, to reach $47.0
billion.
THREAT
OPPORTUNITY
Consumers are more aware of issues related
to weight and obesity, fatty-food intake and
food-safety issues, which is particularly
applicable to the occasionally unhealthy
snack food industry. Despite long-term,
aggregate declines in healthy eating,
consumers are more aware of health issues
associated with fatty foods and are
increasingly going out of their way to avoid
them. The healthy eating index is expected to
increase slowly in 2015 as consumers' diets
progressively improve and become a
potential threat to the industry.
Factors that influence consumer spending
also affect the industry. During the recession,
the spike in unemployment led to
consumption declines. When consumer
spending is high, however, consumers are
more likely to spend money at snack and
coffee shops. Consumer spending is expected
to increase in 2015, providing a potential
opportunity for the industry.
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April 2015 – IBISWorld iExpert
72221b - Coffee and Snack Shops in the US
ISSUE
Despite long-term, aggregate
declines in healthy eating,
consumers are more aware of health
issues associated with fatty foods
and are increasingly going out of
their way to avoid them. The healthy
eating index is expected to increase
slowly in 2015 as consumers' diets
progressively improve and become a
potential threat to the industry.
ISSUE
Coffee shops make up a large
portion of industry revenue and
establishments, and most other
industry establishments also serve
coffee. When coffee consumption
increases, coffee shops and other
snack shops experience revenue
growth. Per capita coffee
consumption is expected to increase
in 2015.
QUESTIONS
How has rising health consciousness
influenced demand for your shops?
Are you introducing healthier
products into your mix? Are the
majority of your products
considered to be healthful?
QUESTIONS
How do you monitor trends in coffee
consumption? Do you try to offset
low coffee consumption by offering a
variety of snacks? Do you market
your company as only a coffee shop?
How might you change this during
periods of low coffee consumption?
ISSUE
Franchising in the United States and
abroad is now a significant
component of this industry and can
assist by providing necessary
support to owners.
ISSUE
Having a clear market positioning
against competitors in the limitedservice industry and other foodservice operators is a necessity.
ISSUE
Firms need to monitor market and
consumer needs, wants and desires,
particularly in relation to demand
for more healthful foods.
QUESTIONS
Do you vary your prices depending
on location? Do you monitor the
prices of your competition? Is your
pricing competitive?
QUESTIONS
Do you undertake market research?
What are the key factors for
attracting customers? What steps
have you taken to encourage wordof-mouth recommendations?
QUESTIONS
What are the benefits of franchising
your operations? How can increased
spending on marketing improve
your business? Do you service
national clients? If not, do you have
plans to enlarge your market share?
ISSUE
During the recession, the spike in
unemployment led to consumption
declines. When consumer spending
is high, however, consumers are
more likely to spend money at snack
and coffee shops. Consumer
spending is expected to increase in
2015, providing a potential
opportunity for the industry.
QUESTIONS
Do you monitor changes in
consumer spending? When
spending is low, do you lower your
prices in order to retain customers?
Are you prepared for an increase in
consumer spending?
www.ibisworld.com | 1-800-330-3772 | [email protected]
April 2015 – IBISWorld iExpert
72221b - Coffee and Snack Shops in the US
Industry: Coffee and Snack Shops
Sector: Accommodation and Food Services
Overall risk in the Coffee and Snack Shops
industry is forecast to be LOW over 2015.
The primary positive factors affecting this
industry are low revenue volatility and per
capita coffee consumption. Overall risk will
be slightly lower than the previous year, a
result of favorable movements in per capita
coffee consumption as well as consumer
spending. Additionally, growth risk is
projected to fall.
Structural risk will be MEDIUM over the
outlook period. The biggest source of
difficulty within the industry is the high level
of competition. Businesses competing
fiercely for market share are forced to incur
expenses to differentiate their offerings, keep
prices low to entice demand or both. The
result is a greater likelihood of declining
revenue and lower profits. However, existing
Structure component
Risk component
Weight
Score
Structural risk
25%
5.16
Growth risk
25%
4.53
Sensitivity risk
50%
3.01
Overall risk
3.93
firms will benefit from increasing barriers to
entry, which protect against higher
competition in the long run by reducing the
ability of new players to enter the
marketplace. Another positive for operators
is the low revenue volatility. This suggests
steady demand, easing the burden of cash
flow management even during broader
economic downturns.
Level
Trend
Weight
Score
Barriers to Entry
Low
Increasing
13%
8.00
Competition
High
20%
9.00
Exports
Low
Steady
7%
1.00
Imports
Low
Steady
7%
2.00
Assistance
None
Steady
13%
7.00
Mature
20%
5.00
Low
20%
1.00
Life Cycle Stage
Revenue Volatility
Structural risk
5.16
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72221b - Coffee and Snack Shops in the US
April 2015 – IBISWorld iExpert
Growth risk is expected to be
Growth component
MEDIUM-LOW over the outlook
2012-14 Annualized growth
period. IBISWorld forecasts that
2014-15 Forecast growth
annual industry revenue will grow 2.9%
Growth risk
to $31.1 billion. In comparison, revenue
expanded 2.1% per year between 2012
and 2014.
IBISWorld has identified and weighted the
most significant external factors affecting
industry performance.
Sensitivity Component
Revenue
Weight
Score
2.1%
25%
4.87
2.9%
75%
4.42
4.53
These factors are scored separately, then
weighted and combined to derive the
sensitivity risk score.
Weight
Score
Consumer spending
35%
2.14
Healthy eating index
25%
6.29
Consumer Confidence Index
20%
1.85
Per capita coffee consumption
20%
1.56
Sensitivity risk
In 2015, the average risk score for all US
industries is expected to be in the MEDIUMLOW band. Furthermore, the risk score for
the Accommodation and Food Services
sector, which includes this industry, is at a
3.01
LOW level. Therefore, the level of risk in the
Coffee and Snack Shops industry will be
lower than that of the US economy and
similar to the Accommodation and Food
Services sector.
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