December 2012
72221b - Coffee and Snack Shops in the US
72221b - Coffee and Snack
Shops in the US
iExpert
Market Share
Starbucks Corporation
36.6%
Dunkin' Brands Inc.
24.5%
Key External Drivers
Consumer spending
Healthy eating index
Consumer sentiment index
Per capita coffee
consumption
Life Cycle Stage
Revenue Volatility
Capital Intensity
Industry Assistance
Concentration Level
Mature
Medium
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.
December 2012 – 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
December 2012 – IBISWorld iExpert
After surging over the past decade, the
Coffee and Snack Shops industry
experienced a major slowdown in 2009
due to a struggling economy and, to a
lesser extent, changing consumer tastes.
Over the five years to 2012, IBISWorld
estimates revenue will grow at an average
annual rate of 1.2% to $27.8 billion. After
revenue declined 6.6% to $25.3 billion in
2009, it resumed its upward climb in 2010
and 2011, with growth of 3.0% and 3.1%,
respectively. In 2012, industry revenue is
expected to continue its rebound with an
increase of 3.4%.
During the recession, consumers
spent less on luxuries like eating out, and
they purchased lower-priced items when
they did spend. This caused high-priced
coffee drinks and other nonessential
snacks to lose the battle over people's
shrinking budgets. Consumers have also
become increasingly health-conscious over
the five years to 2012. Many retailers, such
as Jamba Juice, have responded by
expanding their healthy options and,
therefore, have experienced growth due to
the health benefits of their products. Still,
the general trend toward healthy eating
has hurt the industry's unhealthier
segments, such as donut and ice cream
shops. Furthermore, in response to weak
market conditions, the number of
establishments is expected to increase
more slowly than in the past, at an
annualized rate of 2.8% to 56,041.
To combat slumping sales, major
operators like Starbucks and Dunkin'
Donuts are anticipated to expand their
menus over the next five years and
increase their offerings of nontraditional,
high-margin menu items like iced coffee
drinks, breakfast items and healthy wraps.
These additions are expected to aid these
companies in their turnaround. Many
major chains are also investing in
international growth as part of a long-term
strategy. Larger players view China, in
particular, as a market with huge potential
for growth and long-term profitability.
Over the five years to 2017, revenue is
forecast to grow at an average rate of 4.0%
per year to reach $33.9 billion.
THREAT
OPPORTUNITY
Healthy eating index
The healthy eating index is expected to
decrease slowly in 2013 as consumers' diets
get progressively poorer. Still, consumers are
also becoming more aware of issues related
to weight and obesity, fatty-food intake and
food safety issues. This factor particularly
affects the often-unhealthy snack-food
industry. Despite any long-term aggregate
declines in healthy eating, consumers are
now more aware of the health issues
associated with fatty foods and are
increasingly going out of their way to avoid
them. This is a potential threat for the
industry.
Consumer spending
Factors that influence consumer spending
also affect the industry. During the recession,
in particular, the spike in unemployment led
to declines in consumption. When consumer
spending is high, however, consumers are
more likely to spend money at snack and
coffee shops. Consumer spending is expected
to increase slowly in 2013, providing a
potential opportunity for the industry.
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December 2012 – IBISWorld iExpert
72221b - Coffee and Snack Shops in the US
ISSUE
The industry is affected by factors
that influence the growth of
consumer spending. During a
recession, the spike in
unemployment generally leads to
declines in consumption. When
consumer spending is high,
consumers will be more likely to
spend money at snack and coffee
shops.
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?
ISSUE
Franchising in both the United
States and overseas is now a
significant component of this
industry and can assist by providing
necessary support to owners.
QUESTIONS
Are you part of a franchise or
looking to build a franchise? What
are the advantages and drawbacks to
franchising? Do you have the
necessary support to operate
independently?
ISSUE
Consumers are becoming
increasingly aware of issues related
to weight and obesity, fatty food
intake and food safety issues, which
is measured by the healthy eating
index. This factor particularly hurts
industry demand for any baked,
fried, greasy or otherwise unhealthy
food or drinks.
ISSUE
The industry is affected by factors
that influence the growth in
household disposable income,
including changes to tax and interest
rates and labor market growth.
During an economic recession, the
spike in unemployment leads to
more subdued growth in household
incomes.
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 healthy or
splurges?
QUESTIONS
How heavily is your company
influenced by fluctuations in
customers' disposable income? Are
your products considered affordable
to consumers with low disposable
income? What items in your product
lineup can keep consumers coming
in when disposable income levels
drop?
ISSUE
Having a clear market position
against competitors in the limited
service industry and other food
service operators is a necessity.
ISSUE
It is important to have high profile
locations for stores, with easy
access, parking and drive-thru
services for customer convenience
and service.
QUESTIONS
Do you have a clear market position
against your competitors? How do
you maintain this position? How do
you retain customers? How can you
bring in more customers?
QUESTIONS
Are you located in a high profile
area? Are you located close to your
target market? Do you provide
convenient parking or drive-thru
services?
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December 2012 – 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 MEDIUM over
2013. The primary negative factor affecting
this industry is high competition, while the
primary positive factor is healthy eating
index. Overall risk will be slightly higher
than the previous year, a result of
unfavorable movements in per capita coffee
consumption as well as consumer spending.
However, their impact will be partially offset
by a projected fall in growth risk.
Structural risk will be HIGH 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. Furthermore, existing firms
face the prospect of even higher competition
given the low barriers to entry, which enable
new players to easily enter the marketplace.
A lesser threat to operators is the moderate
revenue volatility. This necessitates sensible
management of cash flows and readiness for
downturns in demand. Companies that fail
to prepare for these scenarios are susceptible
to significant losses and even bankruptcy.
Structure component
Risk component
Weight
Score
Structural risk
25%
5.96
Growth risk
25%
4.06
Sensitivity risk
50%
5.01
Overall risk
5.01
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
None
Steady
Assistance
13%
7.00
Life Cycle Stage
Mature
20%
5.00
Revenue Volatility
Medium
20%
5.00
Structural risk
5.96
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72221b - Coffee and Snack Shops in the US
December 2012 – IBISWorld iExpert
Growth risk is expected to be LOW over Growth component
the outlook period. IBISWorld forecasts 2010-12 Annualized growth
that annual industry revenue will grow
2012-13 Forecast growth
3.6% to $28.8 billion. In comparison,
Growth risk
revenue expanded 3.3% per year
between 2010 and 2012.
IBISWorld has identified and weighted the
most significant external factors affecting
industry performance.
Sensitivity Component
Revenue
Weight
Score
3.3%
25%
4.32
3.6%
75%
3.97
4.06
These factors are scored separately, then
weighted and combined to derive the
sensitivity risk score.
Weight
Score
Consumer spending
35%
3.29
Healthy eating index
25%
2.38
Consumer sentiment index
20%
8.36
Per capita coffee consumption
20%
7.97
Sensitivity risk
In 2013, 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 also at
a MEDIUM-LOW level. Therefore, the level
5.01
of risk in the Coffee and Snack Shops
industry will be higher than that of the US
economy and the Accommodation and Food
Services sector.
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