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Coffee shop industry has been growing very fast in the recent. A perfect example can be the U.S. where the industry has more 20, 000 stores with a combined revenue that goes up to more than $11 billion annually. The major companies in the coffeehouse business in the U.S. include Starbucks, Dunkin’s Donuts, and Tea Leaf among others. Research indicates that the industry is highly concentrated at the top while at the bottom it is fragmented i.e the top 50 stores across the globe have more over 70% of industry sales. This paper will, therefore, show trends in the global coffeehouse industry; how the business has gained in popularity over the past. It will further analyze the anticipated profits/growths expected to be gained and career options in this industry of coffeehouse.
Current Trends in Coffeehouse Business
The consumer taste, as well as personal incomes, is the key factor that drives demand for coffee among the coffee clients across the globe. The profitability of each and every individual company usually depends on the ability of the company to secure prime locations, drive store traffic and also capability in delivering high-quality products. The major coffee products that are preferred by the coffee drinkers are beverages and complimentary food items. The key beverages include the brewed coffee, espresso drinks such as cappuccinos and café lattes, soft drinks among others. The food items preferred are pastries, desserts, sandwiches, candy among others. The research has also indicated that most of the coffee shops in the industry do sell whole and ground coffee beans preferred for home consumption. Currently, there is also high quality, premium coffee referred to as specialty coffee (Ka Leong, 2015).
Among the typical and committed customers of coffee are mainly between age 25 and 45 years old. The coffee shops entirely depend on customer traffic and are occasionally located in areas that have convenient access for pedestrians and long distance drivers. The typical locations for most of the coffee houses include downtown retail centers, shopping malls, office locations as well as university campuses. The coffee shops size tends to vary in terms of the site since some locations do offer more space as compared to others. For instance, Caribou coffeehouses usually range from 200-3000 square feet while the average store ranges from 1200-1600 square feet. The average sizes are mainly for small spaces such as airport and grocery stores while other chains do offer kiosk format stores without seating (Turner & Endres, 2017).
In regards to the prices, coffeehouses/shops tend to offer prices that vary. For instance, the retail price for espresso drinks can sometimes exceed $5 in some shops. However, due to the volatility of cost as far as green coffee and dairy are concerned, the retail prices tend to fluctuate. For instance, a pound of roasted coffee bean may at some point retail be within $15-$25 in many coffeehouses. On the other hand, a pound of high-end coffee such as Peet’s coffee is capable of retailing between $50 and $80 per pound in most of the shops. In regards to the manpower/ labor, most of the coffeehouse tends to depend highly on part-time workers and most of the employees do possess few skills. Many workers of coffeehouse make just above the minimum wages according to the global salary scale. In the U.S., the payment can be sometimes significantly below the average. At Starbucks, the starting wages are about $8 for every hour. Currently, in some regions, Starbucks employees have teamed together to form unions in an attempt to negotiate for better wages and benefits. Sales on the hand are seasonal, with peak being during the fourth quarter during the winter holidays. In addition to this, poor weather conditions are capable of affecting sales negatively since they decrease store traffic. For large companies such as Starbucks, the inventory usually amounts to values between 40 and 80 days sales while the account receivables usually run at 20-30 days sales. This is associated with commercial customers, however, the accounts payable tends to run at 30 and 60 days sales. The research indicates that companies operating in coffeehouse business sometimes use contracts in buying green coffee and dairy products. The gross margin of big companies in the coffee house usually ranges between 40 and 60 percent; however, higher commercial sales usually decrease the margins. Most of the chains use comparable store sales so that they can measure growth within differently located stores (Turner & Endres, 2017).
Anticipated Growth in Coffeehouses Business
The company is expected to continue growing since premium coffee is still in high demand as a result of café culture. The customers are expected to show increasing levels of coffee consumption in the coming years. Across the globe, it is predicted that coffee sales volume is increasing by 7% yearly, however; the total volume per capita consumption is estimated to reach 3.5 kg by 2025 while the espresso drinks market is currently showing 68% increase since the year 2005.
Currently, the growing demand for premium (specialty) coffee has been increasing by an average of 10% per year since the 1990s as compared with 2% for the overall coffee market. In case such trend continues as expected, the demand for coffee will be high thus the additional 3.5 million bags by 2025. Such move is considered to be very useful in this industry since it gives positive development as specialty coffee might be perceived less as a commodity in the market. This will give the coffeehouse business strong sales across the globe. Currently, the coffee is considered as the second popular commodity after oil. Coffee is mainly consumed by more than half of globe’s adult’s population several times every week. Even though recently the business has experienced decreased prices over the last decade, however, the prices of coffee haven’t fallen down which resulted in increased profits among within the industry. It is approximated that retailers of coffee do earn 25% of a $2 coffee cup. This is relatively fair and very profitable leading to the growth of the stores within the coffeehouse business (Robertson-Cowell, 2015).
Career/Employment Trends in Coffeehouse Business
research indicates that median hourly wage in coffeehouse industry was $8.92 in the year 2015 however; many employees are currently forming unions in an attempt to push for better pay and benefits.
Work Environment; research indicates that coffeehouse industry holds about 4.7 million jobs across the globe. About three-quarter of these employees’ works in restaurants such as full-service and fast food joints while the remaining is held up in strict coffee shops and lounges. The employees in this profession are always on their feet where they occasionally carry heavy trays of food, dishes as well as glassware. For instance, during the busy dining periods, the workers tend to be under pressure in serving customers as fast as possible and efficiently. Most of the employees here are employed on a part-time basis. This is due to the nature of the business which has extended dining hours, early morning, late in the evening, weekends and holidays.
Job Outlook; The overall coffeehouse related workers is likely to grow by 10% in by 2025; faster as compared to the average for all occupations across the globe. The coffeehouse workers related is expected to be very excellent in future since many workers have the habit of leaving the occupations every year, resulting in a large number of job openings across the globe (De Luca & Pegan, 2014).
From the analysis above, it can be deduced that coffeehouse business is a very attractive market associated with high margins and high growing demands for the products. It is therefore very clear that the already established companies such as Mc Donald’s, Starbucks, or Dunkin’s Donuts are likely to grow and expand due to high preference by customers while the small companies may find it very difficult to compete significantly.
De Luca, P., & Pegan, G. (2014). The Coffee Shop and Customer Experience: A Study of the US Market. Musso F. e Druica E., a cura di. Handbook of Research on Retailer-Consumer Relationship Development. IGI Global, 173-196.
Ka Leong, C. (2015). Is the blooming of coffeehouses in South Korea at risk?. International Journal of Tourism Sciences, 15(3-4), 110-120.
Robertson-Cowell, S. (2015). An investigation into the marketing strategies of micro café, coffee shop and tearoom enterprises in the Cardiff and Rhondda Cynon Taff areas(Doctoral dissertation, Cardiff Metropolitan University).
Turner, S., & Endres, A. (2017). Strategies for Enhancing Small Business Owners' Success Rates. International Journal of Applied Management and Technology, 16(1), 3.
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