Operators will continue to add high-margin, trendy products to stores to stimulate growth
Los Angeles, CA (PRWEB) May 07, 2013
After surging during 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. In the five years to 2013, IBISWorld estimates revenue will grow at an average annual rate of 0.9% to $29.0 billion. After revenue declined 6.6% to $25.9 billion in 2009, it resumed its upward climb between 2010 and 2012. “In 2013, industry revenue is expected to continue its rebound with an increase of 2.6%,” IBISWorld industry analyst Nima Samadi says.
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 for people's shrinking budgets. Consumers have also become increasingly health conscious during the five years to 2013. “Many retailers, such as Jamba Juice, have responded by expanding their healthful options, and have grown due to the health benefits of their products,” Samadi says. Still, the general trend toward healthful eating has hurt the Coffee and Snack Shop industry's unhealthier segments, such as donut and ice cream shops.
In response to weak market conditions, the number of establishments is expected to increase more slowly than in the past. In 2013, the top two players in this industry include Starbucks Corporation and Dunkin’ Brands Inc. These players make up more than one-half of the industry market share, which gives them considerable market power in determining industry trends and also creates a formidable barrier for nonfranchised players. The industry's concentration has increased because of the recent jump in acquisitions, which indicates that companies are making a concerted effort to increase profitability by claiming larger portions of market share. Between 2008 and 2013, the numbers of establishments and enterprises have experienced muted growth, which caused a marginal increase in industry concentration. The level of industry concentration is expected to continue to increase in the five years to 2018.
To combat slumping sales, major operators like Starbucks and Dunkin' Donuts are anticipated to expand their menus during the five years to 2018, which includes increasing their offerings of nontraditional, high-margin menu items like iced coffee drinks, breakfast items and 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. In the five years to 2018, revenue is forecast to grow. For more information, visit IBISWorld’s Coffee and Snack Shops in the US industry report page.
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IBISWorld industry Report Key Topics
This industry is composed of establishments that prepare or serve specialty snacks and nonalcoholic beverages, including ice cream, frozen yogurt, cookies, donuts, bagels, coffee, juices, smoothies or sodas. Purchases may be consumed on-site, taken out or delivered.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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