72221B Coffee - Snack Shops in The US Industry Report 2019

WWW.IBISWORLD.
COM Coffee & Snack Shops in the USJune 2019 1
Coffee break: Operators will expand their menu

options to appeal to health-conscious consumers
This report was provided to
Harvard Business School - Harvard University (2133963557)
by IBISWorld on 20 September 2019 in accordance with their license agreement with IBISWorld
IBISWorld Industry Report 72221b

Coffee & Snack Shops in the US
June 2019 Rachel Hyland
2 About this Industry 19 International Trade 34 Technology and Systems

2 Industry Definition 20 Business Locations 35 Revenue Volatility
2 Main Activities 36 Regulation and Policy
2 Similar Industries 22 Competitive Landscape 38 Industry Assistance
3 Additional Resources 22 Market Share Concentration
22 Key Success Factors 39 Key Statistics
4 Industry at a Glance 23 Cost Structure Benchmarks 39 Industry Data
25 Basis of Competition 39 Annual Change
5 Industry Performance 26 Barriers to Entry 39 Key Ratios
5 Executive Summary 27 Industry Globalization 40 Industry Financial Ratios
5 Key External Drivers
7 Current Performance 28 Major Companies 41 Jargon & Glossary
10 Industry Outlook 28 Starbucks Corporation
13 Industry Life Cycle 29 Krispy Kreme Doughnuts Inc.
30 Coffee & Bagel Brands
15 Products and Markets 31 Dunkin’ Brands Group Inc.
15 Supply Chain 31 Tim Horton’s Inc.
15 Products and Services
17 Demand Determinants 33 Operating Conditions
18 Major Markets 33 Capital Intensity
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WWW.IBISWORLD.COM Coffee & Snack Shops in the USJune 2019 2
About this Industry
Industry Definition This industry comprises yogurt, cookies, doughnuts, bagels,

establishments that prepare or serve coffee, juices, smoothies and sodas.
specialty snacks and nonalcoholic Purchases may be consumed on-site,
beverages including ice cream, frozen taken to go or delivered.
Main Activities The primary activities of this industry are

Operating snack shops
Operating ice cream and soft-serve shops
Operating frozen yogurt shops
Operating doughnut shops
Operating bagel shops
Operating coffee shops
Operating cookie shops
Operating juice and smoothie shops
Operating pretzel shops
Operating cupcake shops
The major products and services in this industry are

Beverages consumed in-store
Beverages ordered via drive-through
Beverages taken to-go
Food consumed in-store
Food ordered via drive-through
Food taken to-go
Other
Similar Industries 44529 Specialty Food Stores in the US

This industry primarily retails confectionery goods and nuts not packaged for immediate consumption.
72211a Chain Restaurants in the US

This industry primarily engages in full-waiter service and serve food to patrons who pay after eating. Many
of these operators are owned by major companies.
72211b Single Location Full-Service Restaurants in the US

This industry primarily engages in full-waiter service and serve food to patrons who pay after eating. Many
of these operators are locally owned.
72232 Caterers in the US

This industry includes companies that provide individual event-based food services.
72233 Street Vendors in the US

This industry primarily sells snacks and nonalcoholic beverages from vehicles.
Provided to: Harvard Business School - Harvard University (2133963557) | 20 September 2019
About this Industry
Similar Industries 72241 Bars & Nightclubs in the US

This industry primarily prepares and serves alcoholic beverages.
continued
72221a Fast Food Restaurants in the US
This industry primarily provides food to patrons who pay before eating. Generally, there is limited or no
waiter service involved.
Additional Resources For additional information on this industry

www.ncausa.org
National Coffee Association USA
www.restaurant.org
National Restaurant Association
www.scaa.org
Specialty Coffee Association
www.bls.gov
US Bureau of Labor Statistics
IBISWorld writes over 1000 US

industry reports, which are updated
up to four times a year. To see all
reports, go towww.ibisworld.com
WWW.IBISWORLD.COM Coffee & Snack Shops in the US June 2019 4
Industry at a Glance
Coffee & Snack Shops in 2019
Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

Snapshot
$50.7bn 4.6% 1.4%
Profit Wages Businesses
$4.4bn $12.8bn 58,255

Revenue vs. employment growth Consumer spending
Market Share
Starbucks 12 4.0
Corporation 3.5
9
23.9%
3.0
6
% change
% change
2.5
3
2.0
0 1.5
-3 1.0
Year 11 13 15 17 19 21 23 25 Year 13 15 17 19 21 23 25
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 28
Products and services segmentation (2019)
Key External Drivers 3.6%

5.5% Other
Consumer spending Food ordered via drive-through
Healthy eating index 5.7%
Beverages taken to-go 31.7%
Per capita coffee
consumption 9.7%
Beverages ordered
Consumer via drive-through
Confidence Index
16.4%
Food taken to-go
p. 5
27.4%
Food consumed in-store SOURCE: WWW.IBISWORLD.COM
Industry Structure Life Cycle Stage Mature Regulation Level Medium

Revenue Volatility Low Technology Change Medium
Capital Intensity Medium Barriers to Entry Low
Industry Assistance None Industry Globalization Low
Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 39
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Summary Over the five years to 2019, the Coffee with low nutritional value. Some
and Snack Shops industry has been operators have responded to this trend by
bolstered by growth in the domestic expanding the number of healthy options
economy. Increases in consumer on their menus. Other operators have
spending, driven by higher disposable sought a different track to attracting
income and rising consumer confidence, customers, by offering high-end coffee and
have led to increased spending at snack goods, catering to the
industry locations when coupled with the premiumization trend. Additionally, many
falling unemployment rate. Demand for companies are remodeling their cups and
coffee and snack shops has increased at a other service containers to be more
faster rate than most segments of the environmentally friendly and reduce their
food service sector as consumers are contribution to ocean pollution.
increasingly seeking convenience at an Major operators, such as Starbucks
affordable price. The industry has Corporation, are expected to expand their
experienced a boost from increases in menus and remodel their location
designs to increase sales and draw a
wider range of customers over the five
The
industry has experienced a boost years to 2024. This expansion includes
by rebounds in consumer spending more offerings of nontraditional, high-
margin menu items, such as specialized
and confidence coffee drinks, breakfast items and wraps.
These enterprises plan on rolling out
consumer spending and per capita coffee hundreds of new stores over the next five
consumption during the five-year period, years and expanding into unsaturated
which have grown at annualized rates of markets while experimenting with
2.9% and 1.1%, respectively. Over the five different store formats. Major chains are
years to 2019, industry revenue is expected to further invest in international
expected to increase an annualized 4.6% growth as part of their long-term
to $50.7 billion, including an increase of strategy, with many larger players
1.7% in 2019. analyzing emerging economies as
The industry has had to adapt to potential markets for growth and long-
changing consumer preferences over the term profitability. This international
past five years, especially those relating move is being made as the domestic
to health, premiumization and industry approaches maturity. Over the
environmental protection. Some five years to 2024, industry revenue is
consumers have become increasingly forecast to grow at an annualized rate of
health-conscious and are avoiding foods 1.4% to $54.4 billion.
Key External Drivers Consumer spending shops. Consumer spending is expected to

Factors that influence consumer increase in 2019, providing a potential
spending also affect the Coffee and Snack opportunity for the industry.
Shops industry. During periods of low
economic growth, spikes in Healthy eating index
unemployment lead to consumption In the US, there has been an increase in
declines. However, when consumer awareness of health and nutrition over
spending is high, consumers are more the past decade, which has led to growth
likely to spend money at snack and coffee in healthy eating. Consumers are more
Key External Drivers aware of health issues associated with growth. Per capita coffee consumption is
continued fatty foods and are increasingly going out expected to increase in 2019.
of their way to avoid them. The healthy
eating index is expected to marginally Consumer Confidence Index
decrease in 2019. However, as consumers’ The Consumer Confidence Index (CCI)
diets progressively improve, it poses a measures consumers’ perceptions about
potential threat to industry operators. their current and future financial
prospects. Changes in the CCI have a
Per capita coffee consumption significant effect on spending on
Coffee shops account for a large portion discretionary items, including items from
of industry revenue and establishments, snack and coffee shops. During periods of
and most other industry establishments low consumer confidence, consumers
also serve coffee. When coffee tend to forego high-margin items and opt
consumption increases, coffee shops and for low-priced value products. The CCI is
other snack shops experience revenue expected to decrease in 2019.
Consumer spending Healthy eating index
4.0 69.5
3.5 69.0
3.0
68.5
% change
2.5
%
68.0
2.0
1.5 67.5
1.0 67.0
Year 13 15 17 19 21 23 25 Year 11 13 15 17 19 21 23 25
Current The Coffee and Snack Shops industry has

taken advantage of the rising economic Industry revenue
Performance tide over the five years to 2019, posting
12
substantial growth in each year since
2014. They have also benefited from 9
changing consumer preferences toward
premium goods such as artisanal foods 6
% change
and third-wave coffee. As one of the
nimblest industries within the broader 3
food service sector, coffee and snack

0
shops were able to adjust to changing
consumer preferences as spending picked -3
up and consumers increasingly opted for Year 11 13 15 17 19 21 23 25
more convenient and affordable menu
items. Stores that once specialized in SOURCE: WWW.IBISWORLD.COM
catering to the unhealthy whims of

consumers have strategically shifted to expected to increase at an annualized
provide healthier, gourmet menu items. rate of 4.6% to $50.7 billion. This
Since gourmet foods normally come with growth is anticipated to slow during the
higher price tags, industry operators latter half of the five-year period, with
serving higher-value cuisine have revenue only growing an estimated 1.7%
experienced a surge in profit; however, a in 2019. The industry has continued to
segment of operators have struggled to benefit from rising household incomes
maintain higher prices amid increasing and the resulting increase in spending
competition. Nonetheless, over the five on food and beverages prepared outside
years to 2019, industry revenue is the home.
Coffee price volatility As the industry is characterized by high input costs made it difficult for industry
product turnover, external forces that lead operators to consistently pass on price
to increased input costs place negative increases to consumers. This volatility
pressure on industry profitability. The continued during the remaining half of the
world price of coffee has been extremely five-year period to 2019.
volatile over the past five years due to Despite the unpredictable volatility in
growing demand and supply shortages. the price of coffee, operators have
Demand from Russia, Germany and China benefited from overall decline in one of
has grown significantly over the past five their largest inputs during the five-year
years, straining the world’s coffee period. This has been especially beneficial
exporters. Additionally, worldwide for operators that specialize in high-end
consumption has shifted toward more artisanal coffee that is often sold at a
expensive, premium blends of coffee, higher premium than traditional coffee
causing the average price of coffee to rise. shops. This decline has led to an
A reduction in coffee supplies due to expansion in industry profit margins,
adverse weather conditions in the world’s which have risen to 8.7% of revenue in
primary growing areas has exacerbated 2019 from 7.4% in 2014, despite volatile
this trend. These extreme fluctuations of input prices and increased competition.
Third-wave and One of the industry’s fastest-growing throughout Europe, where the act of
artisan coffee segments over the past five years has ordering a cup of coffee has become an
been independent coffee shops, which experience among many demographics.
have targeted coffee connoisseurs with Prominent third-wave coffee exponents,
high-quality espresso and siphoned and such as Stumptown Coffee Roasters and
filtered coffee beverages. Over the past Intelligentsia Coffee, have led the charge
few decades, coffee has been revitalized along with Blue Bottle Coffee Company
from a utilitarian beverage used to fuel (which Nestle SA recently purchased a
the workday to a luxury beverage majority share of), growing at
experience with purpose and pleasure. annualized rates of more than 20.0%.
There has been a continual and increased Although specialty coffee remains small
focus on the quality of beans, roasting compared with the larger industry,
techniques and refined preparations that partially because of its higher price
has fundamentally changed how we view point, the segment has grown quickly
coffee culture. This trend, which has been over the past five years and has had a
termed third-wave coffee, considers large influence on major coffee chains.
coffee an artisanal product rather than a In fact, Starbucks Corporation
commodity. Specialty coffee has become (Starbucks) has recently introduced its
a product similar to craft beer and wine, own brand of high-end coffee under the
in which the origin and quality of the name Reserve to effectively compete
ingredients are important. This mirrors with high-end roasters in New York City,
trends in other countries, especially Tokyo, Chicago and Seattle.
Renewed focus Consumers have become increasingly

health-conscious, and consequently, Retailers
have expanded
retailers have expanded the number of the number of low-calorie
low-calorie options on their menus. This
has enabled many chains to target a new options on their menus
segment of the market and renew
consumer interest in their products. For Furthermore, some industry operators
example, Dunkin’ Brands Group Inc. are courting consumers that are
(Dunkin’) has expanded its health- environmentally conscious. In 2018,
conscious menu options under their Starbucks announced that the company
DDSMART grouping. Products in this will remove plastic straws from all of its
segment of their menu are reduced in locations by 2020. The company has
fat, calories, sugar or sodium and already begun removing its iconic green
typically offer additional nutritional and straws from establishments in states such
health benefits. Starbucks also as California and Hawaii, which have
introduced healthy menu items, such as introduced bills to ban all plastic straws
oatmeal, apple bran muffins, multigrain within the state. Similarly, Dunkin’ has also
rolls, breakfast egg wraps and a power stated that it will eliminate all polystyrene
protein plate. foam cups from its stores by 2020.
Strong enterprise Over the five years to 2019, IBISWorld

estimates that industry employment will Establishmentgrowth is
growth expected to
give way to grow at an annualized rate of 4.2% to expected to stay on pace
776,090 workers. This industry has
consolidation experienced a period of rapid expansion with enterprise growth
over much of the past decade and this
growth in employment is directly related annualized 2.8% to 77,065 over the five
to continued demand for industry years to 2019. An increase in
services, as evidenced by the acquisition activity during the latter
promulgation of third-wave coffee and half of the five-year period indicates
other niche operators. Some of these that major players are recognizing the
third-wave roasters, such as Blue Bottle benefits of economies of scale and are
Coffee Company, roast their own beans attempting to gain a competitive
on-site or nearby specifically for use advantage by expanding market share.
inside of their coffee shops, further Establishment growth is expected to
inflating the number of employees stay on pace with enterprise growth
entering the industry. during the five-year period, as the
Furthermore, the number of industry majority of industry operators are small
establishments is expected to grow an local businesses.
Industry The Coffee and Snack Shops industry’s

recent growth is expected to continue
pocketbook flexibility into quick,
satisfying edible fixes provided by coffee and
Outlook over the five years to 2024, albeit at a snack shops. This is especially true among
much slower pace. As long as the younger consumers, such as millennials who
economy continues to grow, coffee and already spend more on eating away from
snack shops will continue to benefit from home than older generations. In addition,
economic factors such as stable operators will continue to stimulate
employment and increasing consumer renewed interest in their products by
spending on luxuries such as eating out. expanding their menu options to appeal to
Consumer spending is expected to health-conscious consumers. As a result,
increase an annualized 2.0% over the five industry revenue is projected to rise at an
years to 2024. Consequently, consumers annualized rate of 1.4% to $54.4 billion
will increasingly translate their during the five-year period.
Growth strategies The industry’s high level of competition

is expected to intensify over the next five Operators
are expanding
years, with significant price-based into markets that have not
competition and an increased emphasis
on the regular introduction of new become oversaturated
products. Most chains will introduce
new, healthy alternatives and expand Bottle Coffee Company or Intelligentsia
their current product lines. Major Coffee, while also incorporating aspects
operators will also attempt to expand of a distillery.
revenue and profit by providing a variety Additionally, many operators are
of other menu options, including expanding into markets that have not
premium coffees and breakfast items. become oversaturated. This is a sign that
Starbucks Corporation (Starbucks) has the industry still has some room to grow
made its initial foray into third-wave domestically. This domestic expansion is
coffee, with plans to open another now a major priority for the company,
large-scale, 20,000-square-foot roastery which plans to partner with trusted
in New York. Starbucks is dubbing the existing franchisers. Many domestic
location a coffee theater, where operators will continue to expand
consumers will be able to try a range of internationally. Although it does not have
small-batch and rare roasts and choose an impact on the domestic industry,
from a variety of different value-added international expansion is anticipated to
brewing methods. This remains similar to be the largest source of revenue and
the experience one may have at larger profit growth for major players over the
third-wave competitors, such as Blue five years to 2024.
Competition to Fierce competition is expected between The continued expansion of Starbucks

intensify the major chains and independent and Dunkin’ Brands Group Inc. will likely
establishments over the next five years. present strong challenges to their
This competition will increase as the competitors, as their economies of scale
market becomes saturated and operators will enable them to compete heavily in
attempt to appeal to a wider audience. terms of price. However, the industry’s
Competition to competition is expanding beyond price to coffee shops serving more expensive
intensify style, quality, ambiance and service. To specialty coffee. The perceived quality
combat these additional forces of status and elevated ambiance of these
continued
competition, Starbucks will continue to locations draw in this higher-income
aggressively target younger urban crowd despite the relatively high
demographics in the hope that they can price points for their products. These
convert these consumers for life. White- high-income urbanites will be the major
collar workers, especially those in driver of the third-wave trend, which is
high-income, urban locations, are the anticipated to continue defining the global
most likely to gravitate to independent coffee industry over the next five years.
Industry structure Over the five years to 2024, industry

profitability is expected to stagnate Consolidationwill likely
slightly as domestic competition continue in certain
continues to rise across the industry.
Larger operators that experience saturated markets
stagnant domestic profit will likely
double down on international expansion attract these consumers over the five
while other smaller companies have years to 2024.
different methods to bolster stagnating Consolidation among operators has
profit. Smaller operators will try to avoid occurred for some time and will likely
stagnating profit by expanding beverage continue in certain saturated markets.
options to include more smoothies and Despite consolidation trends, the
luxury coffee drinks. Additionally, they number of establishments is expected to
will work to set themselves apart from increase at an annualized rate of 2.1% to
other operators by creating brand 85,609 over the five years to 2024.
awareness and accessing online markets. Similarly, despite the long-term trend of
The main driver to fight stagnating profit automation in the food-preparation
for smaller industry operators, however, process, wages and employment are
is their high-end artisanal coffee both forecast to increase during the
beverages. These low-cost, high-profit period as demand grows. However,
menu items offer a quick way for part-time and seasonal employment is
companies to increase revenue and grow expected to become increasingly
their bottom lines. As small businesses, prominent among industry operators
independent workers, freelancers and that wish to keep wage costs
other noncorporate jobs proliferate, manageable. Industry employment is
individuals will increasingly look to projected to grow at an annualized rate
industry establishments as a place to of 2.0% to 856,910 people over the five
work and be productive. This will force years to 2024, as new establishments
many industry operators to shift part of will need to hire at a similar rate to
their focus to aesthetic and function to ensure they are adequately staffed.
New regulation Industry operators, especially those that some challenges moving forward. In
primarily focus on sales of coffee and March 2018, a Supreme Court Justice
coffee-based products, may experience from the state of California made a
New regulation preliminary ruling that coffee sellers Additionally, the number of bans on
continued must put a cancer warning on coffee sold the use of plastic straws throughout the
in that state. This ruling comes as a result United States is anticipated to continue
of a lawsuit filed by the nonprofit Council growing over the five years to 2024.
for Education and Research on Toxics, While this may not set industry operators
which argued that the chemical back over the long run, small
acrylamide, which is created when the establishments might have issues finding
coffee beans are roasted, is cancer- appropriate alternatives to the use of
causing and can be found in high straws in the short run, negatively
amounts in coffee. While this is only a affecting profit margins. If operators fail
preliminary ruling, if it is finalized it to comply with these bans, they may
could prove disruptive for California draw legal charges or hefty fines. Moving
operators or potential entrants. It could forward, industry operators have to be
also stand as a precedent for other states increasingly aware of the changing
to follow suit. regulatory environment.
Life Cycle Stage The industry is growing at a faster
rate than the overall economy
Operators are concentrating on
international openings
There is heavy price-based competition
Industry Life Cycle The Coffee and Snack Shops industry is the size of operations and infrastructure
in the mature phase of its lifecycle. increase, purchasing and labor costs
Industry revenue has grown consistently generally decrease, giving operators
Thisindustry over the past 10 years and has outpaced further incentive to acquire or merge
is M
ature the broader food service sector. However, with other players.
in many regions, the industry has become The rate of technological change
saturated, leading large chains such as within the industry is moderate as there
Starbucks Corporation to seek growth are very little changes that can be made
elsewhere, either overseas or through to coffee, tea, juice or ice cream products.
new product lines. Over the 10 years to Many operators have just adjusted the
2024, industry value added (IVA), which style in which the product is served to
measures an industry’s contribution to customers. For example, the US has
US GDP, is projected to grow at an undergone several ice cream trends over
annualized rate of 3.6%. During the same the previous decade, from self-serve
period, GDP is estimated to grow at an frozen yogurt to most recently rolled ice
annualized rate of 2.0%, meaning the cream. Despite the limited product
industry is growing at a slightly faster innovation, the rapid increase in internet
rate than the overall economy due to the penetration and smartphone usage over
resurgence of coffee beverages into the the past five years has presented savvy
domestic market. coffee and snack shop operators with the
Although IVA is higher than opportunity to engage with customers on
forecasted US GDP growth, the industry several new levels. Many small coffee and
exhibits other characteristics of a mature snack shop operators have used online
industry rather than a growth industry. advertising, informative and interactive
In recent years, there have been several company websites and social media such
mergers and acquisitions that have as Twitter and Facebook to increase their
highlighted the highly competitive brand recognition and revenue.
nature of the industry. Peet’s Coffee & Furthermore, technology is also being
Tea, a brand currently held under JAB used to boost profit margins, improve
Holdings Co., acquired Stumptown service levels and to help minimize labor
Coffee Roasters and Intelligentsia Coffee costs, reducing food waste, improving
in 2015. JAB also recently acquired business processes. For example, new
Krispy Kreme Doughnuts Inc. in 2016 systems and technology, such as
and Panera Bread in 2017, further electronic ordering systems linking the
consolidating smaller industry operators front counter with the kitchen as orders
with national brands. Many chains have are taken, are designed to ensure
also recently acquired regional players quality service and reduce customer
to gain inroads into regional markets. As waiting time.
Products & Markets

Supply Chain | Products and Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES

9901 Consumers in the US
Households are the key driver of demand for this industry’s products.
KEY SELLING INDUSTRIES

31192a Coffee Production in the US
This industry supplies coffee to operators.
42442 Frozen Food Wholesaling in the US
This industry supplies frozen foods to operators.
42443 Dairy Wholesaling in the US
This industry supplies dairy products to operators.
42444 Egg & Poultry Wholesaling in the US
This industry supplies poultry products to operators.
42446 Fish & Seafood Wholesaling in the US
This industry supplies seafood to operators.
42447 Beef & Pork Wholesaling in the US
This industry supplies meat products to operators.
42448 Fruit & Vegetable Wholesaling in the US
This industry supplies fruit and vegetables to operators.
Products and Services Products and services segmentation (2019)
3.6%
Other
5.7% 5.5%
Food ordered via drive-through
Beverages taken to-go
9.7%
Beverages ordered via drive-through
31.7%
16.4%
Food taken to-go
27.4%
Food consumed in-store
Total $50.7bn SOURCE: WWW.IBISWORLD.COM
The Coffee and Snack Shops industry (Starbucks) and Dunkin’ Brands Group
includes a range of store types that Inc. (Dunkin’), due to their large market
generally promote and sell a specific share. Both of these chains generate more
snack or beverage, such as coffee, bagels, than 50.0% of their revenue from
ice cream, frozen yogurt or cookies. The beverages, with Starbucks earning an
product mix for individual stores varies estimated 74.0% and Dunkin’ earning
considerably; however, the industry 57.0% from beverage sales. On average,
average is weighted toward coffee shop beverages make up an estimated 46.8%
operators such as Starbucks Corporation of industry revenue, while food makes up
Products & Markets
Products and Services a large 47.1% of industry revenue. Over coffee. Iced coffee sales are largely
continued the past five years, food has grown to seasonal, with demand much higher in
become a larger part of industry revenue. warmer seasons.
As the unemployment rate falls, more
consumers are time poor needed with Other beverages
and inexpensive food options. Industry operators sell a range of other
Additionally, trends for delivery of these hot and cold beverages. Cold beverages
products have shifted over the past five include products such as milkshakes and
years as many operators offer iced teas. Coffee and snack shops also tend
comfortable seating and workspaces or to sell bottled water, juices and a limited
have added drive-through options, taking selection of carbonated drinks. Hot
away from in-store orders taken to-go. beverages include products such as tea,
hot chocolates and chai lattes. These
Coffee beverages products provide an alternative to highly
Coffee is by far the largest product caffeinated drinks. A coffee shop may offer
segment in the industry, as it accounts several types of tea and chai. As with cold
for a large portion of beverage sales for beverages, demand for this segment is
most industry operators. Industry seasonal. In warmer seasons, demand for
establishments that focus on coffee retail hot beverages decreases. This segment has
drive the large concentration of coffee. declined as a share of industry revenue
Industry operators produce a wide range over the past five years, outpaced by
of coffee products that are differentiated growth in coffee and food items.
by strength, style, type of beans and type
of milk. Traditionally the industry mainly Food
serves brewed coffee at a low price point. The food segment includes snack items such
Dunkin’s house coffee blend typically as doughnuts, cookies, pastries, cookies,
sells for $2.00 per 20-ounce cup. cakes, bagels and muffins, yogurt and
Meanwhile, a 20-ounce cup of brewed ice-cream in addition to full-meal food
coffee at Starbucks retails for a slightly options such as sandwiches, wraps, salads
higher price point of $2.45. Over the past and fruit. These items and other food items
five years, higher-priced forms of coffee, are estimated to represent 49.4% of industry
such as espresso, siphoned and filtered revenue. The industry competes on the basis
coffee beverages, which retail for more of speed of service; therefore, items that
than $4.00 per cup at most industry require more preparation time are not
locations, have grown as a share of the commonly found in coffee and snack shops.
coffee segment. The type of beans While sandwiches, salads and other lunch
operators use has become a significant items do not sell in as large volumes as other
point of differentiation among smaller products, they tend to be more expensive
niche shops, with rare blends, fair trade and thus boost revenue. Additionally, these
coffee and organic beans becoming more items are positioned as complements to
popular. This trend has supported coffee and consumers rarely buy them
premium pricing across the segment and without a beverage. Industry establishments
given rise to a greater number of have begun offering combination deals for
independent operators. The number and customers that order food and beverages
form of iced coffee beverages have also together to incentive people to purchase
grown over the past five years as brewing food along with their beverages. The food
and serving techniques have improved, segment has increased as a share of industry
given rise to forms that do not revenue over the past five years as coffee
compromise flavor, such as cold-brewed and snack shop owners have sought to
Products & Markets
Products and Services promote the sale of higher-margin food coffee pods, drinkware, equipment and
continued products. Consequently, the industry now other accessories. This segment has
competes directly with fast food and other increased only slightly as a proportion
restaurant operators. of total industry sales over the past
five years as coffee and snack shop
Other revenue streams operators have become savvier at
Industry operators also sell a range of marketing ancillary products and
retail items such as packaged coffee, offering in-store promotions.
Demand Demand for Coffee and Snack Shops influences the types of products and
Determinants industry operators is driven by several services offered by the industry. In recent
factors including consumer confidence, years, many third-wave or artisan coffee
attitudes to health and consumer’s shops have entered the market and
propensity to eat out, rather than at home. expanded rapidly as consumer have more
Additionally, coffee and snack shops are money to spend on coffee. These
influenced by factors that affect the products are superior goods that are
growth in household disposable income, often more expensive. This boosts
which is sensitive to changes in the overall industry revenue by increasing individual
economy such as the unemployment rate, purchase costs.
tax policy and interest rates. Household
disposable income affects the ability of Demographics
consumers to spend on products at coffee The changing age structure of the
and snack shops. population influences industry demand.
Two broad demographic trends have
Income and expenditure encouraged industry growth in the past
This industry is sensitive to factors that decade. Firstly, the baby-boomer
affect the growth in household disposable generation has access to higher disposable
income because disposable income is incomes than previous generations,
required to finance restaurant and dining meaning they are more likely to spend on
expenditures. Household disposable eating out. Also, young adults aged
income growth is affected by changes in between 18 and 30 years old are delaying
labor market growth (i.e. employment marriage and having children, compared
rates), tax and interest rates, high and with previous generations. This enables
increasing gas prices and changes in them to spend a greater proportion of
consumer confidence. The growth of their time and income on eating out.
industry revenue over the past five years According to the Bureau of Labor
illustrates the extent to which the Statistics Consumer expenditure survey,
industry’s performance is reliant on young adults in this age bracket spend
positive income levels, high consumer more of their food budget on eating out
confidence and a robust economy. For than any other age group. This benefits
example, increasing consumer the industry substantially.
confidence, growing levels of disposable
income and falling unemployment Health and lifestyle
enabled households to spend more at Rising health consciousness has a direct
food service establishments as they have effect on coffee and snack shop operators as
become more cash rich and time poor consumers have become increasingly
over the five years to 2019. This also concerned about fat content, fried foods and
Products & Markets
Demand salt content, especially when dining out. As a Convenience, value for money and
Determinants result, rising concerns regarding the time are other important demand
nutritional content and value of cafe meals determinants. Recent social trends
continued
is likely to influence demand for certain such as busy lifestyles, heavy
foods on cafe menus, encouraging industry workloads and long working hours
players to alter their product mix. It is also have helped boost demand for coffee
expected to affect overall performance for and snack shops as time-poor
industry players selling unhealthy food on consumers look to cut down
menus, such as fried food or hamburgers. cooking time.
Major Markets Major market segmentation (2019)
3.1%
25.4%
Businesses
14.1%
Households earning less than $30,000
Households earning $30,000 to $69,999
15.9%
23.3%
Households earning more than $150,000
18.2%
Total $50.7bn SOURCE: WWW.IBISWORLD.COM
The major markets for the Coffee and An estimated 41.5% of industry
Snack Shops industry can be segmented demand comes from consumers in the
based on several factors including nation’s two highest income segments or
income, age, geographic location and households that earn over $100,000. In
family structure. Given the discretionary 2017 (latest data available), the average
nature of the industry, an indication of consumer who earns over $100,000
major markets can be inferred on the spent $6,500 on food and beverages
basis of annual expenditure on food and consumed outside the home, according to
beverages consumed outside the home. the US Census Bureau. Often, individuals
According to the US Census Bureau, the that earn over $100,000 have full-time
average consumer spends 5.5% of their employment with limited time to cook or
annual expenditure on food and prepare meals and beverages at home. As
beverages consumed outside the home. these households have relatively high
The level of spending differs between disposable incomes and are time poor,
products such as coffee, bagels and ice they are more likely to eat away from
cream. Spending also differs between home. Conversely, those in the lowest
locations, seasons and restaurant or income segments often need to make
store type; therefore, this significant sacrifices to afford meals away
segmentation of spending is not true of from home. The average consumer that
all industry products. earned less than $30,000 spent $1,580
Products & Markets
Major Markets on out-of-home food consumption in many businesses will offer bagels, coffee,
continued 2017. Meanwhile, households that earn doughnuts or other industry products as
between $30,000 and $99,999 are incentives or rewards to employees.
estimated to represent 41.3% of revenue Many also will bring these products to
for food consumed away from home, meetings or meet at industry
showing how important the middle-class establishments to get switch up daily
consumer is to the industry’s routines. The industry’s major markets
performance. While these consumers do distribution has not changed dramatically
not typically spend often on luxury food over time as spending patterns within
items, they contribute to the steady income brackets are relatively
demand for middle-range products in established. This trend is anticipated to
coffee and snack shops that have continue moving forward as the economy
generally low-priced products compared is anticipated to continue growing over
with the broader food service sector. the five years to 2024. Additionally, in
Additionally, businesses are estimated times of economic decline, people tend to
to represent 3.1% of industry demand. reduce spending on food away from
Although it is a small portion of revenue, home across all income segments.
International Trade As a retail industry, the Coffee and Snack from abroad. Given the mature stage of
Shops industry is not technically engaged this industry’s life cycle in the domestic
in importing or exporting products, so market, and changes in customer profiles
international trade is not relevant to the and tastes, many major operators are
industry. However, several industry seeking to increase their growth in
players have overseas operations and revenue and earnings through further
earn a significant portion of their revenue global expansion.
Products & Markets
Business Locations 2019
West
AK
0.5 New
England
ME
Great Mid- 0.7
Lakes Atlantic 1 2
NY 3
WA MT ND 9.0
5 4
4.1 0.2 MN
Rocky
0.5 1.5
WI
OR Mountains SD
0.3
Plains 1.4 MI
2.5
PA
3.9
6
7
2.2 ID IA OH 9 8
0.5 WY 3.2
0.2
NE
0.8
IL IN WV VA
3.4 1.4 2.0
West NV
0.5 0.3
KY
UT MO
0.8 NC
0.9
0.8 CO KS 1.4 2.2
2.0 0.7 TN
SC
Southeast
1.2
CA 0.9
16.6
OK AR GA
0.9 0.6 AL 1.9
AZ MS 0.6
1.7 NM
0.5 Southwest 0.5
TX LA
1.1 FL
7.0 4.7
West Establishments (%)
HI Less than 3%
0.7 Additional States (as marked on map) 3% to less than 10%
1 VT 2 NH 3 MA 4 RI 10% to less than 20%
0.2 0.7 4.0 0.7 20% or more
5 CT 6 NJ 7 DE 8 MD 9 DC
1.7 3.8 0.3 1.6 0.3
Products & Markets
Business Locations The Coffee and Snack Shops industry’s

Distribution of establishments vs. population
business locations are primarily
distributed according to the population.
30
Since the industry provides quick meals
to consumers, industry establishments
need to be located near their customer 20
base. The level of household income per
capita disposable income also plays a
%
role, as those households with higher 10
incomes are more likely to spend higher
amounts on food and beverages
consumed outside the home. 0
The West region contains the highest
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
number of establishments, with 24.9% of
the industry total. This high percentage is
due to the large population of the region,
representing 17.3% of total US Establishments
population. Additionally, the region is a Population
hub for tourism and business. California SOURCE: WWW.IBISWORLD.COM
specifically makes up a large portion of

the West region’s dominance as 16.6% of because it holds the largest percentage of
establishments are located in California the US population.
alone. Home to a large population, Additionally, there is a large share of
California is notorious for its focus on establishments in New England, which
health fads such as juice trends and cold contains 8.1% of industry locations. This
brew coffee, making it an ideal spot for is due to the fact that New England is
industry operators. Furthermore, home to one of the largest industry
California has a large population of operators, Dunkin’ Brands Group Inc.
commuters that demand the quick food The popularity of the brand throughout
service that the industry provides. the region contributes largely to the high
Other regions with a significant concentration in this region. Moreover,
number of establishments include the the industry also tends to have a higher
Mid-Atlantic, the Great Lakes and the concentration in areas where households
Southeast, representing 18.9%, 11.8% and have an annual income of at least
16.7%, respectively. Again, the high $50,000 per year. This benefits industry
volume of establishments in these areas establishments as individuals with higher
follows population trends. Furthermore, amounts of disposable income often are
these three regions, specifically the able to spend more on products provided
Mid-Atlantic are home to large urban by industry establishments. New
cities that are popular for industry England, California and New York City
operators. New York, located in the all have wage concentrations above
Mid-Atlantic region, has 9.0% of industry $50,000. The current distribution is not
establishments. New York City expected to change significantly over the
specifically is known for its high volume next five years, as IBISWorld does not
of coffee shops and similar locations. The expect any substantial demographic
Southeast also has a higher concentration changes or population shifts during the
of franchised establishments and a higher period, and the same fundamentals
share of employment and revenue remain at play.
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share IBISWorld estimates that in 2019, the top with Starbuck’s existing market share
Concentration four players in the Coffee and Snack give these two companies substantial
Shops industry account for 28.2% of the market power and create a formidable
available market share, providing this barrier for nonfranchise players.
Level
industry with a low level of Major industry players have increased
Concentration in concentration. Given the diversity of acquisition activity recently, which
this industry is L ow snack and beverage styles and industry indicates that companies are making a
operations, nearly 53.4% of concerted effort to increase profitability
establishments are small-business with larger portions of market share.
operators with nine or fewer employees, Given that establishments are expected to
according to the US Census Bureau. An move at a slightly faster rate than
additional 46.5% of establishments enterprises over the five years to 2019,
employ between 10 and 99 staff many operators are banking on the
members. There is also a small number of benefits of scale and, therefore, have
extremely large chain and franchised begun to undergo consolidation to keep
operators; only an estimated 0.14% of operating costs low and remain
operators employ over 100 people. The competitive. Operators have been
small percentage of larger operators is increasing their number of establishments
primarily dominated by the top industry to take advantage of economies of scale
operator, Starbucks Corporation. This and grow their individual market share.
one company is estimated to make up Over the five years to 2024,
23.9% of industry market share, giving consolidation is expected to increase, as
them considerable market power in establishments are expected to move at a
determining industry trends. While faster rate than enterprises, indicating
Dunkin’ Brands Group Inc. does not that more operators will continue to
generate any industry relevant revenue increase their scale as opposed to the
on their own, the brand’s staggering industry experiencing a higher influx of
number of franchised locations, coupled newer operators.
Key Success Factors Having a clear market position Product is sold at high-profile outlets
Having a clear market position against It is important to have high-profile
competitors in the limited-service locations for stores, with easy access,
IBISWorld identifies industry and other food service operators parking and drive-through services for
250 Key Success is a necessity. customer convenience and service.
Factors for a
business. The most Effective cost controls Market research and understanding
Cost controls with minimal waste Companies need to monitor market and
important for this
are important in this low-margin consumer needs, wants and desires,
industry are: industry, particularly related to particularly in relation to demand for
food inputs. healthy foods.
Ability to franchise operations Access to multiskilled and

Franchising in the United States and flexible workforce
abroad is now a significant component of Businesses need to have access to a good
this industry and can provide significant supply of skilled, seasonal workers to
support to owners. meet peak demand periods.
Cost Structure Wages Starbucks, also have been increasing

Benchmarks Wages also represent a high cost for college assistance and health benefits for
operators due to the labor-intensive employees, contributing to this increase.
nature of food preparation, cooking,
serving and clean up. These costs include Purchases
wages and benefits, such as health, Typically, the largest cost for industry
workers’ compensation and operators is the purchases of food and
unemployment insurance. Menu prices beverages sold in shops. Food and beverages
and industry profitability are affected by are usually purchased from wholesalers,
labor intensity because cost increases particularly from operators that can
cannot simply be passed directly onto guarantee prompt delivery and high quality.
consumers in the form of higher prices. Fluctuations in the cost of food significantly
Wage costs are expected to account for affect industry revenue and profit. In the
25.2% of the average operator’s revenue short term, many of these cost increases
in 2019. Over the five years to 2019, labor cannot be passed on to the consumer or
costs have slightly increased as a client; therefore, menus, portion sizes and
percentage of revenue, as labor remains a other food service inputs must be
necessary component to the day-to-day monitored. Food prices have decreased over
operations of industry establishments. the past five years due to falling farming and
Additionally, as the national transportation costs. These decreases in
unemployment rate falls, wages typically input costs have benefited many industry
increase to attract suitable workers. operators by reducing some of their input
Large industry operators, such as costs. Additionally, other inputs, such as the
Sector vs. Industry Costs
Average Costs of
all Industries in Industry Costs
sector (2019) (2019)
100 n Profit
10.1 8.7 n Wages
n Purchases
n Depreciation
80
25.1 25.2 n Marketing
n Rent & Utilities
n Other
Percentage of revenue
60
30.0 34.7
40
4.9 3.5
2.0 2.5
9.7
20 11.4
18.2 14.0
0
Cost Structure world price of coffee have decreased during kitchen equipment, store fixtures and
Benchmarks the period, positively influencing industry fittings, furniture, crockery and cutlery.
establishments that primarily serve coffee- Depreciation is much higher for operators
continued
based beverages. Industry operators must that own the building in which they
also monitor wastage as the oversupply of operate; consequently, over the past ten
meals or excess ingredients that cannot be years, the trend has been for operators to
used negatively affect industry operators. rent, rather than own, their stores. For
IBISWorld estimates purchases will account this reason, depreciation has remained
for 34.7% of an average operator’s revenue relatively steady as a proportion of
in 2019, representing a very mild decrease industry revenue and is expected to
from 34.9% in 2014. account for 3.5% of total revenue in 2019.
Depreciation costs are expected to
Profit decrease slightly over the five years to
The Coffee and Snack Shops industry’s 2024, as renting and franchising becomes
profit is based on earnings before interest more prevalent for industry operators.
and taxes. Profit margins vary between
players depending upon the size of the Marketing
business. Larger operators, such as Marketing costs can vary significantly
Starbucks Corporation (Starbucks), among industry operators. Large brands
benefit from economies of scale, enabling such as Dunkin’ Brands Group Inc. and
them to access higher profit margins. Starbucks might have larger marketing
However, the highly competitive nature and advertising budgets than smaller
of the industry means most operators can single-location operators that might use
only access slim profit margins. An inexpensive advertising on social media
operator’s product lineup also influences in lieu of TV or radio commercials.
profit. For example, Starbucks has added However, marketing costs are estimated
several complementary food items to its to represent 2.5% of industry revenue on
menu in an attempt to access higher average. This represents marginal decline
profit margins. IBISWorld estimates that over the five years to 2019 as more
in 2019, the average industry operator operators take to social media for their
will obtain profit equivalent to 8.7% of advertising needs.
revenue, representing an increase from
7.4% in 2014. This increase in profit is Rent
derived from an increase in consumer Rent expenses are high for the industry
spending, especially on small-priced because of the need for locations in
luxury items such as premium coffee, and high-traffic areas with high visibility. As
growth in per capita coffee consumption. there is high competition for these
Nevertheless, there has been a large locations among industry operators, they
increase in competition among industry often run at a premium. Therefore, rent
establishments and external competitors. expenses are proportionally high and are
Additionally, industry operators have expected to equal 8.9% of the average
high input costs in terms of wages paid operator’s revenue in 2019. Rent costs
and food and beverages purchased for have remained relatively stagnant as a
sale, forcing careful management to share of industry revenue over the five
maintain profitability. years to 2019.
Depreciation Utilities
Operators in the industry are subject to Utility costs can also represent a
capital expenditure, such as commercial significant share of industry revenue,
Cost Structure but can vary greatly between Other

Benchmarks industry operators. Industry Operators in the industry are subject to a
establishments are often open during range of other costs including
continued
early morning and/or late-night hours, professional fees, administrative costs
requiring extended periods of energy and franchise royalties. Franchise
usage, increasing utility expenses. royalties are a factor for operators that
Nonetheless, utility costs have operate under franchise agreements. An
remained a steady and significant additional marketing fee is sometimes
portion of industry revenue over the paid to the franchiser as well. These
five years to 2019. In 2019, utilities are expenses vary among industry
estimated to represent 2.5% of establishments given the individual
industry revenue. nature of each contact and agreement.
Basis of Competition Internal competition students use coffee shops and other
There is significant price-based industry locations as meeting or
competition within the Coffee and Snack workspace outside of the office or home.
Level & Trend Shops industry as many establishments Locations in food courts and other dining
ompetition
C in offer the same or similar products and hubs have also become increasingly
this industry is consumers are inherently price sensitive. popular in recent years due to the
Highand the trend Coffee, snack and other quick-service convivence for shoppers and employees
establishments also compete on the basis throughout other stores. Therefore,
is I ncreasing
of location, food quality, ambiance, industry operators must also compete
service, consistency, food range and with each other on the basis of location.
variety. Operators may try and keep prices
slightly higher than some competitors External competition
based on enhanced product quality and External competition arises from the
superior service. In this regard, operators broader food service sector. This includes
must understand the positioning of the fast-food restaurants and independent and
establishment in the marketplace and the chain full-service restaurants that offer
type of clients they are looking to attract. dining and take-out services. These
Most importantly, the coffee or snack shop restaurants can sometimes provide a
must consistently deliver on customers’ friendlier dining experience, as guests are
product expectations and set proper price able to directly interact with the owners or
points to fit them. the chef. Additionally, these locations may
Industry establishments tend to be offer a more diverse food menu to
located in the same general geographic consumers. Breakfast is the main
area, in food courts at malls and airports. battleground between operators in this
Many operators tend to locate in the industry and other food service providers
same area of city or town due to that that may provide similar products. Other
area’s proximity to a large population, external competition is derived from
shipping area or major highway, adding consumers deciding to make coffee, eat ice
convenience to people running errands, cream or prepare more in-home meals.
commuting or on road trips. Additionally, Often individuals turn to eating or drinking
locations in high traffic areas near at home in economic downturns in an effort
businesses or universities are also to save money, as preparing meals or drinks
popular locations for industry at home is often less expensive than buying
establishments. Often, workers and products at industry establishments.
Barriers to Entry Barriers to entry are low in the Coffee and

Snack Shops industry, given that an Barriers to Entry checklist
Level & Trend operator can lease premises, equipment, Competition High
furniture and fittings, which lowers the Concentration Low
arriers to Entry
B initial capital costs, outlays and Life Cycle Stage Mature
in this industry are borrowings for the industry. The Capital Intensity Medium
Lowand I ncreasing industry’s biggest player, Starbucks Technology Change Medium
Corporation dominates aspects of the Regulation and Policy Medium
coffee shop segment of the industry and Industry Assistance None
has a large effect on product development,
however, in other market segments, such SOURCE: WWW.IBISWORLD.COM
as frozen yogurt, smoothies and sodas,

they have limited influence. The industry individuals entering this industry. Many
is on the whole highly fragmented and other industry operators are increasing
small-business orientated. their number of franchise agreements,
making it easier for individuals to enter
Franchise agreements the industry by lowering competition for
Outside of opening an independent and franchise contracts.
individual establishment, entry to the
industry can also occur through signing a Location and regulation
franchise agreement. Franchise There is significant competition among
agreements typically include contracts the major franchised companies to obtain
for which the parent company pays for suitable sites, which has increased the cost
the outfitting a location and installation of many prime store locations. However,
of equipment needed for product supply, some major franchised operators are now
as well as employee training and all co-locating within an area or a single
necessary computer systems. Franchisors building, shopping centers or malls to
also provide food and beverages and lower costs. For example, Dunkin’s
some financial and accounting functions Baskin-Robbins and Dunkin’ Donuts
for a proportional share of revenue brands often share storefronts or
(franchise fee) from their franchisees. coinhabit a building, offering both product
This lowers operational costs and can selections at the same counter.
minimize some risks, especially for Additionally, owner-operated locations
inexperienced persons entering the are also experiencing increased
industry. However, individual franchisees competition for prime locations. Many
still carry much of the day-to-day establishments often want to be located in
operational and management risks a highly populated region, often close to
associated with their own business. businesses. Traditionally, industry
Additionally, this limits the freedom for establishments are also small but zoned as
which individuals can enter the industry a business or food service establishment.
as they must follow standards and These ideal locations are often tough to
procedures from the parent company. find and expensive due to the increasing
Dunkin’ Brands Group Inc. (Dunkin’) is competition. While industry regulation is
the parent company for the nationally significant as it includes health and food
recognized Dunkin’ Donuts coffee shop service regulations and general
locations. Over the past five years, they occupational health and safety issues,
have moved to a franchise only business these regulations do not create any
model, increasing the number of insurmountable barriers to enter or
franchise agreements they are offering to operate in this industry.
Barriers to Entry Barriers to success those family-owned-and-operated

continued Overall, the industry’s barriers to entry establishments that are successful,
are low. Meanwhile, barriers to success owner burnout is high since the hours
(i.e. the ability to stay profitable and in are often demanding. Operators that sell
operation for more than a few initial breakfast foods such as bagel shops and
years) are significantly higher. coffee bars often need to be up and open
According to various sources, over half before 5:00 am to prepare the food and
of new coffee shops change hands within provide service to people with early
three years of opening. Even among morning commutes.
Industry The majority of nonfranchise Coffee Inc., a Canadian-based fast-casual

Globalization and Snack Shops industry operators restaurant chain with a focus on coffee
are small businesses and are locally and doughnuts, is the biggest foreign
owned and operated and earn the chain operating in the US industry but
Level & Trend majority of their sales domestically. has a market share well under 5.0%.
lobalization
G in However, some of the major operators It is expected that the industry will be
this industry is have a high level of globalization due subject to an increasing level of
Lowand the trend to the mature stage of the domestic globalization in the coming years.
industry, leading these companies to IBISWorld anticipates the larger US
is I ncreasing
expand internationally to increase operators will continue to enter the
revenue and earnings. These include international market, particularly in
companies such as Starbucks countries and regions with promising
Corporation and Dunkin’ Brands growth, such as China. However, there
Group Inc. There are, however, no will continue to be a very strong local
major foreign-controlled operators in presence and the majority of the industry
the domestic market. Tim Horton’s will have purely a domestic focus.
Major Companies
Starbucks Corporation | Other Companies
Major Players
(Market Share)
76.1%
Other
Starbucks Corporation 23.9% SOURCE: WWW.IBISWORLD.COM
Player Performance Starbucks Corporation (Starbucks) an estimated 175,000 working in company-

commenced operations in Seattle in 1971, operated stores.
as a specialty fresh-ground coffee retailer Starbucks stores vary in size and
Starbucks and coffee shop operator. The company format and are typically situated in
Corporation sells coffee, pastries, coffee accessories and, high-traffic, high-visibility locations.
Market Share: 23.9% more recently, breakfast options and Store settings include downtown or
sandwiches. At the end of fiscal 2018 suburban retail centers, university
(year-end September), Starbucks had more campuses, office buildings and off-
than 29,320 stores globally. Starbucks’ highway locations. Starbucks also offers
business model relies on a mixture of drive-through locations to further
licensed stores, which are operated by leverage the chain’s convenience factor.
external licensees that pay an annual The Starbucks brand was built on coffee,
royalty and license fee to Starbucks, and and the company still offers a broad
company-operated stores. Additionally, the range of regular and decaffeinated coffee
company reported $24.7 billion in revenue beverages and espresso drinks. The
for fiscal 2018. An estimated 52.0% of company has also expanded into several
Starbucks stores are company-operated, product lines, and now serves a large
which generates their Coffee and Snack assortment of food items, fresh juices and
Shops industry-relevant revenue. In fiscal packaged goods to capture a larger piece
2018, Starbucks employed an estimated of the breakfast and lunch market.
185,000 workers in the United States, with Among its newer offerings, the company
Starbucks Corporation (US industry-specific segment) - financial

performance*
Revenue Operating Income
Year** ($ million) (% change) ($ million) (% change)
2012-13 8,195.7 N/C -226.1 N/C
2013-14 8,847.0 7.9 2,100.4 N/C
2014-15 9,389.2 6.1 2,224.8 5.9
2015-16 10,442.3 11.2 2,586.3 16.2
2016-17 10,932.1 4.7 2,560.9 -1.0
2017-18 11,006.1 0.7 2,170.6 -15.2
2018-19 12,109.2 10.0 2,153.1 -0.8
*Estimates; **Year-end September

SOURCE: NATION’S RESTAURANT NEWS
Major Companies
Player Performance has introduced bite-sized sous-vide eggs tons of plastic end up in oceans each
continued and the company’s first certified gluten- year. Although it is a small step, the
free breakfast sandwich. In a move to company hopes that by eliminating
capitalize on consumers with less time to small plastic products, such as straws,
prepare food as a result of lower they can be an example for other
unemployment, the company has also companies across the globe. Starbucks
introduced its power lunch. This consists has a 30-year history of focusing on and
of modular offerings to create one’s own incorporating sustainability into their
lunch box depending on diet and day-to-day functions.
preferences. In 2017, the company
decided to close all remaining Teavana Financial performance
establishments, opting to incorporate the Over the five years to fiscal 2019,
product line into existing Starbucks Starbucks’ US industry-specific revenue
locations instead. is expected to grow at an annualized rate
In 2015, the company introduced two of 6.1% to $11.0 billion. Sales have grown
value-added delivery models throughout strongly over the past five years due to a
New York City and Seattle to further the rise in global comparable store sales,
accessibility of their products to which was brought on by an increase in
consumers. The company also added the number of transactions and higher
video functionality to several of its US average spending per transaction.
drive-through locations to improve Starbucks also offers free Wi-Fi internet
overall customer experience. The access and wireless charging booths to its
company also has plans to expand its customers, attracting more store traffic
third-wave specialty locations, which will and increasing the number of potential
primarily promote its higher-end Reserve purchases. Furthermore, the company
line of coffee. Recent openings in New has increased revenue through the
York City, Tokyo, Boston and Chicago expansion of its product lineup during
suggest that the company plans to roll the five-year period, exemplified by the
their high-end concept within urban inclusion of hot breakfast options for
areas to compete with third-wave consumers. However, possible market
roasters more effectively over the five saturation, intensifying competition and
years to 2024. Furthermore, in 2019, still-changing consumer preferences have
Starbucks announced its plan to all presented issues for the company with
eliminate plastic straws from all of its regard to maintaining strong growth.
locations by 2020. The company decided Over the five years to 2024, revenue
to enact this plan to help protect the growth is expected to slow somewhat as a
world’s oceans, as over 8.0 million metric result of these factors.
Other Company Founded in 1937, Krispy Kreme and international franchise stores. At the
Performance Doughnuts Inc. (Krispy Kreme) is a end of 2015 (latest data available), the
branded retailer and wholesaler of company had 116 company stores, 181
doughnuts and packaged sweets. The domestic franchise stores and 824
Krispy Kreme company produces more than 20 international franchise stores in 32
Doughnuts Inc. varieties of doughnut and an array of countries. According to the company’s
Market Share: 3.1% coffees and other beverages. Krispy website they currently have over 320
Kreme generates revenue from company- locations domestically, with plans for
owned stores, domestic franchise stores expansion moving forward. The company
Major Companies
Other Company employs an estimated 5,200 people, 2,300 the home-brewing company Keurig
Performance of which are full-time. In fiscal 2019 Green Mountain. Krispy Kreme is
(year-end January), US industry-relevant expected to benefit from this move, as
continued
revenue is expected to grow to $1.6 billion. coffee is anticipated to play an
In May 2016, Krispy Kreme was increasingly large role in enticing
acquired for an estimated $1.4 billion by consumers to purchase other items in the
a subsidiary of JAB Holding Company company’s overall product mix. In 2017,
(JAB), called JAB Beech Inc., bolstered the company announced a change to its
by a minority investment from BDT coffee quality, declaring it as doughnut-
Capital Partners. This acquisition will worthy and making it better suited for
place Krispy Kreme in the same portfolio standalone consumption or in
as Peet’s Coffee & Tea, which also conjunction with the company’s signature
recently acquired third-wave coffee doughnuts. Tapping into already-existing
juggernauts Intelligentsia Coffee and distribution networks established by
Stumptown Coffee Roasters. The other companies in JAB’s larger portfolio
company also owns Caribou Coffee, may help Krispy Kreme accelerate this
which primarily operates in Canada, and transition over the next five years.
Other Company Coffee and Bagel Brands (C&B) is a baked on-site and include made-to-order
Performance holding company of several coffee and breakfast and lunch sandwiches on a
bagels branded establishments that are variety of bagels, breads or wraps;
primarily owned by JAB Holding gourmet soups and salads; assorted
Coffee & Bagel Company (JAB). JAB is a private equity pastries; premium coffees; and an
Brands firm that invests in small to mid-cap assortment of snacks. Einstein Bros.
Market Share: 1.2% companies. C&B includes the brands Bagels and Noah’s New York Bagels each
Noah’s New York Bagels, Einstein Bros. generate an estimated two-thirds of their
Bagels, Manhattan Bagel and Caribou revenue during breakfast hours. JAB
Coffee. It is the largest operator, adding these brands to its growing
franchisor and licensor of bagel specialty collection of coffee, bagel and pastry
restaurants in the United States; in 2019, locations signals an attempt to expand
the company has over 1,825 restaurants the scale of their share of industry
across the United States and abroad. operators through C&B’s existing
Einstein Bros. Bagels and Noah’s New network of stores. This has enabled the
York Bagels restaurants are company to better compete with major
predominantly company-owned or competitors, such as Starbucks
licensed, while Manhattan Bagel Corporation and Tim Horton’s Inc. Over
restaurants are predominantly the five years to 2019, the company’s
franchised. Company stores sell fresh industry-relevant revenue is expected to
bagels and other bakery items, which are reach $603.8 million.
Major Companies
Other Company Dunkin’ Brands Group Inc. (Dunkin’) is million people each week. Dunkin’ is now
Performance an international doughnut, coffee and ice a publicly listed company, having been
cream retailer that sells these products previously owned by a consortium of
under its Dunkin’ Donuts and Baskin- private equity firms.
Dunkin’ Brands Robbins brands. Boasting an estimated Dunkin’ pursues an asset-light business
Group Inc. total company revenue of over $1.3 model; over the past five years the brand
Market Share: 0.0% billion in 2019, Dunkin’ has an estimated has worked to become a 100.0% franchise-
20,500 distribution points in 60 based company. As of 2017, all of its retail
countries, including more than 11,969 locations have been operating under
locations in the United States. Dunkin’ franchise agreements. This has enabled the
was founded in Quincy, MA, in 1950. It is company to open more than 1,500 Dunkin’
currently one of the largest coffee and Donuts locations over the past five years.
baked goods chains in the world. An estimated 86.0% of Dunkin’s points of
Contrary to the company’s name, the distribution are traditional restaurants,
majority of store sales come from consisting of standalone locations and
beverages, with doughnuts and other those contained in gas stations and
bakery items only accounting for between convenient locations. In addition, the
20.0% and 25.0% of a typical store’s company has full- and self-service kiosks in
sales, and coffee comprising an estimated grocery stores, hospitals, airports, offices
half or more of stores sales. Dunkin’s and other locations with small retail
growth has been fueled mainly by coffee; footprints. However, this model has
according to the company website, it sells excluded the company of Dunkin’ Brands
more than 1.0 billion cups of coffee each Group Inc. from being included in this
year. Baskin-Robbins was founded in industry. Revenue generated by franchises
1945 in Glendale, CA, and is one of the is considered that of individual
world’s largest hard ice cream franchises, establishments, according to the US
with more than 8,041 outlets in 53 Census, and the fees collected by the
countries. In the United States, Baskin- franchise agreements are not industry-
Robbins operates 2,550 outlets and relevant. These fees are included in the
develops and sells a full range of ice Intellectual Property Licensing industry
cream products, serving more than 3.7 (IBISWorld report 53311).
Other Company In December 2014, Burger King than 25,700 restaurants in an estimated
Performance Corporation acquired Tim Horton’s Inc. 100 countries, and employ 450,000
(Tim Horton’s). Subsequently, both individuals worldwide. Moving forward,
chains were taken off the stock market the company’s business strategy aims to
Tim Horton’s Inc. and combined under Restaurant Brands expand internationally while defending
Market Share: 0.0% International Inc. (RBI), a Canadian its favorable position in Canada and
holding company majority-owned by 3G aggressively compete in the saturated US
Capital. The acquisition and subsequent market. The company plans on doing this
combination of companies under RBI will through significant menu overhauls,
likely significantly boost the company’s introducing premium products and
market share over the coming years, as extending its brand reach in urban areas
RBI is expected to continue to through nontraditional formats.
aggressively expand Tim Horton’s Tim Horton’s is a Canadian fast-casual
worldwide. According to RBI, the restaurant that focuses on coffee and
combined companies comprise more doughnuts. The company was founded in
Major Companies
Other Company 1964 in Hamilton, ON, and is the biggest limited product offering. The company’s
Performance retailer of its kind in Canada. Tim strategy is to use self-service kiosks
Horton’s caters to a broad range of where existing full-service locations are
continued
consumer tastes, with a menu that at full capacity. Over the past five years,
includes premium-blend coffee; espresso- RBI has worked to switch their business
based hot and cold specialty drinks, such model to a franchise-based model. This
as lattes, cappuccinos and espresso shots; has been successful, and has thus
teas; cold beverages; fruit smoothies; and reduced the number of stores owned and
a growing range of food options, operated directly by the company and its
including soups, sandwiches, wraps, respective brands. Instead, franchisees
yogurts and baked goods. Tim Horton’s own and operate the location, paying a
opened its first US store in 1985 in set percentage of their revenue to RBI for
Buffalo, NY, and expanded rapidly the use of the Tim Horton’s brand. These
through the 1990s by acquiring former franchised establishments, however, are
locations of fast food chains. The not included in Tim Horton’s industry
company has made significant inroads relevant revenue as they are considered
into the US market over the past five independent enterprises according to the
years and currently has more than 850 United Stated Census Bureau. This
locations in the United States. Tim reduces Tim Horton’s market share
Horton’s operates both full-service respectively, despite growing brand
restaurants and self-serve kiosks that awareness. IBISWorld estimates that the
operate in offices, hospitals, colleges, company will earn $1.1 million in US
airports and convenience stores with a industry-specific revenue in 2019.
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity The Coffee and Snack Shops industry has a

medium level of capital intensity, and in Capital Intensity
Capital units per labor unit
2019, IBISWorld estimates that for every
Level
$1.00 spent on wages, industry operators 0.5
The levelof capital will spend $0.14 on the use and
intensity is M
edium replacement of capital. Capital intensity 0.4
has remained stagnant over the five years 0.3

to 2019, from an estimated $0.14 in 2014.
This stagnation in capital intensity stems 0.2
primarily from the growth of industry 0.1

wages as a percentage of revenue, in
conjunction with consistent spending on in 0.0
Economy Accommodation Coffee & Snack
capital investment. As operators continue and Food Shops
Services
to grow, opening more establishments and Dotted line shows a high level of capital intensity
hiring more employees, total industry SOURCE: WWW.IBISWORLD.COM
wages will also increase, maintaining

capital intensity levels. face service and labor input in all areas of
The industry relies heavily on labor operation. This includes personnel for
because of the need for personal, face-to- order taking, serving, food and beverage
Capital Intensity preparation, acceptance of deliveries, kitchen equipment, furniture and decor
continued cleaning and management. The industry’s required to set-up a store. However, little
overall spending on labor is relatively low ongoing capital investment is required
compared with other food service for a coffee or snack shop once it is up
industries as most positions within coffee and running. Many coffee and snack
and snack shops require little training or shops lease their premises and
skills and can be undertaken by students equipment to lower the initial capital
or other low-skilled workers. Upscale outlay. Although technology can help
cafes and coffee shops may require staff with staff scheduling, ordering and sales
(including chefs) with a broad knowledge analytics, labor cannot be reduced
of coffee and food, however, this is beyond a certain level. For these reasons,
currently a niche segment of the industry. the industry’s level of capital intensity is
Start-up costs can be relatively high for anticipated to remain relatively
a new industry entrant, with commercial unchanged moving forward.
Technology and The food services sector as a whole is promote quality service and reduce
Systems experiencing a medium level of customer wait time. Wireless electronic
technological change. Food service ordering systems that link front-of-the-
Level operators regularly leverage technology house orders to kitchen meal preparation
to reduce labor and food costs to increase are an example of such innovation. The
The level
of sales. They also use it to improve increasing sophistication of the internet
technology change business processes, support growth, and mobile technology has also enabled
is M
edium maintain current operations and improve industry players to reach wholesalers and
meal experiences. suppliers online. Many large players have
However, these changes may not affect launched company-wide apps that help
many operators in the Coffee and Snack consumers find store locations and place
Shops industry, especially those small orders for pick up at a specific location on
business owners that do not have a strong the app. This saves time for many
incentive to invest heavily in new technology consumers who may be commuting to
due to the limited economies of scale work or running errands as it enables
available. Many owner-operators rely them to skip the line and have their food
heavily on their own labor or that of ready when they arrive. Equipment such
extended family and friends, usually at as advanced bean grinders and coffee
relatively low hourly rates. Consequently, machines are also used to minimize
implementing new technology is not as coffee brewing times.
critical to lower wage costs or raise
productivity, particularly for small Straw alternatives
businesses in the industry. Conversely, large Many operators, such as Starbucks
industry operators are able to take Corporation (Starbucks) and Dunkin’
advantage of these technologies as they have Brands Group Inc. have been required to
access to economies of scale that benefit adapt to changing environmental
from implementing new technology. policies. As cities and states begin to
prohibit the use of plastic straws,
Quality of service industry operators have had to adapt and
The majority of technological adoption by find ways to provide their beverages
the industry aims to address new systems without the use of a straw. Starbucks, for
and processes that are designed to example, has found a way to turn their
Technology and lids into an adult sippy cup for their iced of transaction. With these devices,
Systems coffees, teas and espresso beverages. customers can sign with their finger on a
Some drinks have required additional touchscreen rather than with a pen and
continued
attention to detail. Thicker milkshake have the receipt emailed to them.
style beverages cannot be easily Further, some retail establishments,
consumed through a sippy cup style lid especially larger chains and growing
and therefore have required further franchises have begun to implement
technological development. Industry touch screen ordering systems at the
operators have had to change the entrance of stores. These let consumers
materials they use for their straws that order and pay for their food or beverages
are needed for these products, often at a machine rather than at a physical
turning to alternatives such as paper. counter. This reduces labor costs and can
increase efficiency during the ordering
Point of sale systems process. This touch screen service is
The small-business nature of the industry similar to online mobile applications
means many operators do not have the where consumers order via their phones
capacity to invest heavily in advanced and pick up in-store.
technology such as mobile applications or
online ordering. However, there are Social media
various low-cost options that assist store Technology has also aided coffee and
efficiency. Most operators now have snack shop owners with marketing. Social
point-of-sale systems in stores to speed media outlets such as Facebook, Twitter
up service, which helps lead to larger and Instagram enable savvy operators to
purchases on average and cuts down on connect directly with customers and tailor
labor costs. Furthermore, many retailers their brand’s message to target
are increasingly accepting credit card fragmented consumer segments. This is
payments through devices such as especially true for many small, owner-
Square, which connects directly to the operated establishments that have low
store’s iPad or iPhone and facilitates ease budgets for advertising and marketing.
Revenue Volatility Coffee and Snack Shops industry revenue suit consumers’ changing tastes and needs.
volatility is low to moderate due to the The fact that certain product segments,
steady growth in demand that continues such as coffee shops and frozen yogurt,
Level
to come from the high-income households have experienced steady growth within the
The level of and the general progress of the US past 10 years has helped to maintain the
volatility is L ow economy. Like most industries in the industry’s level of volatility. Furthermore,
economy, volatility has decreased over the the vast product variety offered by industry
past five years as consumers have operators has been a response to changes
continued and furthered normal spending in consumer tastes and preference.
habits amid a steadily growing economy. Although one product segment may lose
However, due to the substantial growth of popularity, another product segment
9.7% in 2015 and slower growth of 4.4% in maybe growing to compensate for the
2017, the industry has experienced change. For example, the general increase
marginally higher amounts of volatility in health consciousness has worked to the
over the five years to 2019. advantage of some industry product
The industry also offers a range of food segments and to the detriment of others,
types, quality, menu prices and locations to keeping overall industry revenue stable.
Revenue Volatility
continued
Regulation and Policy The Coffee and Snack Shops industry is recipe from a health association or a
subject to a medium level of regulation recognized dietary group. Complete
that is increasing. There are regulations nutritional information, however, is not
Level & Trend covering a range of areas, from food safety required to be on menus.
he level of
T and standards to labor conditions and In an attempt to prevent illness and
Regulation is franchising requirements. Most regulation deaths, the FDA has announced it will
Mediumand the is enacted and enforced at the state level, require the food industry to gradually
but many federal laws also apply. phase out trans fats from food. Trans fats
trend is I ncreasing
are commonly used in processed foods to
Food safety and standards improve the taste or shelf life of foods
There are more than 3,000 state, local and are believed to cause some health
and tribal agencies that have the issues, including heart disease. While
responsibility to regulate the retail food trans fats have been eliminated from
and food service industries in the United many foods over the past decade due to
States. The main agency responsible for stricter labeling requirements, many fast
providing guidance and regulation is the foods still contain small amounts. The
US Food and Drug Administration’s plan provided a three-year compliance
(FDA). The FDA’s Model Food Code, period to industry operators. IBISWorld
which is a best-practice guide to food expects the industry to quickly adapt to
handling and presentation, applies to this the new requirements and to use the new
industry and is updated each year. The feature in marketing campaigns to
FDA Nutritional Value applies as well. promote the health benefits.
Since 1996, the FDA regulations have set Additionally, a supreme court justice
standards for nutritional values of from the state of California made a
individual foods and meals. If claims preliminary ruling that coffee sellers
such as low fat or heart healthy are on a must put a cancer warning on coffee sold
menu, an owner must be able to in that state in March 2019. This ruling
demonstrate to officials that there is a was based on claims that the chemical
reasonable basis for the claim. For acrylamide, which is created as part of
instance, the meal may be based on a the coffee roasting process, is found in
Regulation and Policy high quantities in coffee and is a cancer- level, various state agencies regulate
continued causing chemical. Although this ruling is franchises and laws vary between states.
not finalized, it may set a precedent for A state’s franchise laws usually only apply
other states to follow. While this does not if the sale of a franchise is made in the
require industry operators to stop selling state and the business is located in the
coffee or change their physical product, it state. Laws generally fall into three
may cause consumers to seek alternatives categories: disclosure laws, registration
to their favorite morning drink. laws and relationship laws.
Under the FTC Franchise Rule there
Labor relations are three elements of a franchise: the
The industry employs a high number of franchise has a trademark under which
young and low-skilled workers at hourly the franchisee is given the right to
rates and, therefore, is subject to distribute goods and services; the
minimum wage and employee benefits franchisor has significant control of or
regulations. Workers in the US are provides significance to the franchisee’s
entitled to be paid no less than the method of operation; and the franchisee
statutory minimum wage, which as of is required to pay the franchisor at least
early 2019 has been maintained at $7.25 $500.00 within the first six months
per hour. Each state also formulates and opening for business.
regulates its own minimum wage, with
most states implementing rates higher Pending changes
than the federal rate. Over the past five years, many
The implementation of the Affordable companies and local governments
Care Act over the next five years will have a throughout the US have become
minor impact on the industry. Employers increasingly environmentally conscious.
with 50 or more employees that work 30 One small change that many US states,
hours a week will be required to provide cities and companies have been trying to
healthcare coverage or pay a fine. However, tackle is plastic usage. In 2018, many
the large majority of operators in the cities such as New York City, Miami
industry employ fewer than 50 staff. Beach and Seattle and states such as
Howard Schultz, CEO of the industry’s California and Hawaii have placed
biggest player, Starbucks Corporation, has regulations to limit the use of plastic
stated that his company will not cut worker straws. In many of these areas, the
hours to avoid paying benefits to its regulations in place are still pending and
employees under the new law. have yet to fully remove plastic straws
from the region. Additionally, many are
Franchising laws not outright bans on the use of straws.
A large proportion of industry Some areas, however, are even looking
establishments are operated under to completely ban single use plastic
franchise agreements. There are both products beyond plastic straws to
federal and state laws governing include other single use products. Many
franchising, which vary from state to of these regulations offer amendments
state. Franchising is regulated at the for individuals with disabilities or other
federal level by the US Federal Trade needs. This will force establishments
Commission and applied in any region operating in these regions to provide
within the United States. At the state alternative ways to serve beverages.
Industry Assistance Although the Coffee and Snack Shops supports the broader coffee retail and
industry receives no formal assistance in production markets by providing
the form of government aid or monetary operators with research and
Level & Trend compensation, there are industry connections for its members across all
he level of
T associations that help the industry as a aspects of the coffee industry. Similarly,
Industry Assistance whole. These associations provide the National Restaurant Association
is N
oneand the industry news, research, sponsoring provides similar services but supports
events, networking opportunities and the broader food and beverage services
trend is S
teady
representation, among other things. sector, not just industry operators.
There are also organizations that Other operators in this industry, such
provide the same services on a more as ice cream retailers or pretzel shop
granular basis, often connecting and operators also have more niche
providing support at the state and other associations that provide similar
local levels. One such example is the services and benefits to their members
National Coffee Association. This group on a national and local level.
Key Statistics
Industry Data Industry Consumer
Revenue Value Added Establish- Wages Domestic spending
($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand ($b)
2010 32,089.6 10,902.1 60,485 45,839 515,391 -- -- 8,014.0 N/A 10,643.0
2011 33,420.8 11,855.0 62,050 47,298 532,458 -- -- 8,379.3 N/A 10,843.8
2012 34,932.4 12,728.7 63,371 48,243 549,097 -- -- 8,606.7 N/A 11,006.8
2013 36,992.9 14,806.8 65,318 49,554 587,802 -- -- 9,451.7 N/A 11,166.9
2014 40,435.0 14,499.4 67,272 50,954 632,138 -- -- 10,043.5 N/A 11,494.3
2015 44,356.0 16,243.5 68,842 52,090 670,048 -- -- 10,903.1 N/A 11,921.9
2016 47,719.9 17,497.3 71,576 54,064 715,960 -- -- 11,827.6 N/A 12,248.2
2017 49,812.0 18,749.9 73,946 55,822 745,435 -- -- 12,320.8 N/A 12,558.7
2018 49,900.2 18,534.4 75,291 56,896 757,029 -- -- 12,478.5 N/A 12,890.6
2019 50,740.8 18,924.5 77,065 58,255 776,090 -- -- 12,771.9 N/A 13,231.0
2020 51,642.3 19,401.0 78,924 59,679 796,009 -- -- 13,079.5 N/A 13,500.1
2021 52,328.5 19,753.6 80,642 61,009 812,904 -- -- 13,336.3 N/A 13,764.0
2022 52,950.1 20,045.7 82,296 62,294 828,008 -- -- 13,566.2 N/A 14,041.7
2023 53,572.7 20,346.9 83,959 63,588 842,304 -- -- 13,785.5 N/A 14,320.3
2024 54,350.1 20,734.5 85,609 64,862 856,910 -- -- 14,016.8 N/A 14,618.2
Sector Rank 6/12 7/12 6/12 8/12 5/12 N/A N/A 7/12 N/A N/A
Economy Rank 197/694 157/694 93/694 110/694 49/694 N/A N/A 141/694 N/A N/A
Annual Change Industry Establish- Domestic Consumer

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand spending
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2011 4.1 8.7 2.6 3.2 3.3 N/A N/A 4.6 N/A 1.9
2012 4.5 7.4 2.1 2.0 3.1 N/A N/A 2.7 N/A 1.5
2013 5.9 16.3 3.1 2.7 7.0 N/A N/A 9.8 N/A 1.5
2014 9.3 -2.1 3.0 2.8 7.5 N/A N/A 6.3 N/A 2.9
2015 9.7 12.0 2.3 2.2 6.0 N/A N/A 8.6 N/A 3.7
2016 7.6 7.7 4.0 3.8 6.9 N/A N/A 8.5 N/A 2.7
2017 4.4 7.2 3.3 3.3 4.1 N/A N/A 4.2 N/A 2.5
2018 0.2 -1.1 1.8 1.9 1.6 N/A N/A 1.3 N/A 2.6
2019 1.7 2.1 2.4 2.4 2.5 N/A N/A 2.4 N/A 2.6
2020 1.8 2.5 2.4 2.4 2.6 N/A N/A 2.4 N/A 2.0
2021 1.3 1.8 2.2 2.2 2.1 N/A N/A 2.0 N/A 2.0
2022 1.2 1.5 2.1 2.1 1.9 N/A N/A 1.7 N/A 2.0
2023 1.2 1.5 2.0 2.1 1.7 N/A N/A 1.6 N/A 2.0
2024 1.5 1.9 2.0 2.0 1.7 N/A N/A 1.7 N/A 2.1
Sector Rank 6/12 6/12 5/12 5/12 3/12 N/A N/A 4/12 N/A N/A
Economy Rank 330/694 291/694 158/694 150/694 162/694 N/A N/A 207/694 N/A N/A
Key Ratios Imports/ Exports/ Revenue per Share of the

IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2010 33.97 N/A N/A 62.26 24.97 8.52 15,549.36 0.07
2011 35.47 N/A N/A 62.77 25.07 8.58 15,737.02 0.07
2012 36.44 N/A N/A 63.62 24.64 8.66 15,674.28 0.08
2013 40.03 N/A N/A 62.93 25.55 9.00 16,079.73 0.09
2014 35.86 N/A N/A 63.97 24.84 9.40 15,888.14 0.09
2015 36.62 N/A N/A 66.20 24.58 9.73 16,272.12 0.09
2016 36.67 N/A N/A 66.65 24.79 10.00 16,519.92 0.10
2017 37.64 N/A N/A 66.82 24.73 10.08 16,528.34 0.10
2018 37.14 N/A N/A 65.92 25.01 10.05 16,483.52 0.10
2019 37.30 N/A N/A 65.38 25.17 10.07 16,456.73 0.10
2020 37.57 N/A N/A 64.88 25.33 10.09 16,431.35 0.10
2021 37.75 N/A N/A 64.37 25.49 10.08 16,405.75 0.10
2022 37.86 N/A N/A 63.95 25.62 10.06 16,384.14 0.10
2023 37.98 N/A N/A 63.60 25.73 10.03 16,366.42 0.10
2024 38.15 N/A N/A 63.43 25.79 10.01 16,357.38 0.10
Sector Rank 9/12 N/A N/A 6/12 8/12 7/12 10/12 7/12
Economy Rank 253/694 N/A N/A 647/694 226/694 359/694 654/694 157/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. SOURCE: WWW.IBISWORLD.COM
Industry Financial Ratios

Apr 2017 - Mar 2018 by company revenue
Apr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium Large
Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 0.8 0.8 0.8 0.8 0.9 0.8 0.5
Quick Ratio 0.6 0.6 0.6 0.6 0.6 0.6 0.4
Sales / Receivables (Trade Receivables
Turnover) n/c n/c n/c n/c n/c n/c 292.8
Days’ Receivables 0.4 n/a 0.4 0.4 0.4 0.4 1.2
Cost of Sales / Inventory (Inventory Turnover) 43.3 43.2 43.6 42.8 44.4 41.4 40.0
Days’ Inventory 8.4 8.4 8.4 8.5 8.2 8.8 9.1
Cost of Sales / Payables (Payables Turnover) 27.2 28.6 26.6 28.6 44.3 19.2 13.4
Days’ Payables 13.4 12.8 13.7 12.8 8.2 19.0 27.2
Sales / Working Capital -86.0 -98.5 -88.3 -87.7 -181.7 -69.2 -22.5
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) /
Interest 5.0 6.0 6.2 4.4 4.7 5.1 2.8
Net Profit + Dep., Depletion, Amort. / Current
Maturities LT Debt 2.7 2.9 2.7 2.6 3.0 2.4 2.7
Leverage Ratios
Fixed Assets / Net Worth 4.2 4.2 4.8 4.9 3.3 8.8 -3.9
Debt / Net Worth 6.6 6.7 8.0 9.6 6.0 12.1 -6.7
Tangible Net Worth -0.3 1.8 -0.2 -2.1 -2.1 3.6 -13.4
Operating Ratios
Profit before Taxes / Net Worth, % 47.5 57.2 57.9 52.8 61.6 41.4 24.3
Profit before Taxes / Total Assets, % 11.7 14.1 14.0 10.9 13.9 9.0 5.4
Sales / Net Fixed Assets 8.4 8.3 7.9 8.2 10.2 6.9 4.8
Sales / Total Assets (Asset Turnover) 3.4 3.3 3.1 3.2 3.7 2.7 2.0
Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading 66.2 67.2 68.6 68.4 67.5 70.2 69.7
Cash after Operations 7.9 8.5 9.0 8.2 7.8 8.8 8.4
Net Cash after Operations 8.0 8.8 9.2 8.3 8.1 8.9 8.3
Cash after Debt Amortization 2.1 2.5 2.4 1.9 1.7 2.3 2.8
Debt Service P&I Coverage 2.8 3.1 3.0 2.6 2.7 2.7 2.3
Interest Coverage (Operating Cash) 8.9 10.7 10.1 8.7 8.0 11.7 6.3
Assets, %
Cash & Equivalents 18.9 19.2 19.6 19.1 20.9 17.1 10.3
Trade Receivables (net) 1.5 1.6 1.4 1.6 1.5 1.6 2.6
Inventory 5.2 4.8 4.5 4.5 5.1 3.1 3.0
All Other Current Assets 2.2 2.1 2.3 2.8 3.2 2.0 1.9
Total Current Assets 27.8 27.7 27.9 28.0 30.7 23.8 17.8
Fixed Assets (net) 46.7 46.0 45.9 45.1 44.3 46.4 48.3
Intangibles (net) 15.4 16.5 17.0 18.0 15.3 22.7 27.0
All Other Non-Current Assets 10.2 9.9 9.2 8.9 9.7 7.1 6.8
Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total Assets ($m) 55,786.9 63,571.0 58,403.2 62,722.6 4,389.9 12,091.0 46,241.7
Liabilities, %
Notes Payable-Short Term 4.4 4.7 4.3 4.6 5.7 1.9 2.3
Current Maturities L/T/D 4.9 5.1 5.4 5.3 4.7 7.2 5.9
Trade Payables 9.3 8.0 7.6 7.6 8.0 6.7 7.0
Income Taxes Payable 0.1 0.2 0.1 0.2 0.2 0.1 0.1
All Other Current Liabilities 19.9 18.5 19.6 19.0 22.1 11.7 12.2
Total Current Liabilities 38.6 36.5 37.1 36.7 40.7 27.6 27.5
Long Term Debt 34.2 34.2 36.9 37.1 34.2 40.8 49.6
Deferred Taxes 0.2 0.1 0.1 0.1 n/a 0.1 0.8
All Other Non-Current Liabilities 12.0 10.9 9.2 10.2 11.8 5.2 8.5
Net Worth 15.1 18.3 16.8 15.9 13.2 26.3 13.6
Total Liabilities & Net Worth ($m) 55,786.9 63,571.0 58,403.2 62,722.6 4,389.9 12,091.0 46,241.7
Maximum Number of Statements Used 5,949 6,247 5,566 5,616 3,905 1,151 560
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more
than 260,000 statements of member financial institutions’ borrowers and prospects.
Note: For a full description of the ratios refer to the Key Statistics chapter online.
Jargon & Glossary
Industry Jargon BABY BOOMERSThe generation of Americans born FRANCHISEA store that uses a well-known company’s
between 1946 and 1964. business model, including their trademark and goods, for
BARISTAA person who prepares and serves espresso- a fee. This is an alternative to chain stores, which share
based coffee drinks. a brand and a central management.
ESPRESSOCoffee brewed by forcing a small amount of POINT OF SALE (POS)A system used at checkout in
nearly boiling water under pressure through finely retail stores using computers and cash registers to
ground coffee beans. capture transaction data at the time and place of sale.
FOOD SERVICEThe practice or business of making,
transporting and serving or dispensing prepared foods
outside the home.
BARRIERS TO ENTRYHigh barriers to entry mean that IMPORTSTotal value of industry goods and services
IBISWorld Glossary new companies struggle to enter an industry, while low brought in from foreign countries to be sold in the
barriers mean it is easy for new companies to enter an United States.
industry. INDUSTRY CONCENTRATIONAn indicator of the
CAPITAL INTENSITYCompares the amount of money dominance of the top four players in an industry.
spent on capital (plant, machinery and equipment) with Concentration is considered high if the top players
that spent on labor. IBISWorld uses the ratio of account for more than 70% of industry revenue.
depreciation to wages as a proxy for capital intensity. Medium is 40% to 70% of industry revenue. Low is less
High capital intensity is more than $0.333 of capital to than 40%.
$1 of labor; medium is $0.125 to $0.333 of capital to $1 INDUSTRY REVENUEThe total sales of industry goods
of labor; low is less than $0.125 of capital for every $1 of and services (exclusive of excise and sales tax); subsidies
labor. on production; all other operating income from outside
CONSTANT PRICESThe dollar figures in the Key the firm (such as commission income, repair and service
Statistics table, including forecasts, are adjusted for income, and rent, leasing and hiring income); and
inflation using the current year (i.e. year published) as capital work done by rental or lease. Receipts from
the base year. This removes the impact of changes in interest royalties, dividends and the sale of fixed
the purchasing power of the dollar, leaving only the tangible assets are excluded.
“real” growth or decline in industry metrics. The inflation INDUSTRY VALUE ADDED (IVA)The market value of
adjustments in IBISWorld’s reports are made using the goods and services produced by the industry minus the
US Bureau of Economic Analysis’ implicit GDP price cost of goods and services used in production. IVA is
deflator. also described as the industry’s contribution to GDP, or
DOMESTIC DEMANDSpending on industry goods and profit plus wages and depreciation.
services within the United States, regardless of their INTERNATIONAL TRADEThe level of international
country of origin. It is derived by adding imports to trade is determined by ratios of exports to revenue and
industry revenue, and then subtracting exports. imports to domestic demand. For exports/revenue: low is
EMPLOYMENTThe number of permanent, part-time, less than 5%, medium is 5% to 20%, and high is more
temporary and seasonal employees, working proprietors, than 20%. Imports/domestic demand: low is less than
partners, managers and executives within the industry. 5%, medium is 5% to 35%, and high is more than
ENTERPRISEA division that is separately managed and 35%.
keeps management accounts. Each enterprise consists LIFE CYCLEAll industries go through periods of growth,
of one or more establishments that are under common maturity and decline. IBISWorld determines an
ownership or control. industry’s life cycle by considering its growth rate
ESTABLISHMENTThe smallest type of accounting unit (measured by IVA) compared with GDP; the growth rate
within an enterprise, an establishment is a single of the number of establishments; the amount of change
physical location where business is conducted or where the industry’s products are undergoing; the rate of
services or industrial operations are performed. Multiple technological change; and the level of customer
establishments under common control make up an acceptance of industry products and services.
enterprise.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
Jargon & Glossary
IBISWorld Glossary NONEMPLOYING ESTABLISHMENTBusinesses with WAGESThe gross total wages and salaries of all
no paid employment or payroll, also known as employees in the industry. The cost of benefits is also
continued nonemployers. These are mostly set up by self-employed included in this figure.
individuals.
PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
VOLATILITYThe level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
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WWW.IBISWORLD.

COM Coffee & Snack Shops in the USJune 2019 1

Coffee break: Operators will expand their menu

IBISWorld Industry Report 72221b

2 About this Industry 19 International Trade 34 Technology and Systems

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

About this Industry

Industry Definition This industry comprises yogurt, cookies, doughnuts, bagels,

Main Activities The primary activities of this industry are

The major products and services in this industry are

Similar Industries 44529 Specialty Food Stores in the US

72211a Chain Restaurants in the US

72211b Single Location Full-Service Restaurants in the US

72232 Caterers in the US

72233 Street Vendors in the US

About this Industry

Similar Industries 72241 Bars & Nightclubs in the US

Additional Resources For additional information on this industry

IBISWorld writes over 1000 US

Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

$4.4bn $12.8bn 58,255

Key External Drivers 3.6%

Industry Structure Life Cycle Stage Mature Regulation Level Medium

Key External Drivers Consumer spending shops. Consumer spending is expected to

Consumer spending Healthy eating index

Current The Coffee and Snack Shops industry has

food service sector, coffee and snack

catering to the unhealthy whims of

Renewed focus Consumers have become increasingly

Strong enterprise Over the five years to 2019, IBISWorld

Industry The Coffee and Snack Shops industry’s

Growth strategies The industry’s high level of competition

Competition to Fierce competition is expected between The continued expansion of Starbucks

Industry structure Over the five years to 2024, industry

Products & Markets

Supply Chain KEY BUYING INDUSTRIES

KEY SELLING INDUSTRIES

Products and Services Products and services segmentation (2019)

Products & Markets

Products & Markets

Products & Markets

Major Markets Major market segmentation (2019)

Total $50.7bn SOURCE: WWW.IBISWORLD.COM

Products & Markets

Products & Markets

Business Locations 2019

West Establishments (%)

Products & Markets

Business Locations The Coffee and Snack Shops industry’s

specifically makes up a large portion of

Ability to franchise operations Access to multiskilled and

Cost Structure Wages Starbucks, also have been increasing

Sector vs. Industry Costs

Cost Structure but can vary greatly between Other

Barriers to Entry Barriers to entry are low in the Coffee and

as frozen yogurt, smoothies and sodas,

Barriers to Entry Barriers to success those family-owned-and-operated

Industry The majority of nonfranchise Coffee Inc., a Canadian-based fast-casual

COM Coffee & Snack Shops in the USJune 2019 1