Coffee Shops

The coffee shop industry includes about 20,000 stores with combined annual revenue of about $11 billion. Major companies include Starbucks, Caribou, Coffee Bean and Tea Leaf, and Diedrich (Gloria Jean’s). The industry is highly concentrated: the top 50 companies have more than 70 percent of industry sales.

COMPETITIVE LANDSCAPE

Consumer taste and personal income drive demand. The profitability of individual companies depends on the ability to secure prime locations, drive store traffic, and deliver high quality products. Large companies have advantages in purchasing, finance, and marketing. Small companies can compete effectively by offering specialized products, serving a local market, or providing a personal level of customer service. The industry is extremely labor-intensive: average annual revenue per worker is $40,000.

Starbucks dominates with over 10,000 stores worldwide. Caribou Coffee is a distant second with almost 400 locations. Besides other coffee shops, companies compete with convenience stores, gas stations, quick service and fast food restaurants, gourmet food shops, and donut shops.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major products include beverages and food. Beverages include brewed coffee and tea; espresso drinks (cappuccinos, café lattes); cold blended beverages; bottled water; soft drinks; and juices. Food includes pastries, bakery items, desserts, sandwiches, and candy. Many coffee shops sell whole or ground coffee beans for home consumption. Some coffee shops sell coffee or espresso-making equipment, grinders, mugs, and other accessories. Most coffee shops serve high-quality, premium coffee known as specialty coffee.

Companies may blend ...