May 29 2018
Demand for coffee and snack shops has increased at a faster rate in the US than most other foodservice sector segments. Why? Consumers are increasingly seeking convenience and quality.
“The coffee shops industry in the US has had to adapt to changing consumer preferences over the past five years. Some consumers have become increasingly health conscious and are increasingly avoiding foods that are high in fat and salt content,” says IBISWorld analyst Rachel Hyland.
The coffee and snack shops industry is made up of businesses that prepare or serve specialty snacks and nonalcoholic beverages including coffee, ice cream, frozen yogurt, cookies, donuts, bagels, juices, smoothies and sodas.
IBISWorld estimates that coffee and snack shops industry revenue is expected to grow 5.9% to $48.6 billion over the five years to 2018. The industry has gotten a boost from increases in consumer spending.
To increase sales and draw a wider range of customers, major players, such as Starbucks and Dunkin’ Donuts, are expected to expand their menus and remodel the designs of their locations.
This expansion includes more offerings of nontraditional, high-margin menu items, such as iced coffee drinks, breakfast items and wraps. Dunkin’ Donuts, which is highly concentrated in the eastern part of the United States, is aiming to expand westward to steal market share from local competitors.
Premium options and third-wave coffee is another avenue of growth. Starbucks has plans to open a large-scale 20,000 square-foot roastery in New York to compete with third-wave competitors, such as Blue Bottle or Intelligentsia. The type of beans coffee shops use has become a significant point of differentiation among niche coffee houses, with rare blends, fair trade coffee and organic beans becoming more popular. This trend has supported premium pricing across the coffee segment and given rise to a greater number of independent coffee shops.
“Major coffee chains are expected to further invest in international growth as part of their long-term strategy, as many larger players view emerging economies as markets with huge potential for growth and long-term profitability,” says Hyland.
This international move is being made as the domestic industry approaches maturity. IBISWorld expects coffee and snack shops industry revenue to grow at a slower annualized rate of 0.9% to $51.0 billion.
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