Coffee & Snack Shops in The US Industry Report

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Coffee & Snack Shops in the USJuly 2013 1
Caffeine fix: Stores will add high-margin, healthful items to menus to aid growth
IBISWorld Industry Report 72221b

July 2013
Coffee & Snack Shops in the US

Andy Brennan
2 About this Industry
2 2 2 3 Industry Definition Main Activities Similar Industries Additional Resources 15 International Trade 16 Business Locations 28 Industry Assistance
29 Key Statistics 18 Competitive Landscape

18 Market Share Concentration 18 Key Success Factors 18 Cost Structure Benchmarks 20 Basis of Competition 29 Industry Data 29 Annual Change 29 Key Ratios
4 Industry at a Glance 5 Industry Performance

5 5 6 8 Executive Summary Key External Drivers Current Performance Industry Outlook
30 Jargon & Glossary
20 Barriers to Entry 21 Industry Globalization
22 Major Companies
22 Starbucks Corporation 23 Dunkin Brands Inc.
10 Industry Life Cycle
12 Products & Markets

12 Supply Chain 12 Products & Services 13 Demand Determinants 14 Major Markets
26 Operating Conditions
26 Capital Intensity 27 Technology & Systems 27 Revenue Volatility 28 Regulation & Policy
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
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About this Industry

Industry Definition
This industry is composed of establishments that prepare or serve specialty snacks and nonalcoholic beverages including ice cream, frozen yogurt, cookies, donuts, bagels, coffee, juices, smoothies and sodas. Purchases may be consumed on-site, 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 donut 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 Bagel shops Coffee shops Cookie shops Donut shops Frozen yogurt shops Ice cream shops Other snack shops
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 primarily engages in catering. 72233 Street Vendors in the US This industry primarily sells snacks and nonalcoholic beverages from vehicles.
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About this Industry
Similar Industries continued
72241 Bars & Nightclubs in the US This industry primarily prepares and serves alcoholic beverages. 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.restaurant.org National Restaurant Association www.specialty-coffee.com Specialty Coffee Retailer www.bls.gov US Bureau of Labor Statistics
IBISWorld
writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go towww.ibisworld.com
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Coffee & Snack Shops in the US July 2013
Industry at a Glance
Coffee & Snack Shops in 2013 Key Statistics Snapshot
Revenue
$29.0bn 1.0%
Profit
Annual Growth 08-13
Annual Growth 13-18
$1.7bn
Market Share
Wages
$7.7bn
4 3 2
3.9% 40,144
Businesses
1 0
Revenue vs. employment growth

20 15
Consumer spending
Starbucks Corporation 36.7%

% change
5 0 5
% change
Dunkin Brands Inc. 2 4.6%
10
1 2
Year 05 Revenue
p. 22
10
07
09
11
13
15
17
19
Year
07
09
11
13
15
17
19
Employment
SOURCE: WWW.IBISWORLD.COM
Products and services segmentation (2013)
Key External Drivers

Consumer spending Per capita coffee consumption Consumer Confidence Index Healthy eating index
Ice cream shops
Bagel shops
5%
Cookie shops
2%
Frozen yogurt shops
2%
13%
Coffee shops
42%
Donut shops
15%
p. 5
Other snack shops
21%
SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM
Industry Structure
Life Cycle Stage Revenue Volatility Capital Intensity Industry Assistance Concentration Level
Mature Medium Medium None Medium
Regulation Level Technology Change Barriers to Entry Industry Globalization Competition Level
Medium Medium Low Low High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29
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Industry Performance
Executive Summary
The Coffee and Snack Shops industry experienced a major slowdown in 2009 due to a struggling economy and, to a lesser extent, changing consumer tastes, despite surging during the past decade. In the five years to 2013, IBISWorld estimates revenue will grow at an average annual rate of 0.9% to $29.0 billion. After revenue declined 6.6% to $25.9 billion in 2009, it resumed its upward climb in 2010. In 2013, industry revenue is expected to continue its rebound with an increase of 2.6%.
Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
Operators
will continue to add high-margin, trendy products to stores to stimulate growth

During the recession, consumers spent less on luxuries like eating out and many chose to purchase low-price items when they did spend. This caused high-priced coffee drinks and other nonessential snacks to lose the battle for consumers shrinking budgets. Consumers have also become increasingly health conscious during the five years to 2013. Many retailers, such as Jamba Juice, have expanded their healthful options in
response to this trend; consequently, these companies have grown. Still, the general trend toward healthful eating has hurt the industrys unhealthier segments, such as donut and ice cream shops. Furthermore, in response to weak market conditions, the number of establishments is expected to increase more slowly than in the past, at an annualized rate of 1.6% to 55,428 in the five years to 2013. To combat slumping sales major operators like Starbucks and Dunkin Donuts are expected to expand their menus during the five years to 2018, which includes increasing their offerings of nontraditional, highmargin menu items like iced coffee drinks, breakfast items and wraps. These additions are expected to help these companies gain higher revenue and profit. Many major chains are also expected to invest more in international growth as part of a long-term strategy because many larger players view China, in particular, as a market with huge potential for growth and long-term profitability. In the five years to 2018, revenue is forecast to grow at an annualized rate of 3.9% to reach $35.1 billion.
Key External Drivers
Consumer spending Factors that influence consumer spending also affect the industry. During the recession, the spike in unemployment led to consumption declines. When consumer spending is high, however, consumers are more likely to spend money at snack and coffee shops. Consumer spending is expected to increase in 2013, providing a potential opportunity for the industry. Healthy eating index The healthy eating index is expected to decrease slowly in 2013, as consumers diets get progressively poorer. However, consumers are also more aware of issues
related to weight and obesity, fatty-food intake and food-safety issues, which is particularly applicable to the occasionally unhealthy snack-food industry. Despite long-term, aggregate declines in healthy eating, consumers are more aware of health issues associated with fatty foods and are increasingly going out of their way to avoid them. Per capita coffee consumption Coffee shops account for a large portion of industry revenue and establishments, and most other industry establishments also serve coffee. When coffee consumption increases, coffee shops and
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Key External Drivers continued
other snack shops experience revenue growth. Per capita coffee consumption is expected to decrease slowly in 2013, posing a potential threat to the industry. Consumer Confidence Index Consumer sentiment measures consumers perceptions about their current and future financial prospects.
Consumer spending
4 3 2
Changes in consumer sentiment have a significant effect on the spending of discretionary items, including items from snack and coffee shops. During a recession, consumers tend to forego higher-margin items and opt for lowerpriced value products. The consumer sentiment index is expected to increase in 2013.
Healthy eating index
72 71 70 69 68
% change
1 0 1 2
Year
%
07 09 11 13 15 17 19
Year 04
06
08
10
12
14
16
18
Current Performance
The Coffee and Snack Shops industry has been a victim of the weakened economy, the rapid rise in unemployment and, to a lesser extent, societys rising awareness of the health risks associated with diets high in fat, salt and sugar in the five years to 2013. Despite these obstacles, the industry has responded to changes in consumer
preferences, which has helped revenue grow. In the five years to 2013, revenue is expected to increase at an average annual rate of 0.9%. In 2009, industry revenue declined 6.6% to $25.9 billion, but since 2010, the industrys revenue growth has been positive. In 2013, industry revenue is expected to rise another 2.6% to $29.0 billion.
Cutting back
As the economy fell into a recession and unemployment numbers rose, consumers became more selective when spending their disposable incomes. For example, in 2009, consumer spending declined 1.9%, and luxuries such as eating out and a morning cup of coffee at Starbucks were among the first expenditures to
go. Some consumers cut out coffee and snack shops from their budgets entirely, opting to eat in to save money. This trend reversed as consumer confidence improved; consumer spending is expected to grow at an annualized rate of 1.3% over the five years to 2013. With consumer spending on track to rise an additional 2.1% in
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Cutting back continued
2013, IBISWorld anticipates a rise in the number of consumers treating themselves to industry products. Many consumers who continued to purchase coffee and snacks during the recession purchased lower-priced items, often settling for a plain cup of coffee instead of springing for a cafe mocha, for example. This trend has forced coffee and snack shop chains to compete with each other in an attempt to convince consumers that they can get the most bang for their buck at their particular establishment. In years
The
recession caused some consumers to cut out coffee from their budgets
past, coffee and snack shops strategized to win a larger share of a growing market, but now, these retailers are attempting to take market share from each other because of a shrinking pool of customers and intensified competition.
New products, new markets
Consumers have become increasingly health conscious, and consequently, retailers have expanded the number of low-calorie options on their menus. For many chains, this has allowed them to target a new segment of the market and renew this segments interest in the industrys products. For example, Dunkin Donuts introduced two new flatbread sandwiches made with egg whites; both have fewer than 300 calories with no more than nine grams of fat. Starbucks also introduced healthy menu items, such as oatmeal, apple bran muffins, multigrain rolls and a power protein plate. Aside from these healthy options, many operators have expanded their menu options to ensure that they can also retain a large portion of their customers
snack-food dollars. Traditional snack shops have been increasingly expanding their coffee offerings, while more traditional coffee shops have been tapping into the snack-foods market. For example, Dunkin Donuts now offers a wide range of espresso drinks and flavored coffees and Starbucks now sells breakfast sandwiches and hot paninis. In addition, international growth is still a large part of many major chains long-term strategy. In particular, many snack-food chains view China as a market with huge potential for growth and long-term profitability. Starbucks and Dunkin Donuts already have a sizeable presence in foreign markets, and even for these companies, there is still much room for growth.
Consolidation and profit
In the five years to 2013, IBISWorld estimates that industry employment will grow at an average annual rate of 0.3% to 562,954 people. This growth rate is considered slow for the industry, which experienced a period of rapid expansion during the majority of the past decade. This relatively muted growth is directly related to the
industrys 2009 decline in revenue and the consolidation of major operators underperforming locations. Therefore, the number of establishments is expected to grow at an average annual rate of 1.6% to 55,428 during the same period, which is also slow compared with years past. Because of these factors, increased
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Consolidation and profit continued
consolidation defined the industry in the five years to 2013. Consolidation indicates that major players recognize the benefits of economies of scale and that they are attempting to gain a competitive advantage through acquisition and growth. Competitive pressure and declining demand have forced some companies to consolidate their operations and streamline employment, driving wages
down. IBISWorld estimates the industrys average wage in 2013 to be $13,695.0, compared with $13,024.0 in 2008, meaning there has been little real wage growth during the past five years. Industry profit margins have fallen or remained flat because of lower sales volume, customers opting for lowerpriced items, high competition in the domestic market and the industry nearing saturation.
Industry Outlook
The Coffee and Snack Shops industry is expected to continue its growth during the five years to 2018, with revenue anticipated to jump 4.1% in 2014 to total $30.2 billion. Coffee and snack shops will benefit from the economy improving, the unemployment rate declining and consumers spending money on luxuries like eating out. Furthermore, during the five years to 2018, consumer spending is expected to increase at an average annual rate of 2.9%. As a result, industry revenue is projected to increase at an average annual rate of 3.9% to $35.1 billion during the period. The US economys continued recovery during the next five years will play a large role in boosting demand for coffee and other snacks. As consumer spending continues to rebound, consumers will increasingly parlay their pocketbook flexibility into quick,
Industry revenue
20 15
% change
10 5 0 5
Year 05
10
07
09
11
13
15
17
19
satisfying edible fixes provided by industry operators. In addition, operators will continue to stimulate renewed interest in their products by expanding their menu options that appeal to health-conscious consumers.
Growth strategies
The industrys high level of competition is expected to intensify in the next five years. This factor will involve significant price-based competition and an increased emphasis on the regular introduction of new products. Most chains will introduce new, healthy alternatives as well as expand their current product lines. Major operators will also attempt to expand
revenue and profit by providing a variety of other menu options, including premium coffees and breakfast items. Many domestic operators will continue to expand internationally. International expansion is anticipated to be the largest source of revenue and profit growth for major players during the five years to 2018. Snack-food brands
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Growth strategies continued
have not yet saturated the markets of Asia and the Middle East; however, certain industry giants like Starbucks and Dunkin Brands are already
experiencing strong growth in those regions. The success of these operators is enticing others to try to garner a share of the growing market.
Establishments, employment and wages increase
Industry profitability is expected to improve slightly as sales volumes increase and consumers begin to indulge in high-priced premium items. Operators that experience stagnant domestic profit will likely double down on international expansion to grow profit margins. Companies will also continue trying to emulate Starbucks success by expanding beverage options to include more coffeebased drinks and smoothies. These low-cost, high-profit menu items offer a quick way for companies to perk up revenue and grow their bottom lines. Nonetheless, operators will still have to compete for their share of revenue. Consolidation among operators has occurred for some time and will likely continue slightly in certain saturated markets; however, new growth opportunities will likely offset losses from consolidation. In the five years to 2018, the number of
Wage
and employment levels will recover in the short term, despite greater automation
establishments is projected to increase at an average rate of 2.1% per year to 61,494. Similarly, industry employment is projected to grow at an average annual rate of 2.1%, to 623,314 people in the five years to 2018. At the same time, the average industry wage is projected to increase from $13,695.0 per worker in 2013 to $14,327.0 in 2018. Despite the long-term trend of automation of the food-preparation process, wages and employment are both forecast to increase in the next five years as the industry recovers from the recession.
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Life Cycle Stage
The rate of new store openings has slowed Operators are concentrating on international openings There is heavy price-based competition
% Growth in share of economy
20
Company consolidation; level of economic importance stable
Maturity
Quality Growth
High growth in economic importance; weaker companies close down; developed technology and markets
Key Features of a Mature Industry Revenue grows at same pace as economy Company numbers stabilize; M&A stage Established technology & processes Total market acceptance of product & brand Rationalization of low margin products & brands
15
10
Quantity Growth
5
Many new companies; minor growth in economic importance; substantial technology change
Coffee & Snack Shops

0
Chain Restaurants
Coffee Production Single Location Full-Service Restaurants Specialty Food Stores
Frozen Food Wholesaling

5
Decline
Shrinking economic importance
10 10
10
15
20
% Growth in number of establishments

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Industry Life Cycle This industry is M ature
The Coffee and Snack Shops industry is in the mature phase of its lifecycle. Aside from the industrys poor performance during the recession, industry revenue has grown consistently during the past decade. During the five years to 2013, however, growth has slowed and is expected to be lower than the long-term average during the five years to 2018. This is because the industry is saturated in some areas, leading large chains such as Starbucks to seek growth elsewhere, either overseas or through new product lines. In the 10 years to 2018, industry value added (IVA), which measures an industrys contribution to GDP, is projected to grow at an annual rate of 2.5% per year. During the same period, GDP is estimated to grow at an annualized rate of 2.1%, meaning the industry is growing in line with the overall economy. In recent years, there have been a number of mergers and acquisitions that have highlighted the highly competitive nature of the industry. In 2012, Joh. A. Benckiser acquired both Peets Coffee & Tea and Caribou Coffee, and in 2011, 2012 and 2013 respectively, Starbucks purchased Evolution Fresh,
Teavana and La Boulange. Many chains have also recently acquired regional players to gain inroads into regional markets, while simultaneously increasing their market shares. As the size of operations and infrastructure increase, many costs decrease, giving operators further incentive to acquire or merge with other players. The industry has also experienced significant shifts in the market, including changes in consumer preferences. Demand for healthy foods has risen and consumers are increasingly rebuffing high-fat, high-salt meals as the obesity epidemic continues to grow. In addition, the industry is currently in a period of slow growth, following a rapid rise in the domestic fast-food market during the past decade. The number of establishments is expected to grow at a relatively muted annualized rate of 1.6% during the five years to 2013. As such, price-based competition is intensifying, as operators strive to capture a larger market share in a saturated domestic market. Furthermore, many major franchised operators are receiving some of their sales growth from the expansion of their operations overseas.
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Products & Markets

Supply Chain
KEY BUYING INDUSTRIES
9901
Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
Consumers in the US Households are the key driver of demand for this industrys products.
KEY SELLING INDUSTRIES

31192a 42442 42443 42444 42446 42447 42448 Coffee Production in the US This industry supplies coffee to operators. Frozen Food Wholesaling in the US This industry supplies frozen foods to operators. Dairy Wholesaling in the US This industry supplies dairy products to operators. Egg & Poultry Wholesaling in the US This industry supplies poultry products to operators. Fish & Seafood Wholesaling in the US This industry supplies seafood to operators. Beef & Pork Wholesaling in the US This industry supplies meat products to operators. Fruit & Vegetable Wholesaling in the US This industry supplies fruit and vegetables to operators.
Products & Services
Products and services segmentation (2013)
Bagel shops Ice cream shops
5%
Cookie shops
2%
13% 15%
Frozen yogurt shops
2%
Donut shops
Coffee shops
42%
Total $29.0bn
Other snack shops

21%
The major product segments for the Coffee and Snack Shops industry include coffee shops, donut shops, ice cream shops, bagel shops, frozen yogurt shops and cookie shops. Coffee shops Coffee shops are the largest product segment in the industry, and they are
estimated to make up about 42.0% of industry revenue in 2013. The proportion of industry revenue that comes from coffee shops has increased in the 10 years to 2013. This is due to the rapid proliferation of coffee shops and cafes throughout the United States and the increased popularity of major coffee shop chains, such as Starbucks.
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Products & Markets
Products & Services continued
Donut shops Donut shops are the second-largest product segment in this industry, and they are estimated to make up about 15.0% of industry revenue in 2013. The proportion of industry revenue that comes from donut shops has decreased in the 10 years to 2013, largely due to health concerns associated with eating unhealthy foods like donuts. However, this fall has been mitigated by the continued success and growth of major donut chains, such as Dunkin Donuts and Krispy Kreme. Ice cream shops Ice cream shops are the third-largest product segment in this industry. In 2013, ice cream shops make up an estimated 13.0% of industry revenue. The proportion of industry revenue that comes from ice cream shops has decreased in the 10 years to 2013, largely due to the health concerns associated with eating unhealthy foods like ice cream. The growth in popularity of easily
substitutable foods, such as frozen yogurt, has also affected the industrys revenue coming from ice cream shops. Bagel shops Bagel shops are the fourth-largest product segment in the industry. In 2013, bagel shops are estimated to make up about 5.0% of industry revenue. The proportion of industry revenue that comes from bagel shops has increased during the past 10 years due to the growing popularity of bagels and the introduction of bagels to new markets. Frozen yogurt Frozen yogurt shops are the fifth-largest industry product segment, and they are estimated to make up about 2.0% of industry revenue in 2013. The proportion of industry revenue that comes from frozen yogurt shops has strongly increased in the past 10 years. This is mainly due to the growing popularity of frozen yogurt chains such as Pinkberry, Red Mango and Yogurtland.
Demand Determinants
Demand for coffee and snack shops is driven by a number of factors including household income, consumer confidence, attitudes to health and propensity to eat out, rather than at home. Income and expenditure This industry is sensitive to factors that affect the growth in household disposable income because disposable income is required to finance restaurant and dining expenditures. Household disposable income growth is affected by changes in labor market growth (i.e. employment rates), in tax and interest rates, high and increasing gas prices, and changes in consumer confidence. The decline in industry revenue during the recession illustrates the extent to which the industrys performance is reliant on
positive income levels, high consumer confidence and a robust economy. For example, lower consumer confidence, weak levels of disposable income and rising unemployment tightened household budgets, encouraging people to save more and spend less by cooking at home rather than eating out. Demographics The changing age structure of the population influences industry demand. Two broad demographic trends have encouraged industry growth in the past decade. Firstly, the baby-boomer generation has access to higher disposable incomes than previous generations, meaning they are more likely to spend on eating out. Also, young adults aged between 18 and 30 years old
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Products & Markets
Demand Determinants continued
are delaying marriage and having children compared to previous generations; this allows them to spend a greater proportion of their income on eating out. Young adults in this age bracket spend more of their food budget on eating out than any other age group. Health and lifestyle Rising health consciousness has a direct effect on coffee and snack shop operators as consumers have become increasingly concerned about fat content, fried foods and salt content, especially when dining out. As such, rising concerns regarding the nutritional
content and value of cafe meals is likely to influence the demand for certain foods on cafe menus, encouraging industry players to alter their product mix. It is also expected to affect overall performance for industry players selling unhealthy food on menus, such as fried food or hamburgers. Convenience, value for money and time are other important demand determinants. Recent social trends such as busy lifestyles, heavy workloads and long working hours have helped boost demand for coffee and snack shops as time-poor consumers look to cut down cooking time.
Major Markets
Major market segmentation (2013)

Lowest quintile of incomes
8.5%
Second quintile of incomes
12.5%
Highest quintile of incomes
39.0%
Middle quintile of incomes
16.0%
Total $29.0bn
Fourth quintile of incomes

24.0%
The major markets for the Coffee and Snack Shops industry can be segmented based on a number of factors including income, age, geographic location and family structure. Given the discretionary nature of the industry, an indication of major markets can be inferred on the basis of annual expenditure on food and beverages consumed outside the home. According to the US Census Bureau, the average consumer spends about 5.3% of their annual expenditure on food and
beverages consumed outside the home. The level of spending differs between products such as coffee, bagels and ice cream. Spending also differs between locations, seasons, and restaurant or store type; therefore, this segmentation of spending is not true of all industry products. An estimated 39.0% of industry demand comes from consumers in the nations highest income quintile. In 2011 (the latest available data), the average
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Products & Markets
Major Markets continued
consumer in the highest income bracket spent $5,163.0 on food and beverages consumed outside the home, according to the US Census Bureau. On the other hand, those in the lowest income quintiles often need to make significant sacrifices in order to afford meals away from home. The average consumer in the lowest income quintile spent $1,099.0 on out-of-home food consumption in 2011. The three middle-income quintiles represent more than 50.0% of industry demand, showing how important the middle-class consumer is to the
industrys performance. While these consumers dont typically spend big on luxury food items, they contribute to steady demand for middle-range products in coffee and snack shops. The industrys major markets distribution has not changed dramatically over time as spending patterns within income brackets are relatively established. There was some tightening of budgets during the recession, but this occurred across all demographics, so it didnt influence the industrys major markets distribution.
International Trade
As a retail industry, the Coffee and Snack Shops industry is not technically engaged in importing or exporting products, so international trade is not relevant to the industry. However, a number of industry players have overseas operations and earn a significant portion of their revenue
from abroad. Given the mature stage of this industrys life cycle in the domestic market, and changes in customer profiles and tastes, many major operators are seeking to increase their growth in revenue and earnings through further global expansion.
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Products & Markets

Business Locations 2013
West
AK
0.5
New England Great Lakes

MN
MidAtlantic
MI
2.9
ME
0.7
WA
4.6
OR
2.3
Rocky Mountains ID
0.5 0.6
MT
ND
0.2
SD
0.3
Plains
IA
0.8
1.7
1 2 3 NY 7.8 5 4 6 7 8
WI
1.3
PA
4.1
WY
0.2
West NV
0.9
NE
0.6
IL
3.7
IN
1.5
OH
3.4
UT
0.7
CO
2.0
KS
0.7
MO
1.3
KY
0.6
WV VA 2.1
0.3
NC
2.0
CA
16.9
OK AZ
1.7 1.0
AR
0.4
Southeast
1.0
TN
SC
0.8
NM
0.5
Southwest
TX
5.7
MS
0.4
AL
0.6
GA
1.8
LA
1.1
FL
4.5
West
HI
0.7
Additional States (as marked on map) 1 VT

0.2 1.8
Establishments (%) Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
2 NH
0.8
3 MA
4.3
4 RI
0.8
5 CT
6 NJ
4.1
7 DE
0.3
8 MD
1.6
9 DC
0.4
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Products & Markets
Business Locations
The industrys business locations are distributed according to the population. Because the industry provides quick meals to consumers, industry establishments need to be located near their customer base. The West region contains the highest number of establishments, with 26.0% of the industry total. This high percentage is due to the large population of the region (17.0%) and the fact that the region is a tourism and business hub. Other regions with a significant number of establishments include the Mid-Atlantic (18.4%), the Great Lakes (12.8%) and the Southeast (15.6%). Again, these tend to follow population trends. States with the highest proportion of establishments include California (16.9%), New York (7.8%), Texas (5.7%), Florida (4.5%) and Washington (4.6%). There is a larger share of establishments in the Great Lakes, New England and Plains regions, compared to the Southeast and Southwest regions. This is due to the fact that the Southeast and Southwest have higher concentrations of franchised establishments and a
Establishments vs. population

30
20
%
10 0 Great Lakes Mid-Atlantic New England Rocky Mountains Southwest West Southeast Plains
Establishments Population
higher share of employment and revenue. The industry also tends to have a higher concentration in areas where households have an annual income of at least $50,000.0 per year. Therefore, this level of geographic concentration is not expected to change in the near future.
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Competitive Landscape
Market Share Concentration
Level Concentration in this IBISWorld estimates that in 2013, the top four players in this industry account for about 64.8% of the available market share, providing this industry with a medium level of concentration. Given the diversity of snack and beverage styles, as well as industry operations, nearly 48.0% of establishments are smallbusiness operators with nine or fewer employees, according to the US Census Bureau. An additional 52.0% of establishments employ between 10 and 99 staff members. There is also a small number of extremely large chain and franchised operators. For example, Starbucks and Dunkin Brands make up more than 60.0% of industry market share, giving them considerable market Having a clear market position Having a clear market position against competitors in the limited-service industry and other food-service operators is a necessity. Effective cost controls Cost controls with minimal waste are important in this low-margin industry, particularly related to food inputs. Ability to franchise operations Franchising in the United States and abroad is now a significant component of this industry, and it can provide significant support to owners.
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
industry is M edium
power in determining industry trends and creating a formidable barrier for nonfranchised players. The industrys concentration has increased recently because of the increase in acquisitions, which indicates that companies are making a concerted effort to increase profitability with larger portions of market share. Between 2008 and 2013, establishments and enterprises have experienced muted growth, which has caused a marginal increase in industry concentration. The level of industry concentration is expected to continue to increase in the five years to 2018, though the industry will remain somewhat fragmented. Product is sold at high-profile outlets It is important to have high-profile locations for stores, with easy access, parking and drive-through services for customer convenience and service. Market research and understanding Firms need to monitor market and consumer needs, wants and desires, particularly in relation to demand for healthy foods. Access to multiskilled and flexible workforce Firms need to have access to a good supply of skilled, seasonal workers to meet peak demand periods.
Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
Cost Structure Benchmarks
The Coffee and Snack Shops industry has recently struggled with subdued revenue growth, as demand for the industrys services have fallen due to the global recession. The industry has high product turnaround but low profit margins, which makes it susceptible to any adverse changes in demand. Changes in household preferences, household
disposable incomes, and other health and food safety concerns influence industry demand. Profit Industry profit is based on earnings before interest and taxes recorded by industry operators. Profit varies between players depending upon the size of the
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Cost Structure Benchmarks continued
firm. Larger operators, such as Starbucks, generally benefit from economies of scale; however, the highly competitive nature of the industry means most operators can only access slim profit margins. The types of products an operator sells also influences profit. For example, Starbucks has added a number of complementary food items to its menu in an attempt to access higher profit margins. IBISWorld estimates that in 2013, the average industry firm will obtain profit equivalent to 5.8% of revenue. Purchases Typically, the largest costs for the industry are the purchases of food and beverages sold in shops. Food and beverages are usually purchased from wholesalers, particularly from operators that can guarantee prompt delivery and the high quality. Fluctuations in the cost Sector vs. Industry Costs
Average Costs of all Industries in sector (2013) 100
of food and liquor significantly impact industry revenue and profit. In the short term, many of these cost increases cannot be passed on to the consumer or client; therefore, menus, portion sizes and other food service inputs must be monitored. The industry must also monitor wastage. Fluctuations in demand, and the oversupply of meals or excess ingredients that cannot be used, negatively impact industry operators. IBISWorld estimates purchases will account for 38.0% of an average firms revenue in 2013. Wages Wages also represent a high cost for operators due to the labor-intensive nature of food preparation, cooking, serving and clean up. During the five years to 2013, labor costs have increased; these costs include wages and benefits, such as health, workers compensation and unemployment insurance. Menu
Industry Costs (2013)
7.0 22.0
5.8 26.5
80
Percentage of revenue
60
Profit Wages Purchases Depreciation Marketing Rent & Utilities Other
38.1
40
38.0 4.6
4.1
20
2.8 7.6 18.4
3.5 9.0 12.6

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20
Cost Structure Benchmarks continued
prices and industry profitability are affected by labor intensity because cost increases cannot simply be passed directly onto consumers in the form of higher prices. Wage costs are expected to account for 26.5% of an average firms revenue in 2013. Depreciation Operators in the industry are subject to capital expenditure, such as commercial kitchen equipment, store fixtures and fittings, furniture, and crockery and cutlery. Depreciation is much higher for operators that own the building in which
they operate; consequently, during the past decade, the trend has been for operators to rent, rather than own, their stores. For this reason, depreciation has declined as a proportion of industry revenue and is expected to account for 4.6% of total revenue in 2013. Rent and utilities Rent and utilities expenses are high for the industry because of the need for locations in high-traffic areas with high visibility. Therefore, rent and utilities expenses are expected to equal 9.0% of an average firms revenue in 2013.
Basis of Competition
Level & Trend ompetition C
in this industry is Highand the trend is I ncreasing
There is significant price-based competition within this industry; however, coffee, snack and other quickservice establishments also compete on the basis of location, food quality and consistency, style and presentation, food range, variety and service. Franchised, multiestablishment and other operators also compete with each other. While franchised and multiestablishment operators account for a small portion of establishments, these operators account for the majority of industry revenue. Establishments located in the same, general geographic area or in food courts at malls and airports must also compete with each other. Food courts and other dining hubs have become
increasingly popular in recent years. The nutritional value of the food sold in these areas has become increasingly important to customers. External competition Industry competition tends to arise from other food service areas. This includes fast-food restaurants, and independent and chain full-service restaurants that offer take-out services. These restaurants can sometimes provide a more friendly dining experience, as guests are able to directly interact with the owners or the chef. Other competition is derived from consumers deciding to cook more in-home meals, which occurs particularly during difficult economic times.
Barriers to Entry
Level & Trend arriers to Entry B
in this industry are Lowand I ncreasing
Barriers to entry are low in this industry, given that an operator can lease premises, equipment, furniture and fittings, which lowers the initial capital costs, outlays and borrowings for the industry. The top four players are not expected to dominate this widespread, diverse market in 2013, which is an indication of the fragmented, small-
business nature of this industry. Consequently, there is limited majorplayer dominance within the industry. Entry can also occur through signing a franchise agreement, which includes outfitting and equipment, as well as training and computer systems. Franchisors also provide food and beverages and some financial and
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Barriers to Entry continued
accounting functions for a proportional share of revenue from their franchisees. This lowers operational costs and can minimize some risks, especially for inexperienced persons entering the industry. However, individual franchisees still carry much of the day-to-day operational and management risks associated with their own business. There is significant competition among the major franchised companies to obtain suitable sites, which has increased the cost of many prime sites. However, some major franchised operators are now colocating within an area or single building, shopping centers or malls to lower costs. While industry regulation and licensing is significant,
Barriers to Entry checklist

Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance
Level High Medium Mature Medium Medium Medium None

including health and food-service regulations, liquor licensing, and general occupational health and safety issues, these regulations do not create any insurmountable barriers to enter or operate in this industry.
Industry Globalization
Level & Trend lobalization G
in this industry is Lowand the trend is I ncreasing
Many major operators have a high level of globalization due to the mature stage of the domestic industry, leading these firms to expand internationally in order to increase revenue and earnings. These include companies like Starbucks and Dunkin Brands. There are, however, no major foreigncontrolled operators in the domestic market. It is important to note, that before being acquired by the Carlyle
Group and Bain Capital, Dunkin Brands was owned by British and French companies. It is expected that the industry will be subject to an increasing level of globalization in the coming years. IBISWorld anticipates US operators will continue to enter the international market, particularly in countries and regions with promising growth, such as China.
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Major Companies
Major players
(Market share)
Starbucks Corporation | Dunkin Brands Inc. | Other Companies
Dunkin Brands Inc. 24.6%
38.7%
Other Starbucks Corporation 36.7%
Player Performance Starbucks Corporation Market share: 36.7%
Starbucks Corporation commenced operations in Seattle, WA, in 1971, as a specialty fresh-ground coffee retailer and coffee-shop operator. The company sells coffee, pastries, coffee accessories and, more recently, breakfast options and sandwiches. At the end of fiscal 2012 (year-end September), total company stores numbered 18,066, compared with 17,003 in 2011. Starbucks business model relies on a mixture of companyoperated and licensed stores, which are operated by external licensees that pay an annual royalty and license fee to Starbucks. About 52.0% of Starbucks stores are company-operated, with these stores accounting for about 79.0% of the companys $13.3 billion in global revenue in 2012. In 2012 Starbucks employed about 120,000 people in the US, and about 113,000 of these employees worked in company-operated stores.
Starbucks stores vary in size and format, and are typically situated in high-traffic, high-visibility locations. Store settings include downtown or suburban retail centers, and university campuses, office buildings and offhighway locations. Starbucks has also started offering drive-through locations to further leverage the chains convenience factor. The Starbucks brand was built on coffee, and the company still offers a broad range of regular and decaffeinated coffee beverages, along with espresso drinks. The company has also expanded into a number of product lines, and it now serves a large assortment of food items, fresh juice and packaged goods. In the five years to 2013, Starbucks has sought to further diversify its product offerings with a number of multimilliondollar strategic acquisitions. In
Starbucks Corporation (US industry-specific segment) financial performance

Year* 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13**
*Year-end September; **Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
Sales ($ million) 8,624 8,141 8,943 9,205 10,007 10,654
(% change) 7.1 -5.6 9.9 2.9 8.7 6.5
Operating Income ($ million) 419 468 1,186 1,360 1,503 1,705
(% change) -50.7 11.7 153.4 14.7 10.5 13.4
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Major Companies
Player Performance continued
November 2011, Starbucks acquired Evolution Fresh, a natural fruit and vegetable juice maker. A year later, in November 2012, the company acquired Teavana. Most recently, in June 2013, Starbucks purchased bakery chain La Boulange with the aim of integrating the companys baked goods into its menu. Financial performance In the five years to fiscal 2013, Starbucks US industry-specific sales are expected to grow at an average rate of 4.3% per year to $10.7 billion. In 2009, during the height of the recession, company sales fell due to customers cutting back on spending because of falling disposable
incomes. Consequently, by the end of 2009, Starbucks had closed 800 company-operated stores in the United States. Between fiscal 2010 and 2012, however, sales grew strongly due to a rise in global comparable-stores sales, which was brought on by an increase in the number of transactions and higher average spending per transaction. Starbucks operating profit nearly tripled in 2010, compared to 2009, hitting historic highs as store attendance and spending rates soared. Starbucks also started offering free Wi-Fi internet access to its customers, attracting more store traffic, increasing the number of potential purchases.
Player Performance Dunkin Brands Inc. Market share: 24.6% Industry Brand Names
Dunkin Donuts Baskin Robbins
Dunkin Brands Inc. is an international donut, coffee and ice cream retailer that sells these products under its Dunkin Donuts and Baskin-Robbins brands. Dunkin Brands has 17,495 locations in 55 countries, including 9,742 locations in the United States. A number of privateequity companies, including Bain Capital, The Carlyle Group and Thomas H. Lee Partners, own Dunkin Brands. In July 2011, Dunkin Brands successfully underwent an IPO (initial public offering)
in order to double its US outlets to 15,000, with shares rising 47.0% on the first day of trading. More than 99.0% of Dunkin Donuts and Baskin-Robbins stores are franchised. Dunkin Donuts was founded in Quincy, MA, in 1950, and today, it is one of the largest coffee and baked-goods chains in the world. According to the company website, it sells more than one billion cups of coffee each year. The company has about 10,479 stores, of
Dunkin Brands Inc. (US industry-specific segment) financial performance

Year 2008 2009 2010 2011 2012 2013*
* Estimates SOURCE: COMPANY WEBSITE
Sales ($ million) 5,572 5,706 5,921 6,433 6,774 7,150
(% change) N/C 2.4 3.8 8.6 5.3 5.6
Operating Income ($ million) 273 331 403 482 542 644
(% change) N/C 21.2 21.8 19.6 12.4 18.8
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Major Companies
Player Performance continued
which about 7,306 are in the United States. Baskin-Robbins was founded in 1946 in Glendale, CA, and is the worlds largest hard-serve ice cream franchise, with 6,980 outlets in 35 countries. Baskin-Robbins has about 2,463 outlets in the United States, and develops and sells a full range of frozen ice cream products, serving more than 3.7 million people each week. Financial performance In the five years to 2013, Dunkin Brands US-specific sales are expected to grow at an average annual rate of
5.1% per year to $7.2 billion. Between 2010 and 2012, Dunkin Donuts US sales grew in response to same-store sales growth and new store openings. Same-store sales growth was driven by increased transaction counts and larger average sales. Sales of cold beverages and breakfast sandwiches have been particularly strong during the five years to 2013, and sales of these products have been boosted by limited-time offerings. The companys high-growth franchise model is expected to lead to higher than average growth in the five years to 2018.
Other Companies
Krispy Kreme Doughnut Corporation

Estimated market share: 2.0% Founded in 1937, Krispy Kreme Doughnut Corporation is a branded retailer and wholesaler of donuts and packaged sweets. The company produces more than 20 varieties of donuts, as well as an array of coffees and other beverages. Krispy Kreme generates revenue from companyowned stores, domestic franchise stores and international franchise stores. As of July 2013, the company had 97 company stores, 142 domestic franchise stores and 509 international franchise stores in 21 countries. Krispy Kreme
employs about 3,500 people, of which about 2,670 people are full-time employees. In the five years to fiscal 2013, US system-wide sales are expected to grow at an annualized rate of 0.9% to $576.0 million.
Einstein Noah Restaurant Group
Estimated market share: 1.5% Einstein Noah Restaurant Group includes the brands Noahs New York Bagels, Einstein Bros. and Manhattan Bagel. It is the largest operator, franchisor and licensor of bagel specialty restaurants in the United States, and in 2012, the company had
Krispy Kreme Doughnut Corporation (US segment) financial performance

Year* 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13** Sales ($ million) 550 478 455 483 532 576 (% change) N/C -13.1 -4.8 6.2 10.1 8.3 Revenue ($ million) 382 332 314 324 362 390 (% change) N/C -13.1 -5.4 3.2 11.7 7.7 Net Income ($ million) -52.0 -3.0 0.0 8.0 160.0 N/A (% change) 59.5 -94.2 N/C N/C 1,900.0 N/C
*Year-end January; **Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
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Major Companies
Other Companies continued
816 restaurants in 39 states. Einstein Bros. and Noahs restaurants are predominantly company owned or licensed, while Manhattan Bagel restaurants are predominantly franchised. Company stores sell fresh bagels and other bakery items, which are baked on site and include: made-toorder breakfast and lunch sandwiches on a variety of bagels, breads or wraps; gourmet soups and salads; assorted pastries; premium coffees and an assortment of snacks. In 2012, the company had 6,912 employees, 6,617 of whom were restaurant personnel. That same year, the company generated about 90.1%
total revenue from restaurant sales at Einstein Bros. and Noahs New York Bagels, and restaurant sales during breakfast hours generated about 66.0% of the years revenue. In the five years to 2013, company revenue is expected to grow at an average rate of 1.7% per year to $450.0 million. Revenue grew 2.9% to $424.0 million in 2011 and an additional 0.7% in 2012 to $427.0 million. In order to combat the recession, the company launched a 400-calorie breakfast menu, a premium Frozen Strawberry Lemonade, a $1.99 Chicken Bagel wrap, the Saladwich Sandwich, and it reintroduced Bagel Poppers.
Einstein Noah Restaurant Group financial performance

Year 2008 2009 2010 2011 2012 2013*
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
Revenue ($ million) 413 409 412 424 427 450
(% change) 2.5 -1.0 0.7 2.9 0.7 5.4
Net Income ($ million) 21.0 72.0 10.0 13.2 12.7 13.0
(% change) 61.5 242.9 -86.1 32.0 -3.8 2.4
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Operating Conditions
Capital Intensity
Level The level An industrys level of capital intensity is determined by the ratio of capital to labor costs. The Coffee and Snack Shops industry has a medium level of capital intensity, and in 2013, IBISWorld estimates that for every $1.00 spent on wages, industry operators will spend $0.17 on capital investment. The industry relies heavily on labor because of the need for personal, face-toface service and labor input in all areas including acceptance of deliveries, order taking, serving and cleaning, and management. Some of these activities require significant training, while others are relatively unskilled occupations. Start-up costs can be relatively high for a new industry entrant, however, many
Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital units per labor unit 0.5 0.4 0.3 0.2 0.1 0.0 Economy Accommodation Coffee & Snack and Food Shops Services
Capital intensity
of capital intensity is M edium
Dotted line shows a high level of capital intensity
coffee and snack shops lease their premises and equipment to lower the
Tools of the Trade: Growth Strategies for Success

New Age Economy Recreation, Personal Services, Health and Education. Firms benefit from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation. Investment Economy Information, Communications, Mining, Finance and Real Estate. To increase revenue firms need superior debt management, a stable macroeconomic environment and a sound investment plan.
Capital Intensive
Labor Intensive
Single Location FullService Restaurants

Chain Restaurants Specialty Food Stores Coffee Production Frozen Food Wholesaling
Old Economy
Traditional Service Economy Wholesale andRetail. Reliant on laborrather than capital to sell goods. Functions cannot be outsourced therefore firms must use new technology or improve staff training to increase revenue growth.
Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand firms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.
Change in Share of the Economy
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Capital Intensity continued
initial capital outlay. Also, many operators now have computerized order-taking systems in which data is
entered by table number to assist employees with efficiency and accuracy when taking orders and payments.
Technology & Systems

Level The level
of Technology Change is M edium
According to a Restaurant Technology Study by Hospitality Technology and Deloitte & Touche LLP, industry operators regularly leverage technology to reduce labor and food costs to increase sales. They also use it to improve business processes, support growth, maintain current operations and improve meal experiences. New systems are designed to ensure quality service and reduce consumer wait time. Parent companies have also redesigned kitchen layouts and ordering systems in order to reduce food preparation times. This has involved
technology that connects drive-through customers to kitchens, allowing cooks to hear what orders are coming through. Also, most quick-service operators have installed point-of-sale systems in stores after research showed that it speeds up service, leading to larger purchases on average.drive-thrus have improved correct delivery and allowed customers to go back to face-toface ordering. Most quick-service operators have installed point-of-sale systems in their stores after research showed that it speeds up service, leading to larger purchases on average.
Revenue Volatility
Level The level
of Volatility is M edium
Industry revenue volatility is low to medium due to the significant growth in demand that continues to come from the high-income households. In the five years to 2013, revenue volatility is expected to equal an average of 4.0%, including industry revenue growth as high as 3.1% in 2011 and 2012, and a
A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment. When a firm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.
decline as severe as 6.6% in 2009. The industry also offers a range of food types, quality, menu prices and locations to suit consumers changing tastes and needs. The fact that certain product segments, such as coffee shops and frozen yogurt, have experienced strong growth within the past ten years
Volatility vs Growth
1,000
Hazardous
Rollercoaster
Revenue volatility* (%)
100 10 1 0.1
Stagnant
30 10 10 30 50
Blue Chip
70
Five year annualized revenue growth (%)

* Axis is in logarithmic scale
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Revenue Volatility continued
has also increased the industrys level of volatility. Also, the general increase in health consciousness, has worked to
the advantage of some industry product segments and to the detriment of others.
Regulation & Policy

Level & Trend he level of T
Regulation is Mediumand the trend is I ncreasing
The Coffee and Snack Shops industry is subject to a medium and increasing level of regulation. This includes franchise promotions and sales, regulations by the federal and state governments, minimum-wage regulations, employee benefits and conditions, workers insurance and the payment of health insurance coverage. Many states have also legislated smoking bans in restaurants. The US Food and Drug Administrations (FDA) Model Food Code, which is a best-practice guide to food handling and presentation,
applies to this industry and is updated each year. The FDA Nutritional Value applies as well. Since 1996, the FDA regulations have set standards for nutritional values of individual foods and meals. If claims like low fat or heart healthy are on a menu, an owner must be able to demonstrate to officials that there is a reasonable basis for the claim. For instance, the meal may be based on a recipe from a health association or a recognized dietary group. Complete nutritional information, however, is not required to be on menus.
Industry Assistance
Level & Trend he level of T
Industry Assistance is N oneand the trend is S teady
A state-based and occasionally a separate city or county sales tax, or use or consumption tax applies to industry products. The sales tax is added to the selling price of all immediate consumption foods, including eat-in,
take-out or to-go meals. Some local state exemptions may apply, such as taxes on ice cream or ice milk sold for take-out. All prices quoted in stores exclude the sales tax component, which is added during payment.
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Key Statistics
Industry Data
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank Revenue ($m) 19,817.8 23,330.1 25,233.9 26,806.9 27,705.9 25,877.2 26,652.2 27,465.2 28,317.1 29,042.6 30,235.7 31,122.8 32,457.1 33,898.6 35,126.2 10/24 297/1272 Industry Value Added ($m) 7,267.5 8,177.7 8,852.1 9,814.2 9,893.7 8,344.6 9,931.3 10,132.6 10,515.1 10,730.3 11,062.2 11,416.6 11,753.0 12,196.7 12,618.8 10/24 234/1272 Establishments 40,650 42,909 45,360 48,852 51,214 50,837 51,420 52,808 54,181 55,428 56,758 57,723 59,050 59,936 61,494 6/24 129/1271 Enterprises Employment 30,841 381,664 32,753 412,573 33,908 453,429 35,065 496,224 35,837 553,269 35,748 533,662 36,774 506,326 37,620 527,592 38,936 549,223 40,144 562,954 40,906 570,835 41,683 582,822 43,101 600,307 43,877 608,111 45,281 623,314 6/24 8/24 142/1271 70/1272 Exports ---------------N/A N/A Imports ---------------N/A N/A Wages ($m) 5,424.5 5,704.8 6,127.0 6,570.6 7,206.2 6,999.0 7,212.8 7,413.5 7,570.0 7,709.9 7,887.5 8,148.7 8,345.0 8,637.3 8,930.5 10/24 195/1272 Domestic Demand N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Consumer Spending ($b) 8,515.8 8,803.5 9,054.5 9,262.9 9,211.7 9,032.6 9,196.2 9,428.8 9,604.9 9,802.2 10,025.3 10,299.7 10,624.7 10,984.4 11,285.1 N/A N/A
Annual Change
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank Revenue (%) 17.7 8.2 6.2 3.4 -6.6 3.0 3.1 3.1 2.6 4.1 2.9 4.3 4.4 3.6 15/24 703/1272
Industry Value Added (%) 12.5 8.2 10.9 0.8 -15.7 19.0 2.0 3.8 2.0 3.1 3.2 2.9 3.8 3.5 18/24 794/1272
Establishments (%) 5.6 5.7 7.7 4.8 -0.7 1.1 2.7 2.6 2.3 2.4 1.7 2.3 1.5 2.6 8/24 381/1271
Enterprises Employment (%) (%) 6.2 8.1 3.5 9.9 3.4 9.4 2.2 11.5 -0.2 -3.5 2.9 -5.1 2.3 4.2 3.5 4.1 3.1 2.5 1.9 1.4 1.9 2.1 3.4 3.0 1.8 1.3 3.2 2.5 7/24 8/24 243/1271 403/1272
Exports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Imports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Wages (%) 5.2 7.4 7.2 9.7 -2.9 3.1 2.8 2.1 1.8 2.3 3.3 2.4 3.5 3.4 17/24 684/1272
Domestic Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Consumer Spending (%) 3.4 2.9 2.3 -0.6 -1.9 1.8 2.5 1.9 2.1 2.3 2.7 3.2 3.4 2.7 N/A N/A
Key Ratios
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sector Rank Economy Rank IVA/Revenue (%) 36.67 35.05 35.08 36.61 35.71 32.25 37.26 36.89 37.13 36.95 36.59 36.68 36.21 35.98 35.92 10/24 516/1272
Imports/ Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Exports/Revenue (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Revenue per Employee ($000) 51.92 56.55 55.65 54.02 50.08 48.49 52.64 52.06 51.56 51.59 52.97 53.40 54.07 55.74 56.35 20/24 1199/1272
Wages/Revenue (%) 27.37 24.45 24.28 24.51 26.01 27.05 27.06 26.99 26.73 26.55 26.09 26.18 25.71 25.48 25.42 9/24 370/1272
Employees per Est. 9.39 9.62 10.00 10.16 10.80 10.50 9.85 9.99 10.14 10.16 10.06 10.10 10.17 10.15 10.14 14/24 750/1271
Average Wage ($) 14,212.76 13,827.37 13,512.59 13,241.20 13,024.77 13,115.04 14,245.37 14,051.58 13,783.11 13,695.44 13,817.48 13,981.46 13,901.22 14,203.49 14,327.45 18/24 1216/1272
Share of the Economy (%) 0.06 0.06 0.07 0.07 0.08 0.07 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08 10/24 234/1272
Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.
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Jargon & Glossary
Industry Jargon
BABY BOOMERSThe demographic of Americans born between 1946 and 1964. FRANCHISEA store that uses a well-known firms business model, including their trademark and goods, for a fee. This is an alternative to chain stores, which share a brand and a central management.
POINT OF SALE (POS)A system used at checkout in retail stores using computers and cash registers to capture transaction data at the time and place of sale.
IBISWorld Glossary
BARRIERS TO ENTRYHigh barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry. CAPITAL INTENSITYCompares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor. CONSTANT PRICESThe dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the real growth or decline in industry metrics. The inflation adjustments in IBISWorlds reports are made using the US Bureau of Economic Analysis implicit GDP price deflator. DOMESTIC DEMANDSpending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports. EMPLOYMENTThe number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry. ENTERPRISEA division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control. ESTABLISHMENTThe smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise. EXPORTSTotal value of industry goods and services sold by US companies to customers abroad. IMPORTSTotal value of industry goods and services brought in from foreign countries to be sold in the United States.
INDUSTRY CONCENTRATIONAn indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%. INDUSTRY REVENUEThe total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded. INDUSTRY VALUE ADDED (IVA)The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industrys contribution to GDP, or profit plus wages and depreciation. INTERNATIONAL TRADEThe level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%. LIFE CYCLEAll industries go through periods of growth, maturity and decline. IBISWorld determines an industrys life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industrys products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services. NONEMPLOYING ESTABLISHMENTBusinesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals. PROFITIBISWorld uses earnings before interest and tax (EBIT) as an indicator of a companys profitability. It is calculated as revenue minus expenses, excluding interest and tax.
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Jargon & Glossary
IBISWorld Glossary continued
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%.
WAGESThe gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.
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Coffee & Snack Shops in The US Industry Report

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Coffee & Snack Shops in the USJuly 2013 1

IBISWorld Industry Report 72221b

Coffee & Snack Shops in the US

29 Key Statistics 18 Competitive Landscape

4 Industry at a Glance 5 Industry Performance

30 Jargon & Glossary

20 Barriers to Entry 21 Industry Globalization

10 Industry Life Cycle

12 Products & Markets

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Coffee & Snack Shops in the USJuly 2013 2

About this Industry

Coffee & Snack Shops in the USJuly 2013 3

About this Industry

Similar Industries continued

Coffee & Snack Shops in the US July 2013

Annual Growth 08-13

Annual Growth 13-18

Revenue vs. employment growth

Starbucks Corporation 36.7%

Dunkin Brands Inc. 2 4.6%

Products and services segmentation (2013)

Key External Drivers

Frozen yogurt shops

Other snack shops

SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM

Mature Medium Medium None Medium

Medium Medium Low Low High

Coffee & Snack Shops in the USJuly 2013 5

will continue to add high-margin, trendy products to stores to stimulate growth

Key External Drivers

Coffee & Snack Shops in the USJuly 2013 6

Key External Drivers continued

Coffee & Snack Shops in the USJuly 2013 7

Cutting back continued

New products, new markets

Consolidation and profit

Coffee & Snack Shops in the USJuly 2013 8

Consolidation and profit continued

Coffee & Snack Shops in the USJuly 2013 9

Growth strategies continued

Establishments, employment and wages increase

Coffee & Snack Shops in the USJuly 2013 10

% Growth in share of economy

Company consolidation; level of economic importance stable

Coffee & Snack Shops

Coffee Production Single Location Full-Service Restaurants Specialty Food Stores

Frozen Food Wholesaling

Shrinking economic importance

% Growth in number of establishments

Coffee & Snack Shops in the USJuly 2013 11

Industry Life Cycle This industry is M ature

Coffee & Snack Shops in the USJuly 2013 12

Products & Markets

KEY SELLING INDUSTRIES

Products & Services

Products and services segmentation (2013)

Bagel shops Ice cream shops

Frozen yogurt shops

Other snack shops

Coffee & Snack Shops in the USJuly 2013 13

Products & Markets