Coffee Shops & Snack Bars

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 49,600 coffee shops and snack bars in the US sell non-alcoholic beverages, snacks, and related items for consumption on or near premises. Companies may specialize in bagels, beverages, confectionaries, cookies, donuts, frozen custard, ice cream, yogurt or pretzels. They may prepare food and beverages on site or resell goods purchased from third-parties. Formats include national and regional chains, franchises or licensed shops, and independent operators.

Competition from Alternative Sources

Coffee shops and snack bars compete with a variety of alternative sources, including fast food restaurants, grocery stores, and convenience stores.

Sensitivity to Food Trends

The food and beverage industry is subject to fads and trends which affect demand.

Industry size & Structure

The average coffee shop or snack bar operates out of a single location, employs 13-14 workers, and generates about $926,000 annually.

    • The coffee shop and snack bar industry consists of about 49,600 companies that operate 65,800 locations, employ about 681,500 workers and generate about $46 billion annually.
    • The industry is concentrated at the top and fragmented at the bottom. The top four firms account for 31% of industry sales; the top 50 firms account for 37% of sales.
    • Large companies include Starbucks, Dunkin' Brands (Dunkin' Donuts, Baskin Robbins), and Krispy Kreme Doughnuts. Some large chains have significant international operations.
                              Industry Forecast
                              Coffee Shops & Snack Bars Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 11, 2022 - Urban Restaurants Rebounding
                              • Tim Hortons is among those eateries experiencing an increase in sales and foot traffic as workers return to jobs in urban centers, Nation’s Restaurant News reported in November. The Canada-based coffeehouse’s Q3 2022 sales were down just 5% versus 2019 versus negative 40% in 2021. In New York City, where the office occupancy rate increased by more than 10% in September, Shake Shack is reaping the benefit. “We saw strong momentum coming out of Labor Day, as mobility and back-to-office trends broadly improved. It’s clear that our hometown in New York and other urban centers, things are improving with more people moving about,” Shake Shack CEO Randy Garutti told NRN. Individual city data from Placer.ai shows that some urban markets are exceeding the nationwide average, with foot traffic to offices in NYC, Denver, and Washington, DC tracking with, or exceeding the nationwide average since January 2022.
                              • Bellwether coffee chain Starbucks’ strong performance in 2022 attests to the resilience of the coffee sector, QSR reported in November. Fueled by a rise in average ticket size and number of transactions, Q4 2022 (ended October 2) revenue at the world’s largest coffee chain reached a historic high of $8.4 billion, up 11% from last year. Beverage customization options helped to drive ticket sales up in the quarter, Interim-CEO Howard Schultz told investors in an earnings call. An emphasis on cold beverages in Q4 strengthened customization and high-margin beverage flavor modifiers at the chain. While Starbucks has experienced more foot traffic than the wider coffee segment this year, its success demonstrates a sustained demand for coffee away from home despite challenging market conditions, QSR reports.
                              • Coffee and tea shops are considered to be at low risk of experiencing a pullback in consumer spending because they are relatively inexpensive – compared to other discretionary purchases – and an established part of many consumers’ daily routines. A market forecast from data and analytics firm GlobalData predicts that by the end of 2022 the value of hot coffee served in food service outlets will increase by 10.5% in the US, compared to its value in 2021. This applies especially to food service outlets in travel (11.7%) and restaurants (10.6%). GlobalData’s 2022 consumer surveys also revealed that the number of US consumers who claimed to spend a ‘high amount’ in coffee and tea shops only decreased by 1% in Q3 compared to the first three months of 2022, while other venues where people who spend a high amount on food and drink had decreased by 7% over the same period.
                              • A poor harvest in Brazil – the world’s largest exporter of coffee – is threatening to send coffee prices even higher, The Wall Street Journal reported in August 2022. Drought followed by frost on coffee plantations has hurt the arabica coffee bean crop, which is expected to be less than half of that in a good year. Arabica coffee futures rose sharply last year due in part to bad weather. Now a second year of unfavorable weather threatens to send prices even higher. Moreover, bad weather in neighboring Colombia, also a major coffee producer, has hurt coffee production there. Strong demand amid short supply also threatens to drive up the price of a cup of coffee at coffee trucks. The International Coffee Organization says global consumption will run ahead of production for a second year running, according to WSJ.
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