Coffee Industry Analysis Essay

2324 Words Jan 20th, 2014 10 Pages
Grinder’s Coffee Shop and the Coffee Industry

Primary Company:

Grinders Café

Competitors:

1-Italian Gourmet Market
2-Starbucks
3-Port City Java
4-Dunkin Donuts

1. The Coffee Shop Industry Analysis:

Threat of New Entrants:
The coffee industry is one of the world’s largest commodities, produced in over 70 countries and employing nearly 20 million people. The United States accounts for approximately 20,000 coffee shop businesses with revenues totaling $10 billion in 2011 and on an upward trend, according to the Small Business Development Center (SBDC). Industry analysis, conducted in 2012, found the coffee industry to be controlled by the top 50 companies, which account for 70% of the sales. The remaining 30% of
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This forced suppliers to raise prices, which directly impacted distributors, retailers and customers.

Threat of Substitute Products:
Coffee sales accounts for 83.3% of the total U.S. hot beverage market and are expected to increase through 2015 at an annual rate of 2.7%. Tea is the coffee industries leading competitor but raises little concern for product substitution despite the expected annual growth rate of 3.1% by 2015. Recent studies at Vanderbilt University’s Institute for Coffee Studies, dismissed many of the health concerns associated with the consumption of coffee, such as cancer and high blood pressure. Dr. Tomas DePaulis concluded, “Overall, the research shows that coffee is far more healthful than it is harmful.” Other studies from UCLA, USC, Harvard, and Brigham also support the newly accepted philosophy of healthy coffee. The positive health risk promotes the purchasing and consumption of coffee, deterring customers from searching for alternative products. This supports the upward trend of coffee sales and removes concerns for alternative beverages negatively impacting the coffee industry.

2. Service Strategy:
The coffee shop industry demands quality service, which makes it essential for a firm in the industry to clearly define and implement customer’s expectations throughout their service strategy. Development of

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