Market Research: QSR and Food Delivery Industry
Carry out market research on the quick service restaurant industry and the food delivery industry.
Questions to be answered: growth of the industry, expected growth, market drivers, market segmentation, market demographics and associated use statistics. This all with an emphasis around mobile phone app ordering.
IBIS graphs required and part of length requirements.
1. Market Opportunity
1.1 Coffee Shop Market Overview
Over the past five years, the Coffee and Snack Shops industry has been buoyed by increased consumer spending, driven by higher disposable incomes and greater confidence in the economic outlook. Demand for coffee and snack shops has increased at a faster rate than most segments of the food service sector, as consumers increasingly seek convenience at an affordable price. The industry has been given a boost by rebounds in consumer spending and the Consumer Confidence Index over the five years to 2016, which have increased at annualized rates of 2.4% and 10.4%, respectively. Over the five years to 2016, industry revenue is expected to increase an annualized 4.5% to $39.6 billion, including an increase of 3.6% in 2016. Key Market Drivers are:
? Coffee Consumption Rising: 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’ revenue goes up.
? Consumer Spending: Consumer spending has been rising steadily over the last 5 years, and is expected to continue.
? Healthy Eating Trend: There is a market trend gravitating toward lighter, healthier foods. Coffee shops are catering to this trend by offering low fat and soy milk options, as well as lighter snacks.
1.2 Growth of Independent Coffee Shops
Despite the overwhelming size of Starbucks, the gourmet coffee market has continued to expand. One of the fastest-growing segments of the industry over the past five years has been independent coffee shops targeting coffee connoisseurs with high-quality espresso, as well as siphoned and filtered coffee beverages. This trend, which has been termed “third-wave” or “specialty” coffee, considers coffee an artisanal product, rather than a commodity; the origin of the ingredients is important, much like wine. This mirrors trends in other countries, such as Australia, the United Kingdom and Scandinavia, where ordering a cup of coffee has become an experience in itself among many demographics.
Prominent third-wave coffee exponents such as Stumptown Coffee Roasters in Portland, OR and Intelligentsia Coffee in Chicago, both of which were acquired by Peet’s Coffee and Tea in 2015, have led the charge along with Blue Bottle Coffee in San Francisco by growing at annualized rates of more than 20.0%. Although specialty coffee remains small in comparison to the total industry, in part due to the higher price point that third-wave coffee commands, the segment has grown quickly over the past five years and has had a large influence on the major coffee chains. In fact, Starbucks has recently introduced its own brand of high-end coffee under the name Reserve to effectively compete with higher-end roasters in New York City and Seattle.
Product Offerings
The Coffee and Snack Shops industry includes a range of store types that generally promote and sell a specific snack or beverage, such as coffee, bagels, ice cream, frozen yogurt or cookies. The product mix for individual stores varies considerably; however, the industry average is weighted toward coffee shops such as Starbucks and Dunkin’ Donuts, due to their large market share. Both these chains generate well over 50.0% of their revenue from beverages, with Starbucks earning an estimated 75.0% and Dunkin’ Donuts earning 63.0% from beverage sales. Coffee beverages. Coffee is by far the largest product segment in the industry, accounting for an estimated 51% of industry revenue.
? Coffee: Industry operators produce a wide range of coffee products that are differentiated by strength, style, type of beans and type of milk. Traditionally the industry mainly serves brewed coffee at a low price point. Dunkin’ Donuts’ house coffee blend typically sells for about $2.00 per 20-ounce cup. Meanwhile, a 20-ounce cup of brewed coffee at Starbucks retails for a slightly higher price point of about $2.35. Over the past five years, higher-priced forms of coffee, such as espresso, siphoned and filtered coffee beverages, which typically retail for more than $3.00 per cup, have grown as a share of the coffee segment. The type of beans operators use has become a significant point of differentiation among smaller niche shops, with rare blends, fair trade coffee and organic beans becoming more popular. This trend has supported premium pricing across the segment and given rise to a greater number of independent operators. The number and form of iced coffee beverages has also grown over the past five years as brewing and serving techniques have improved, given rise to forms that do not compromise flavor, such as cold-brewed coffee. Iced coffee sales are largely seasonal, with demand much higher in warmer seasons.
? Other Beverages: Industry operators sell a range of other hot and cold beverages. Cold beverages include products such as milkshakes and iced teas. Coffee and snack shops also tend to sell bottled water, juices and a limited selection of carbonated drinks. Hot beverages include products such as tea, hot chocolates and chai lattes. These products provide an alternative to highly caffeinated drinks. A coffee shop may offer several types of teas. As with cold beverages, demand for this segment is seasonal. In warmer seasons, demand for hot beverages decreases. This segment has declined as a share of industry revenue over the past five years, outpaced by growth in coffee and food items.
? Food: The food segment includes snack items such as donuts, cookies, pastries, cookies, cakes, bagels and muffins, yogurt and ice-cream as well as full-meal food options like sandwiches, wraps, salads and fruit. The industry competes on the basis of speed of service; therefore, items that require more preparation time are not commonly found in coffee and snack shops. While sandwiches, salads and other lunch items do not sell in as large volumes as other products, they tend to be more expensive and thus boost revenue. Additionally, these items are positioned as complements to coffee and consumers rarely buy them without a beverage. The food segment has increased as a share of industry revenue over the past five years as coffee and snack shop owners have sought to promote the sale of higher margin food products. Consequently, the industry now competes directly with fast food and other restaurant operators.
The next table shows segmentation by product offerings:
1.3 Market Segmentation
As a mass market product, coffee appeals to all strata of incomes and ages. However, the top 20% of earners account for 37.8% of the revenue of coffee shops. The next figure shows the revenue by income level.
It is also quite clear that businesses account for a very small share of revenue of these stores. The top 60% of income levels account for 76.8% of revenue. Our marketing will be targeted at this segment of the population.
1.4 Market Demographics
Some key facts for the coffee consumer population are:
? 40% of 18-24 year-olds are drinking coffee every day as of 2012, growing from 31% in 2010.
? 54% of adults age 25-39 drink coffee every day as of 2012, up from 44% in 2010.
? 75% of all US adults drink coffee, and 58% report drinking coffee daily.
We can write this or a similar paper for you! Simply fill the order form!
