Published on 18/11/2016 by Punchmedia

Local Coffee Heads Overseas as Industry Grows

Fair trade coffee entrepreneur Will Young is taking his beans to Park City following a successful pop up experiment. After a successful residency is Seattle, Young decided it was time for his business to "take the next step" and establish a presence in the US. Young said the business' approach to growth had always been very considered, putting top priority on ensuring its brand values were preserved "100 per cent". Australia’s appetite for fine coffee has driven industry growth over the past five years. This love affair with coffee has helped the Coffee Shops industry maintain steady growth despite an uncertain economic environment. Industry revenue is forecast to grow at a compound annual rate of 4.0% over the five years through 2016-17. As coffee drinking has become further entrenched in the daily lives of many Australians, the number of coffee shop establishments has risen. The availability and range of coffees has also expanded. Industry revenue is expected to rise by 2.8% in 2016-17 to total $2.5 billion, as consumers continue to seek out coffee shop beverages.

Key trends

The Coffee Shops industry owes much of its success to several key social trends. Heavier workloads, longer working hours and increased sociability have all spurred demand for on-the-go consumption. This is especially true for convenience foods and beverages as time-poor consumers spend less time at home preparing meals and more time outside for work and leisure. Over the five years through 2016-17, smaller coffee houses have benefited greatly from increasing industry demand, with independent coffee shops with niche products outshining less popular coffee chains.

Profitability

The Coffee Shops industry exhibits relatively healthy profit margins due to high turnover and low input costs. Coffee shops have sought to relocate to higher density inner-city locations to drive store traffic and compete for more customers. In an effort to increase market share, operators have increased their efforts to improve quality. Industry players have invested heavily in hiring more experienced baristas to push quality up and falling purchase costs have provided support for industry profit.

Industry participation

Over the past five years, the industry has struggled to keep up with rising coffee consumption. As a result, the number of enterprises has increased sharply. More coffee shops are springing up as consumers seek variety and new coffee experiences. Industry enterprises are expected to grow by a compound annual rate of 3.8% over the five years through 2016-17. To support the rise in enterprise numbers, industry employment has also grown strongly, increasing by an estimated annualised 3.3% over the period. However, as smaller coffee shops become more widespread, independent operators are shifting their focus to hiring fewer, higher skilled baristas in an effort to increase efficiency, decrease wages and boost profitability.  

punchmedia

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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