U.S. coffee franchise market was estimated to account for a market value of USD 11.27 billion in 2017 and is expected to exhibit a significant growth over the forecast period owing to increasing spending power of consumers. The increasing demand for small luxury recreation places generated mostly by the young generation casual meetings and recessions, are splurging the growth of the U.S. coffee franschising sector.
U.S. coffee franchise market revenue split, by product type, 2017 (% share)
U.S. coffee industry has evolved significantly over the past few years driven by the robust consumption by the millenials. The increasing discretionary income of the U.S. millenials is resulting in the expansion of coffee shops and franchising systems. It is estimated that one third of the American population drinks coffee daily, half of the population drinks coffee once a week and two third of the population drinks occasionally. Thus, average American spending on coffee results to USD 20 each week. Moreover, coffee is the one of the popular beverage U.S. according to the National Coffee Association, in 2017 about 46% of the consumers drink drip brewed coffee. However, the drip coffee drinkers are declining in number. Today the U.S. population is more inclined toward the gourmet or speciality coffee.
According to the National Coffee Association’s National Coffee Drinking Trends report, the daily consumption of espresso based beverage has tripled since 2008. The gourment coffee consumption increased by 19% to 41% among the 25-39 age group. Moreover, the young generation is continuously driving the coffee trend of inclination towards the gourmet coffee. For insance, the gourmet coffee consumption by 18-24 years age group raised from 13% to 36% over the 2008-2016.
The rise in profit of coffee franchisies is not only owing to coffee but also has a significant contribution of non beverage items such as food and beverage products which include tea, smoothies, soft drinks and bottled drinks. pastries, sandwiches, backed goods. For instance, Café Barbera is a renowned coffee company and has franchises in U.S. too. It also offers its fast casual dining along with its coffee. Its casual dining includes locally sourced items like pasteries, pastas, soups, salads, hot and cold sandwiches on Panini and Ciabatta breads. Thus, food products resulting in the revenue benefits is expected to drive the U.S. coffee franchise industry in future.
The consumers are looking for added value to their coffee, in terms of experience, or brands authenticity or taste. Thus, U.S. coffee franchise market is developing an identity for emerging their own coffee culture. For instance, Dunn Brothers Coffee has Bold culture, their motto is “The Bold Standard” relating to the product quality, community efforts and sustainability goals. Moreover, the coffee houses are also gaining popularity as meeting places and thus, the franchiser are also providing dedicated meeting places so their customer can use as when required. Thus, various offerings in terms of customer experience are expected to drive the market over the forecast period.
Segmentation by product type
• Food Products
The increasing demand for quality products from customer is driving the coffee market. Consumers are seeking for specialty coffee drinks. For instance, the consumption of espresso-based beverages increased from 9% to 22% for the age group 18-24. Moreover, the study of National Coffee Association states that coffee drinker aged between 25 to 39 most likely drink expresso-based beverages, cappuccino, cold brew, espresso, gourmet coffee, café Americano, flat white, mocha, and nitrogen-infused coffee. Moreover, the American Medical Association has stated that moderate consumption of coffee has no effect on health of individuals. The study by Harvard Research School is ongoing although the researchers stated that drinking coffee is associated with lower risk of depression among women, lower chances of stroke between both men and women and a lower risk of prostate cancer among men. Thus, increasing benefits of drinking coffee are expected to drive the coffee market which is thereby a potential boost for the growth
of U.S. coffee franchise sector over the forecast period.
Segmentation by consumer age group
• above 40 years of age group
• 18-39 years of age group
• below 18 years of age group
The 18-39 years of age group is the largest accounts for the maximum coffee consumption This is attributed to the increasing spending power owing to the developing employment sector and their willingness for spending on small luxurious recreations. The health benefits of coffee is expected to splurge the growth of coffee consumption among the U.S. consumers which is anticipated to offer lucrative opportunities for the expansion and development of U.S. coffee franchise market in the next few years.
US has many well established companies in the market such as Dukin Donuts, Dunn brothers coffee, Maui Wowi, Scooters Coffee, Tim Hortons, Seattle’s Best Coffee, Coffee Beanery, Biggby Coffee, Bad Ass Coffee company of Hawaii and others. The coffee franchise market is competetive in nature as it invovles not only brands but also, non brand coffee shops, retsros, café’s and others.
Research Support Specialist, USA