coffee & snack shops in the us industry report

WWW.IBISWORLD.COM Coffee & Snack Shops in the US July 2013 1

IBISWorld Industry Report 72221bCoffee & Snack Shops in the USJuly 2013 Andy Brennan

Caffeine fix: Stores will add high-margin, healthful items to menus to aid growth

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

3 Additional Resources

4 Industry at a Glance

5 Industry Performance5 Executive Summary

5 Key External Drivers

6 Current Performance

8 Industry Outlook

10 Industry Life Cycle

12 Products & Markets12 Supply Chain

12 Products & Services

13 Demand Determinants

14 Major Markets

15 International Trade

16 Business Locations

18 Competitive Landscape18 Market Share Concentration

18 Key Success Factors

18 Cost Structure Benchmarks

20 Basis of Competition

20 Barriers to Entry

21 Industry Globalization

22 Major Companies22 Starbucks Corporation

23 Dunkin’ Brands Inc.

26 Operating Conditions26 Capital Intensity

27 Technology & Systems

27 Revenue Volatility

28 Regulation & Policy

28 Industry Assistance

29 Key Statistics29 Industry Data

29 Annual Change

29 Key Ratios

30 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


This industry is composed of establishments that prepare or serve specialty snacks and nonalcoholic beverages including ice cream, frozen

yogurt, cookies, donuts, bagels, coffee, juices, smoothies and sodas. Purchases may be consumed on-site, taken to go or delivered.

The primary activities of this industry are

Operating snack shops

Operating ice cream and soft-serve shops

Operating frozen yogurt shops

Operating donut shops

Operating bagel shops

Operating coffee shops

Operating cookie shops

Operating juice and smoothie shops

Operating pretzel shops

Operating cupcake shops

44529 Specialty Food Stores in the USThis industry primarily retails confectionery goods and nuts not packaged for immediate consumption.

72211a Chain Restaurants in the USThis industry primarily engages in full-waiter service and serve food to patrons who pay after eating. Many of these operators are owned by major companies.

72211b Single Location Full-Service Restaurants in the USThis industry primarily engages in full-waiter service and serve food to patrons who pay after eating. Many of these operators are locally owned.

72232 Caterers in the USThis industry primarily engages in catering.

72233 Street Vendors in the USThis industry primarily sells snacks and nonalcoholic beverages from vehicles.

Industry Definition

Main Activities

Similar Industries

About this Industry

The major products and services in this industry are

Bagel shops

Coffee shops

Cookie shops

Donut shops

Frozen yogurt shops

Ice cream shops

Other snack shops


About this Industry

72241 Bars & Nightclubs in the USThis industry primarily prepares and serves alcoholic beverages.

72221a Fast Food Restaurants in the USThis industry primarily provides food to patrons who pay before eating. Generally, there is limited or no waiter service involved.

Similar Industriescontinued

For additional information on this industry

www.restaurant.org National Restaurant Association

www.specialty-coffee.com Specialty Coffee Retailer

www.bls.gov US Bureau of Labor Statistics

Additional Resources

IBISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com


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SOURCE: WWW.IBISWORLD.COM

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Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2013)

42%Coffee shops

2%Cookie shops

21%Other snack shops

2%Frozen yogurt shops

15%Donut shops

13%Ice cream shops

5%Bagel shops


Key Statistics Snapshot

Industry at a GlanceCoffee & Snack Shops in 2013

Industry Structure Life Cycle Stage Mature

Revenue Volatility Medium

Capital Intensity Medium

Industry Assistance None

Concentration Level Medium

Regulation Level Medium

Technology Change Medium

Barriers to Entry Low

Industry Globalization Low

Competition Level High

Revenue

$29.0bnProfit

$1.7bnWages

$7.7bnBusinesses

40,144

Annual Growth 13-18

3.9%Annual Growth 08-13

1.0%

Key External DriversConsumer spendingHealthy eating indexPer capita coffee consumptionConsumer Confidence Index

Market ShareStarbucks Corporation 36.7%

Dunkin’ Brands Inc. 24.6%

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FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29



Key External Drivers Consumer spendingFactors that influence consumer spending also affect the industry. During the recession, the spike in unemployment led to consumption declines. When consumer spending is high, however, consumers are more likely to spend money at snack and coffee shops. Consumer spending is expected to increase in 2013, providing a potential opportunity for the industry.

Healthy eating indexThe healthy eating index is expected to decrease slowly in 2013, as consumers’ diets get progressively poorer. However, consumers are also more aware of issues

related to weight and obesity, fatty-food intake and food-safety issues, which is particularly applicable to the occasionally unhealthy snack-food industry. Despite long-term, aggregate declines in healthy eating, consumers are more aware of health issues associated with fatty foods and are increasingly going out of their way to avoid them.

Per capita coffee consumptionCoffee 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 and

Executive Summary

The Coffee and Snack Shops industry experienced a major slowdown in 2009 due to a struggling economy and, to a lesser extent, changing consumer tastes, despite surging during the past decade. In the five years to 2013, IBISWorld estimates revenue will grow at an average annual rate of 0.9% to $29.0 billion. After revenue declined 6.6% to $25.9 billion in 2009, it resumed its upward climb in 2010. In 2013, industry revenue is expected to continue its rebound with an increase of 2.6%.

During the recession, consumers spent less on luxuries like eating out and many chose to purchase low-price items when they did spend. This caused high-priced coffee drinks and other nonessential snacks to lose the battle for consumers’ shrinking budgets. Consumers have also become increasingly health conscious during the five years to 2013. Many retailers, such as Jamba Juice, have expanded their healthful options in

response to this trend; consequently, these companies have grown. Still, the general trend toward healthful eating has hurt the industry’s unhealthier segments, such as donut and ice cream shops. Furthermore, in response to weak market conditions, the number of establishments is expected to increase more slowly than in the past, at an annualized rate of 1.6% to 55,428 in the five years to 2013.

To combat slumping sales major operators like Starbucks and Dunkin’ Donuts are expected to expand their menus during the five years to 2018, which includes increasing their offerings of nontraditional, high-margin menu items like iced coffee drinks, breakfast items and wraps. These additions are expected to help these companies gain higher revenue and profit. Many major chains are also expected to invest more in international growth as part of a long-term strategy because many larger players view China, in particular, as a market with huge potential for growth and long-term profitability. In the five years to 2018, revenue is forecast to grow at an annualized rate of 3.9% to reach $35.1 billion.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

Operators will continue to add high-margin, trendy products to stores to stimulate growth


Industry Performance

Cutting back As the economy fell into a recession and unemployment numbers rose, consumers became more selective when spending their disposable incomes. For example, in 2009, consumer spending declined 1.9%, and luxuries such as eating out and a morning cup of coffee at Starbucks were among the first expenditures to

go. Some consumers cut out coffee and snack shops from their budgets entirely, opting to eat in to save money. This trend reversed as consumer confidence improved; consumer spending is expected to grow at an annualized rate of 1.3% over the five years to 2013. With consumer spending on track to rise an additional 2.1% in

Current Performance

The Coffee and Snack Shops industry has been a victim of the weakened economy, the rapid rise in unemployment and, to a lesser extent, society’s rising awareness of the health risks associated with diets high in fat, salt and sugar in the five years to 2013. Despite these obstacles, the industry has responded to changes in consumer

preferences, which has helped revenue grow. In the five years to 2013, revenue is expected to increase at an average annual rate of 0.9%. In 2009, industry revenue declined 6.6% to $25.9 billion, but since 2010, the industry’s revenue growth has been positive. In 2013, industry revenue is expected to rise another 2.6% to $29.0 billion.

Key External Driverscontinued

other snack shops experience revenue growth. Per capita coffee consumption is expected to decrease slowly in 2013, posing a potential threat to the industry.

Consumer Confidence IndexConsumer sentiment measures consumer’s perceptions about their current and future financial prospects.

Changes in consumer sentiment have a significant effect on the spending of discretionary items, including items from snack and coffee shops. During a recession, consumers tend to forego higher-margin items and opt for lower-priced value products. The consumer sentiment index is expected to increase in 2013.

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Healthy eating index


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Cutting backcontinued

2013, IBISWorld anticipates a rise in the number of consumers treating themselves to industry products.

Many consumers who continued to purchase coffee and snacks during the recession purchased lower-priced items, often settling for a plain cup of coffee instead of springing for a cafe mocha, for example. This trend has forced coffee and snack shop chains to compete with each other in an attempt to convince consumers that they can get the most bang for their buck at their particular establishment. In years

past, coffee and snack shops strategized to win a larger share of a growing market, but now, these retailers are attempting to take market share from each other because of a shrinking pool of customers and intensified competition.

New products, new markets

Consumers have become increasingly health conscious, and consequently, retailers have expanded the number of low-calorie options on their menus. For many chains, this has allowed them to target a new segment of the market and renew this segment’s interest in the industry’s products. For example, Dunkin’ Donuts introduced two new flatbread sandwiches made with egg whites; both have fewer than 300 calories with no more than nine grams of fat. Starbucks also introduced healthy menu items, such as oatmeal, apple bran muffins, multigrain rolls and a power protein plate.

Aside from these healthy options, many operators have expanded their menu options to ensure that they can also retain a large portion of their customers’

snack-food dollars. Traditional snack shops have been increasingly expanding their coffee offerings, while more traditional coffee shops have been tapping into the snack-foods market. For example, Dunkin’ Donuts now offers a wide range of espresso drinks and flavored coffees and Starbucks now sells breakfast sandwiches and hot paninis.

In addition, international growth is still a large part of many major chains’ long-term strategy. In particular, many snack-food chains view China as a market with huge potential for growth and long-term profitability. Starbucks and Dunkin’ Donuts already have a sizeable presence in foreign markets, and even for these companies, there is still much room for growth.

Consolidation and profit

In the five years to 2013, IBISWorld estimates that industry employment will grow at an average annual rate of 0.3% to 562,954 people. This growth rate is considered slow for the industry, which experienced a period of rapid expansion during the majority of the past decade. This relatively muted growth is directly related to the

industry’s 2009 decline in revenue and the consolidation of major operators’ underperforming locations. Therefore, the number of establishments is expected to grow at an average annual rate of 1.6% to 55,428 during the same period, which is also slow compared with years past. Because of these factors, increased

The recession caused some consumers to cut out coffee from their budgets



Growth strategies The industry’s high level of competition is expected to intensify in the next five years. This factor will involve significant price-based competition and an increased emphasis on the regular introduction of new products. Most chains will introduce new, healthy alternatives as well as expand their current product lines. Major operators will also attempt to expand

revenue and profit by providing a variety of other menu options, including premium coffees and breakfast items.

Many domestic operators will continue to expand internationally. International expansion is anticipated to be the largest source of revenue and profit growth for major players during the five years to 2018. Snack-food brands

Industry Outlook

The Coffee and Snack Shops industry is expected to continue its growth during the five years to 2018, with revenue anticipated to jump 4.1% in 2014 to total $30.2 billion. Coffee and snack shops will benefit from the economy improving, the unemployment rate declining and consumers spending money on luxuries like eating out. Furthermore, during the five years to 2018, consumer spending is expected to increase at an average annual rate of 2.9%. As a result, industry revenue is projected to increase at an average annual rate of 3.9% to $35.1 billion during the period.

The US economy’s continued recovery during the next five years will play a large role in boosting demand for coffee and other snacks. As consumer spending continues to rebound, consumers will increasingly parlay their pocketbook flexibility into quick,

satisfying edible fixes provided by industry operators. In addition, operators will continue to stimulate renewed interest in their products by expanding their menu options that appeal to health-conscious consumers.

Consolidation and profitcontinued

consolidation defined the industry in the five years to 2013. Consolidation indicates that major players recognize the benefits of economies of scale and that they are attempting to gain a competitive advantage through acquisition and growth.

Competitive pressure and declining demand have forced some companies to consolidate their operations and streamline employment, driving wages

down. IBISWorld estimates the industry’s average wage in 2013 to be $13,695.0, compared with $13,024.0 in 2008, meaning there has been little real wage growth during the past five years. Industry profit margins have fallen or remained flat because of lower sales volume, customers opting for lower-priced items, high competition in the domestic market and the industry nearing saturation.

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Growth strategiescontinued

have not yet saturated the markets of Asia and the Middle East; however, certain industry giants like Starbucks and Dunkin’ Brands are already

experiencing strong growth in those regions. The success of these operators is enticing others to try to garner a share of the growing market.

Establishments, employment and wages increase

Industry profitability is expected to improve slightly as sales volumes increase and consumers begin to indulge in high-priced premium items. Operators that experience stagnant domestic profit will likely double down on international expansion to grow profit margins. Companies will also continue trying to emulate Starbucks’ success by expanding beverage options to include more coffee-based drinks and smoothies. These low-cost, high-profit menu items offer a quick way for companies to perk up revenue and grow their bottom lines.

Nonetheless, operators will still have to compete for their share of revenue. Consolidation among operators has occurred for some time and will likely continue slightly in certain saturated markets; however, new growth opportunities will likely offset losses from consolidation. In the five years to 2018, the number of

establishments is projected to increase at an average rate of 2.1% per year to 61,494. Similarly, industry employment is projected to grow at an average annual rate of 2.1%, to 623,314 people in the five years to 2018. At the same time, the average industry wage is projected to increase from $13,695.0 per worker in 2013 to $14,327.0 in 2018. Despite the long-term trend of automation of the food-preparation process, wages and employment are both forecast to increase in the next five years as the industry recovers from the recession.

Wage and employment levels will recover in the short term, despite greater automation


Industry PerformanceThe rate of new store openings has slowed

Operators are concentrating on international openings

There is heavy price-based competition

Life Cycle Stage


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Quality GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

MaturityCompany consolidation;level of economic importance stable

Quantity GrowthMany new companies; minor growth in economic importance; substantial technology change

DeclineShrinking economicimportance

Key Features of a Mature Industry

Revenue grows at same pace as economyCompany numbers stabilize; M&A stageEstablished technology & processesTotal market acceptance of product & brandRationalization of low margin products & brands

Specialty Food Stores

Coffee ProductionChain Restaurants

Frozen Food Wholesaling

Single Location Full-Service Restaurants

Coffee & Snack Shops



Industry Life Cycle The Coffee and Snack Shops industry is in the mature phase of its lifecycle. Aside from the industry’s poor performance during the recession, industry revenue has grown consistently during the past decade. During the five years to 2013, however, growth has slowed and is expected to be lower than the long-term average during the five years to 2018. This is because the industry is saturated in some areas, leading large chains such as Starbucks to seek growth elsewhere, either overseas or through new product lines. In the 10 years to 2018, industry value added (IVA), which measures an industry’s contribution to GDP, is projected to grow at an annual rate of 2.5% per year. During the same period, GDP is estimated to grow at an annualized rate of 2.1%, meaning the industry is growing in line with the overall economy.

In recent years, there have been a number of mergers and acquisitions that have highlighted the highly competitive nature of the industry. In 2012, Joh. A. Benckiser acquired both Peet’s Coffee & Tea and Caribou Coffee, and in 2011, 2012 and 2013 respectively, Starbucks purchased Evolution Fresh,

Teavana and La Boulange. Many chains have also recently acquired regional players to gain inroads into regional markets, while simultaneously increasing their market shares. As the size of operations and infrastructure increase, many costs decrease, giving operators further incentive to acquire or merge with other players.

The industry has also experienced significant shifts in the market, including changes in consumer preferences. Demand for healthy foods has risen and consumers are increasingly rebuffing high-fat, high-salt meals as the obesity epidemic continues to grow. In addition, the industry is currently in a period of slow growth, following a rapid rise in the domestic fast-food market during the past decade. The number of establishments is expected to grow at a relatively muted annualized rate of 1.6% during the five years to 2013. As such, price-based competition is intensifying, as operators strive to capture a larger market share in a saturated domestic market. Furthermore, many major franchised operators are receiving some of their sales growth from the expansion of their operations overseas.

This industry is Mature


Products & Services

The major product segments for the Coffee and Snack Shops industry include coffee shops, donut shops, ice cream shops, bagel shops, frozen yogurt shops and cookie shops.

Coffee shopsCoffee shops are the largest product segment in the industry, and they are

estimated to make up about 42.0% of industry revenue in 2013. The proportion of industry revenue that comes from coffee shops has increased in the 10 years to 2013. This is due to the rapid proliferation of coffee shops and cafes throughout the United States and the increased popularity of major coffee shop chains, such as Starbucks.

Products & MarketsSupply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

9901 Consumers in the US Households are the key driver of demand for this industry’s products.

KEY SELLING INDUSTRIES

31192a Coffee Production in the US This industry supplies coffee to operators.

42442 Frozen Food Wholesaling in the US This industry supplies frozen foods to operators.

42443 Dairy Wholesaling in the US This industry supplies dairy products to operators.

42444 Egg & Poultry Wholesaling in the US This industry supplies poultry products to operators.

42446 Fish & Seafood Wholesaling in the US This industry supplies seafood to operators.

42447 Beef & Pork Wholesaling in the US This industry supplies meat products to operators.

42448 Fruit & Vegetable Wholesaling in the US This industry supplies fruit and vegetables to operators.

Supply Chain

Products and services segmentation (2013)

Total $29.0bn

42%Coffee shops

2%Cookie shops

21%Other snack shops

2%Frozen yogurt shops

15%Donut shops

13%Ice cream shops

5%Bagel shops



Products & Markets

DemandDeterminants

Demand for coffee and snack shops is driven by a number of factors including household income, consumer confidence, attitudes to health and propensity to eat out, rather than at home.

Income and expenditureThis industry is sensitive to factors that affect the growth in household disposable income because disposable income is required to finance restaurant and dining expenditures. Household disposable income growth is affected by changes in labor market growth (i.e. employment rates), in tax and interest rates, high and increasing gas prices, and changes in consumer confidence. The decline in industry revenue during the recession illustrates the extent to which the industry’s performance is reliant on

positive income levels, high consumer confidence and a robust economy. For example, lower consumer confidence, weak levels of disposable income and rising unemployment tightened household budgets, encouraging people to save more and spend less by cooking at home rather than eating out.

DemographicsThe changing age structure of the population influences industry demand. Two broad demographic trends have encouraged industry growth in the past decade. Firstly, the baby-boomer generation has access to higher disposable incomes than previous generations, meaning they are more likely to spend on eating out. Also, young adults aged between 18 and 30 years old

Products & Servicescontinued

Donut shopsDonut shops are the second-largest product segment in this industry, and they are estimated to make up about 15.0% of industry revenue in 2013. The proportion of industry revenue that comes from donut shops has decreased in the 10 years to 2013, largely due to health concerns associated with eating unhealthy foods like donuts. However, this fall has been mitigated by the continued success and growth of major donut chains, such as Dunkin’ Donuts and Krispy Kreme.

Ice cream shopsIce cream shops are the third-largest product segment in this industry. In 2013, ice cream shops make up an estimated 13.0% of industry revenue. The proportion of industry revenue that comes from ice cream shops has decreased in the 10 years to 2013, largely due to the health concerns associated with eating unhealthy foods like ice cream. The growth in popularity of easily

substitutable foods, such as frozen yogurt, has also affected the industry’s revenue coming from ice cream shops.

Bagel shopsBagel shops are the fourth-largest product segment in the industry. In 2013, bagel shops are estimated to make up about 5.0% of industry revenue. The proportion of industry revenue that comes from bagel shops has increased during the past 10 years due to the growing popularity of bagels and the introduction of bagels to new markets.

Frozen yogurtFrozen yogurt shops are the fifth-largest industry product segment, and they are estimated to make up about 2.0% of industry revenue in 2013. The proportion of industry revenue that comes from frozen yogurt shops has strongly increased in the past 10 years. This is mainly due to the growing popularity of frozen yogurt chains such as Pinkberry, Red Mango and Yogurtland.


Products & Markets

DemandDeterminantscontinued

are delaying marriage and having children compared to previous generations; this allows them to spend a greater proportion of their income on eating out. Young adults in this age bracket spend more of their food budget on eating out than any other age group.

Health and lifestyleRising health consciousness has a direct effect on coffee and snack shop operators as consumers have become increasingly concerned about fat content, fried foods and salt content, especially when dining out. As such, rising concerns regarding the nutritional

content and value of cafe meals is likely to influence the demand for certain foods on cafe menus, encouraging industry players to alter their product mix. It is also expected to affect overall performance for industry players selling unhealthy food on menus, such as fried food or hamburgers.

Convenience, value for money and time are other important demand determinants. Recent social trends such as busy lifestyles, heavy workloads and long working hours have helped boost demand for coffee and snack shops as time-poor consumers look to cut down cooking time.

Major Markets

The major markets for the Coffee and Snack Shops industry can be segmented based on a number of factors including income, age, geographic location and family structure. Given the discretionary nature of the industry, an indication of major markets can be inferred on the basis of annual expenditure on food and beverages consumed outside the home. According to the US Census Bureau, the average consumer spends about 5.3% of their annual expenditure on food and

beverages consumed outside the home. The level of spending differs between products such as coffee, bagels and ice cream. Spending also differs between locations, seasons, and restaurant or store type; therefore, this segmentation of spending is not true of all industry products.

An estimated 39.0% of industry demand comes from consumers in the nation’s highest income quintile. In 2011 (the latest available data), the average

Major market segmentation (2013)

Total $29.0bn

39.0%Highest quintile

of incomes

24.0%Fourth quintile of incomes

16.0%Middle quintile

of incomes

12.5%Second quintile

of incomes

8.5%Lowest quintile

of incomes



Products & Markets

International Trade As a retail industry, the Coffee and Snack Shops industry is not technically engaged in importing or exporting products, so international trade is not relevant to the industry. However, a number of industry players have overseas operations and earn a significant portion of their revenue

from abroad. Given the mature stage of this industry’s life cycle in the domestic market, and changes in customer profiles and tastes, many major operators are seeking to increase their growth in revenue and earnings through further global expansion.

Major Marketscontinued

consumer in the highest income bracket spent $5,163.0 on food and beverages consumed outside the home, according to the US Census Bureau. On the other hand, those in the lowest income quintiles often need to make significant sacrifices in order to afford meals away from home. The average consumer in the lowest income quintile spent $1,099.0 on out-of-home food consumption in 2011. The three middle-income quintiles represent more than 50.0% of industry demand, showing how important the middle-class consumer is to the

industry’s performance. While these consumers don’t typically spend big on luxury food items, they contribute to steady demand for middle-range products in coffee and snack shops.

The industry’s major markets distribution has not changed dramatically over time as spending patterns within income brackets are relatively established. There was some tightening of budgets during the recession, but this occurred across all demographics, so it didn’t influence the industry’s major markets distribution.


Products & Markets

Business Locations 2013

MO1.3

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

Great Lakes

VT0.2

MA4.3

RI0.8

NJ4.1

DE0.3

NH0.8

CT1.8

MD1.6

DC0.4

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ1.7

CA16.9

NV0.9

OR2.3

WA4.6

MT0.5

NE0.6

MN1.7

IA0.8

OH3.4 VA

2.1

FL4.5

KS0.7

CO2.0

UT0.7

ID0.6

TX5.7

OK1.0

NC2.0

AK0.5

WY0.2

TN1.0

KY0.6

GA1.8

IL3.7

ME0.7

ND0.2

WI1.3 MI

2.9 PA4.1

WV0.3

SD0.3

NM0.5

AR0.4

MS0.4

AL0.6

SC0.8

LA1.1

IN1.5

NY7.8 5

67

8

321

4

9


Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

HI0.7


Products & Markets

Business Locations The industry’s business locations are distributed according to the population. Because the industry provides quick meals to consumers, industry establishments need to be located near their customer base.

The West region contains the highest number of establishments, with 26.0% of the industry total. This high percentage is due to the large population of the region (17.0%) and the fact that the region is a tourism and business hub. Other regions with a significant number of establishments include the Mid-Atlantic (18.4%), the Great Lakes (12.8%) and the Southeast (15.6%). Again, these tend to follow population trends. States with the highest proportion of establishments include California (16.9%), New York (7.8%), Texas (5.7%), Florida (4.5%) and Washington (4.6%).

There is a larger share of establishments in the Great Lakes, New England and Plains regions, compared to the Southeast and Southwest regions. This is due to the fact that the Southeast and Southwest have higher concentrations of franchised establishments and a

higher share of employment and revenue. The industry also tends to have a higher concentration in areas where households have an annual income of at least $50,000.0 per year. Therefore, this level of geographic concentration is not expected to change in the near future.

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Cost Structure Benchmarks

The Coffee and Snack Shops industry has recently struggled with subdued revenue growth, as demand for the industry’s services have fallen due to the global recession. The industry has high product turnaround but low profit margins, which makes it susceptible to any adverse changes in demand. Changes in household preferences, household

disposable incomes, and other health and food safety concerns influence industry demand.

ProfitIndustry profit is based on earnings before interest and taxes recorded by industry operators. Profit varies between players depending upon the size of the

Key Success Factors Having a clear market positionHaving a clear market position against competitors in the limited-service industry and other food-service operators is a necessity.

Effective cost controlsCost controls with minimal waste are important in this low-margin industry, particularly related to food inputs.

Ability to franchise operationsFranchising in the United States and abroad is now a significant component of this industry, and it can provide significant support to owners.

Product is sold at high-profile outletsIt is important to have high-profile locations for stores, with easy access, parking and drive-through services for customer convenience and service.

Market research and understandingFirms need to monitor market and consumer needs, wants and desires, particularly in relation to demand for healthy foods.

Access to multiskilled and flexible workforceFirms need to have access to a good supply of skilled, seasonal workers to meet peak demand periods.

Market Share Concentration

IBISWorld estimates that in 2013, the top four players in this industry account for about 64.8% of the available market share, providing this industry with a medium level of concentration. Given the diversity of snack and beverage styles, as well as industry operations, nearly 48.0% of establishments are small-business operators with nine or fewer employees, according to the US Census Bureau. An additional 52.0% of establishments employ between 10 and 99 staff members. There is also a small number of extremely large chain and franchised operators. For example, Starbucks and Dunkin’ Brands make up more than 60.0% of industry market share, giving them considerable market

power in determining industry trends and creating a formidable barrier for nonfranchised players.

The industry’s concentration has increased recently because of the increase in acquisitions, which indicates that companies are making a concerted effort to increase profitability with larger portions of market share. Between 2008 and 2013, establishments and enterprises have experienced muted growth, which has caused a marginal increase in industry concentration. The level of industry concentration is expected to continue to increase in the five years to 2018, though the industry will remain somewhat fragmented.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Medium

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive Landscape

Cost Structure Benchmarkscontinued

firm. Larger operators, such as Starbucks, generally benefit from economies of scale; however, the highly competitive nature of the industry means most operators can only access slim profit margins. The types of products an operator sells also influences profit. For example, Starbucks has added a number of complementary food items to its menu in an attempt to access higher profit margins. IBISWorld estimates that in 2013, the average industry firm will obtain profit equivalent to 5.8% of revenue.

PurchasesTypically, the largest costs for the industry are the purchases of food and beverages sold in shops. Food and beverages are usually purchased from wholesalers, particularly from operators that can guarantee prompt delivery and the high quality. Fluctuations in the cost

of food and liquor significantly impact industry revenue and profit. In the short term, many of these cost increases cannot be passed on to the consumer or client; therefore, menus, portion sizes and other food service inputs must be monitored. The industry must also monitor wastage. Fluctuations in demand, and the oversupply of meals or excess ingredients that cannot be used, negatively impact industry operators. IBISWorld estimates purchases will account for 38.0% of an average firm’s revenue in 2013.

WagesWages also represent a high cost for operators due to the labor-intensive nature of food preparation, cooking, serving and clean up. During the five years to 2013, labor costs have increased; these costs include wages and benefits, such as health, workers’ compensation and unemployment insurance. Menu

Sector vs. Industry Costs

■ Profi t■ Wages■ Purchases■ Depreciation■ Marketing■ Rent & Utilities■ Other

Average Costs of all Industries in sector (2013)

Industry Costs (2013)

0

20

40

60

Perc

enta

ge o

f rev

enue

80

100 7.0

18.4

7.62.84.1

38.1

22.0

5.8

12.6

9.03.5

4.6

38.0

26.5




Barriers to Entry Barriers to entry are low in this industry, given that an operator can lease premises, equipment, furniture and fittings, which lowers the initial capital costs, outlays and borrowings for the industry. The top four players are not expected to dominate this widespread, diverse market in 2013, which is an indication of the fragmented, small-

business nature of this industry. Consequently, there is limited major-player dominance within the industry.

Entry can also occur through signing a franchise agreement, which includes outfitting and equipment, as well as training and computer systems. Franchisors also provide food and beverages and some financial and

Basis of Competition There is significant price-based competition within this industry; however, coffee, snack and other quick-service establishments also compete on the basis of location, food quality and consistency, style and presentation, food range, variety and service.

Franchised, multiestablishment and other operators also compete with each other. While franchised and multiestablishment operators account for a small portion of establishments, these operators account for the majority of industry revenue.

Establishments located in the same, general geographic area or in food courts at malls and airports must also compete with each other. Food courts and other dining hubs have become

increasingly popular in recent years. The nutritional value of the food sold in these areas has become increasingly important to customers.

External competitionIndustry competition tends to arise from other food service areas. This includes fast-food restaurants, and independent and chain full-service restaurants that offer take-out services. These restaurants can sometimes provide a more friendly dining experience, as guests are able to directly interact with the owners or the chef. Other competition is derived from consumers deciding to cook more in-home meals, which occurs particularly during difficult economic times.

Cost Structure Benchmarkscontinued

prices and industry profitability are affected by labor intensity because cost increases cannot simply be passed directly onto consumers in the form of higher prices. Wage costs are expected to account for 26.5% of an average firm’s revenue in 2013.

DepreciationOperators in the industry are subject to capital expenditure, such as commercial kitchen equipment, store fixtures and fittings, furniture, and crockery and cutlery. Depreciation is much higher for operators that own the building in which

they operate; consequently, during the past decade, the trend has been for operators to rent, rather than own, their stores. For this reason, depreciation has declined as a proportion of industry revenue and is expected to account for 4.6% of total revenue in 2013.

Rent and utilitiesRent and utilities expenses are high for the industry because of the need for locations in high-traffic areas with high visibility. Therefore, rent and utilities expenses are expected to equal 9.0% of an average firm’s revenue in 2013.

Level & Trend Competition in this industry is High and the trend is Increasing

Level & Trend Barriers to Entry in this industry are Low and Increasing



Industry Globalization

Many major operators have a high level of globalization due to the mature stage of the domestic industry, leading these firms to expand internationally in order to increase revenue and earnings. These include companies like Starbucks and Dunkin’ Brands. There are, however, no major foreign-controlled operators in the domestic market. It is important to note, that before being acquired by the Carlyle

Group and Bain Capital, Dunkin’ Brands was owned by British and French companies.

It is expected that the industry will be subject to an increasing level of globalization in the coming years. IBISWorld anticipates US operators will continue to enter the international market, particularly in countries and regions with promising growth, such as China.

Barriers to Entrycontinued

accounting functions for a proportional share of revenue from their franchisees. This lowers operational costs and can minimize some risks, especially for inexperienced persons entering the industry. However, individual franchisees still carry much of the day-to-day operational and management risks associated with their own business.

There is significant competition among the major franchised companies to obtain suitable sites, which has increased the cost of many prime sites. However, some major franchised operators are now colocating within an area or single building, shopping centers or malls to lower costs. While industry regulation and licensing is significant,

including health and food-service regulations, liquor licensing, and general occupational health and safety issues, these regulations do not create any insurmountable barriers to enter or operate in this industry.

Barriers to Entry checklist Level

Competition HighConcentration MediumLife Cycle Stage MatureCapital Intensity MediumTechnology Change MediumRegulation & Policy MediumIndustry Assistance None


Level & Trend Globalization in this industry is Low and the trend is Increasing


Player Performance Starbucks Corporation commenced operations in Seattle, WA, in 1971, as a specialty fresh-ground coffee retailer and coffee-shop operator. The company sells coffee, pastries, coffee accessories and, more recently, breakfast options and sandwiches. At the end of fiscal 2012 (year-end September), total company stores numbered 18,066, compared with 17,003 in 2011. Starbucks’ business model relies on a mixture of company-operated and licensed stores, which are operated by external licensees that pay an annual royalty and license fee to Starbucks. About 52.0% of Starbucks stores are company-operated, with these stores accounting for about 79.0% of the company’s $13.3 billion in global revenue in 2012. In 2012 Starbucks employed about 120,000 people in the US, and about 113,000 of these employees worked in company-operated stores.

Starbucks stores vary in size and format, and are typically situated in high-traffic, high-visibility locations. Store settings include downtown or suburban retail centers, and university campuses, office buildings and off-highway locations. Starbucks has also started offering drive-through locations to further leverage the chain’s convenience factor.

The Starbucks brand was built on coffee, and the company still offers a broad range of regular and decaffeinated coffee beverages, along with espresso drinks. The company has also expanded into a number of product lines, and it now serves a large assortment of food items, fresh juice and packaged goods. In the five years to 2013, Starbucks has sought to further diversify its product offerings with a number of multimillion-dollar strategic acquisitions. In

Major CompaniesStarbucks Corporation | Dunkin’ Brands Inc. | Other Companies

38.7%Other

Starbucks Corporation 36.7%

Dunkin’ Brands Inc. 24.6%


Major players(Market share)

Starbucks Corporation (US industry-specifi c segment) – fi nancial performance

Year*Sales

($ million) (% change)Operating Income

($ million) (% change)

2007-08 8,624 7.1 419 -50.7

2008-09 8,141 -5.6 468 11.7

2009-10 8,943 9.9 1,186 153.4

2010-11 9,205 2.9 1,360 14.7

2011-12 10,007 8.7 1,503 10.5

2012-13** 10,654 6.5 1,705 13.4

*Year-end September; **EstimatesSOURCE: ANNUAL REPORT AND IBISWORLD

Starbucks Corporation Market share: 36.7%


Major Companies

Player Performance Dunkin’ Brands Inc. is an international donut, coffee and ice cream retailer that sells these products under its Dunkin’ Donuts and Baskin-Robbins brands. Dunkin’ Brands has 17,495 locations in 55 countries, including 9,742 locations in the United States. A number of private-equity companies, including Bain Capital, The Carlyle Group and Thomas H. Lee Partners, own Dunkin’ Brands. In July 2011, Dunkin’ Brands successfully underwent an IPO (initial public offering)

in order to double its US outlets to 15,000, with shares rising 47.0% on the first day of trading. More than 99.0% of Dunkin’ Donuts and Baskin-Robbins stores are franchised.

Dunkin’ Donuts was founded in Quincy, MA, in 1950, and today, it is one of the largest coffee and baked-goods chains in the world. According to the company website, it sells more than one billion cups of coffee each year. The company has about 10,479 stores, of

Player Performancecontinued

November 2011, Starbucks acquired Evolution Fresh, a natural fruit and vegetable juice maker. A year later, in November 2012, the company acquired Teavana. Most recently, in June 2013, Starbucks purchased bakery chain La Boulange with the aim of integrating the company’s baked goods into its menu.

Financial performanceIn the five years to fiscal 2013, Starbucks’ US industry-specific sales are expected to grow at an average rate of 4.3% per year to $10.7 billion. In 2009, during the height of the recession, company sales fell due to customers cutting back on spending because of falling disposable

incomes. Consequently, by the end of 2009, Starbucks had closed 800 company-operated stores in the United States. Between fiscal 2010 and 2012, however, sales grew strongly due to a rise in global comparable-stores sales, which was brought on by an increase in the number of transactions and higher average spending per transaction. Starbucks’ operating profit nearly tripled in 2010, compared to 2009, hitting historic highs as store attendance and spending rates soared. Starbucks also started offering free Wi-Fi internet access to its customers, attracting more store traffic, increasing the number of potential purchases.

Dunkin’ Brands Inc. (US industry-specifi c segment) – fi nancial performance

YearSales

($ million) (% change)Operating Income


2008 5,572 N/C 273 N/C

2009 5,706 2.4 331 21.2

2010 5,921 3.8 403 21.8

2011 6,433 8.6 482 19.6

2012 6,774 5.3 542 12.4

2013* 7,150 5.6 644 18.8

* EstimatesSOURCE: COMPANY WEBSITE

Dunkin’ Brands Inc. Market share: 24.6% Industry Brand Names Dunkin’ Donuts Baskin Robbins


Major Companies

Other Companies Krispy Kreme Doughnut Corporation Estimated market share: 2.0%Founded in 1937, Krispy Kreme Doughnut Corporation is a branded retailer and wholesaler of donuts and packaged sweets. The company produces more than 20 varieties of donuts, as well as an array of coffees and other beverages. Krispy Kreme generates revenue from company-owned stores, domestic franchise stores and international franchise stores. As of July 2013, the company had 97 company stores, 142 domestic franchise stores and 509 international franchise stores in 21 countries. Krispy Kreme

employs about 3,500 people, of which about 2,670 people are full-time employees. In the five years to fiscal 2013, US system-wide sales are expected to grow at an annualized rate of 0.9% to $576.0 million.

Einstein Noah Restaurant Group Estimated market share: 1.5%Einstein Noah Restaurant Group includes the brands Noah’s New York Bagels, Einstein Bros. and Manhattan Bagel. It is the largest operator, franchisor and licensor of bagel specialty restaurants in the United States, and in 2012, the company had

Player Performancecontinued

which about 7,306 are in the United States. Baskin-Robbins was founded in 1946 in Glendale, CA, and is the world’s largest hard-serve ice cream franchise, with 6,980 outlets in 35 countries. Baskin-Robbins has about 2,463 outlets in the United States, and develops and sells a full range of frozen ice cream products, serving more than 3.7 million people each week.

Financial performanceIn the five years to 2013, Dunkin’ Brands’ US-specific sales are expected to grow at an average annual rate of

5.1% per year to $7.2 billion. Between 2010 and 2012, Dunkin’ Donuts’ US sales grew in response to same-store sales growth and new store openings. Same-store sales growth was driven by increased transaction counts and larger average sales. Sales of cold beverages and breakfast sandwiches have been particularly strong during the five years to 2013, and sales of these products have been boosted by limited-time offerings. The company’s high-growth franchise model is expected to lead to higher than average growth in the five years to 2018.

Krispy Kreme Doughnut Corporation (US segment) – fi nancial performance

Year*Sales

($ million) (% change)Revenue

($ million) (% change)Net Income


2007-08 550 N/C 382 N/C -52.0 59.52008-09 478 -13.1 332 -13.1 -3.0 -94.22009-10 455 -4.8 314 -5.4 0.0 N/C2010-11 483 6.2 324 3.2 8.0 N/C2011-12 532 10.1 362 11.7 160.0 1,900.02012-13** 576 8.3 390 7.7 N/A N/C

*Year-end January; **EstimatesSOURCE: ANNUAL REPORT AND IBISWORLD


Major Companies

Other Companiescontinued

816 restaurants in 39 states. Einstein Bros. and Noah’s restaurants are predominantly company owned or licensed, while Manhattan Bagel restaurants are predominantly franchised. Company stores sell fresh bagels and other bakery items, which are baked on site and include: made-to-order breakfast and lunch sandwiches on a variety of bagels, breads or wraps; gourmet soups and salads; assorted pastries; premium coffees and an assortment of snacks.

In 2012, the company had 6,912 employees, 6,617 of whom were restaurant personnel. That same year, the company generated about 90.1%

total revenue from restaurant sales at Einstein Bros. and Noah’s New York Bagels, and restaurant sales during breakfast hours generated about 66.0% of the year’s revenue.

In the five years to 2013, company revenue is expected to grow at an average rate of 1.7% per year to $450.0 million. Revenue grew 2.9% to $424.0 million in 2011 and an additional 0.7% in 2012 to $427.0 million. In order to combat the recession, the company launched a 400-calorie breakfast menu, a premium Frozen Strawberry Lemonade, a $1.99 Chicken Bagel wrap, the Saladwich Sandwich, and it reintroduced Bagel Poppers.

Einstein Noah Restaurant Group – fi nancial performance

YearRevenue

($ million) (% change)Net Income


2008 413 2.5 21.0 61.52009 409 -1.0 72.0 242.92010 412 0.7 10.0 -86.12011 424 2.9 13.2 32.02012 427 0.7 12.7 -3.82013* 450 5.4 13.0 2.4

*EstimatesSOURCE: ANNUAL REPORT AND IBISWORLD


Capital Intensity An industry’s level of capital intensity is determined by the ratio of capital to labor costs. The Coffee and Snack Shops industry has a medium level of capital intensity, and in 2013, IBISWorld estimates that for every $1.00 spent on wages, industry operators will spend $0.17 on capital investment.

The industry relies heavily on labor because of the need for personal, face-to-face service and labor input in all areas including acceptance of deliveries, order taking, serving and cleaning, and management. Some of these activities require significant training, while others are relatively unskilled occupations.

Start-up costs can be relatively high for a new industry entrant, however, many

coffee and snack shops lease their premises and equipment to lower the

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


Labo

r Int

ensi

veCapital Intensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional Service Economy

Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old Economy

Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment Economy

Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Specialty Food Stores Coffee

Production

Chain Restaurants Frozen Food Wholesaling

Single Location Full-Service Restaurants


Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit


Accommodation and Food Services

Economy

Level The level of capital intensity is Medium


Operating Conditions

Revenue Volatility Industry revenue volatility is low to medium due to the significant growth in demand that continues to come from the high-income households. In the five years to 2013, revenue volatility is expected to equal an average of 4.0%, including industry revenue growth as high as 3.1% in 2011 and 2012, and a

decline as severe as 6.6% in 2009. The industry also offers a range of food types, quality, menu prices and locations to suit consumers’ changing tastes and needs. The fact that certain product segments, such as coffee shops and frozen yogurt, have experienced strong growth within the past ten years

Technology& Systems

According to a Restaurant Technology Study by Hospitality Technology and Deloitte & Touche LLP, industry operators regularly leverage technology to reduce labor and food costs to increase sales. They also use it to improve business processes, support growth, maintain current operations and improve meal experiences.

New systems are designed to ensure quality service and reduce consumer wait time. Parent companies have also redesigned kitchen layouts and ordering systems in order to reduce food preparation times. This has involved

technology that connects drive-through customers to kitchens, allowing cooks to hear what orders are coming through. Also, most quick-service operators have installed point-of-sale systems in stores after research showed that it speeds up service, leading to larger purchases on average.drive-thrus have improved correct delivery and allowed customers to go back to face-to-face ordering. Most quick-service operators have installed point-of-sale systems in their stores after research showed that it speeds up service, leading to larger purchases on average.

Capital Intensitycontinued

initial capital outlay. Also, many operators now have computerized order-taking systems in which data is

entered by table number to assist employees with efficiency and accuracy when taking orders and payments.

Level The level of Technology Change is Medium


Volatility vs Growth

Reve

nue

vola

tility

* (%

)

1,000

100

10

1

0.1

Five year annualized revenue growth (%)–30 –10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale


A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level The level of Volatility is Medium


Operating Conditions

Industry Assistance A state-based and occasionally a separate city or county sales tax, or use or consumption tax applies to industry products. The sales tax is added to the selling price of all immediate consumption foods, including eat-in,

take-out or to-go meals. Some local state exemptions may apply, such as taxes on ice cream or ice milk sold for take-out. All prices quoted in stores exclude the sales tax component, which is added during payment.

Regulation & Policy The Coffee and Snack Shops industry is subject to a medium and increasing level of regulation. This includes franchise promotions and sales, regulations by the federal and state governments, minimum-wage regulations, employee benefits and conditions, workers’ insurance and the payment of health insurance coverage. Many states have also legislated smoking bans in restaurants.

The US Food and Drug Administration’s (FDA) Model Food Code, which is a best-practice guide to food handling and presentation,

applies to this industry and is updated each year. The FDA Nutritional Value applies as well. Since 1996, the FDA regulations have set standards for nutritional values of individual foods and meals. If claims like “low fat” or “heart healthy” are on a menu, an owner must be able to demonstrate to officials that there is a reasonable basis for the claim. For instance, the meal may be based on a recipe from a health association or a recognized dietary group. Complete nutritional information, however, is not required to be on menus.

Revenue Volatilitycontinued

has also increased the industry’s level of volatility. Also, the general increase in health consciousness, has worked to

the advantage of some industry product segments and to the detriment of others.

Level & Trend The level of Regulation is Medium and the trend is Increasing

Level & Trend The level of Industry Assistance is None and the trend is Steady


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments Enterprises Employment Exports ImportsWages ($m)

Domestic Demand

Consumer Spending

($b)2004 19,817.8 7,267.5 40,650 30,841 381,664 -- -- 5,424.5 N/A 8,515.82005 23,330.1 8,177.7 42,909 32,753 412,573 -- -- 5,704.8 N/A 8,803.52006 25,233.9 8,852.1 45,360 33,908 453,429 -- -- 6,127.0 N/A 9,054.52007 26,806.9 9,814.2 48,852 35,065 496,224 -- -- 6,570.6 N/A 9,262.92008 27,705.9 9,893.7 51,214 35,837 553,269 -- -- 7,206.2 N/A 9,211.72009 25,877.2 8,344.6 50,837 35,748 533,662 -- -- 6,999.0 N/A 9,032.62010 26,652.2 9,931.3 51,420 36,774 506,326 -- -- 7,212.8 N/A 9,196.22011 27,465.2 10,132.6 52,808 37,620 527,592 -- -- 7,413.5 N/A 9,428.82012 28,317.1 10,515.1 54,181 38,936 549,223 -- -- 7,570.0 N/A 9,604.92013 29,042.6 10,730.3 55,428 40,144 562,954 -- -- 7,709.9 N/A 9,802.22014 30,235.7 11,062.2 56,758 40,906 570,835 -- -- 7,887.5 N/A 10,025.32015 31,122.8 11,416.6 57,723 41,683 582,822 -- -- 8,148.7 N/A 10,299.72016 32,457.1 11,753.0 59,050 43,101 600,307 -- -- 8,345.0 N/A 10,624.72017 33,898.6 12,196.7 59,936 43,877 608,111 -- -- 8,637.3 N/A 10,984.42018 35,126.2 12,618.8 61,494 45,281 623,314 -- -- 8,930.5 N/A 11,285.1Sector Rank 10/24 10/24 6/24 6/24 8/24 N/A N/A 10/24 N/A N/AEconomy Rank 297/1272 234/1272 129/1271 142/1271 70/1272 N/A N/A 195/1272 N/A N/A

IVA/Revenue (%)

Imports/Demand

(%)Exports/Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2004 36.67 N/A N/A 51.92 27.37 9.39 14,212.76 0.062005 35.05 N/A N/A 56.55 24.45 9.62 13,827.37 0.062006 35.08 N/A N/A 55.65 24.28 10.00 13,512.59 0.072007 36.61 N/A N/A 54.02 24.51 10.16 13,241.20 0.072008 35.71 N/A N/A 50.08 26.01 10.80 13,024.77 0.082009 32.25 N/A N/A 48.49 27.05 10.50 13,115.04 0.072010 37.26 N/A N/A 52.64 27.06 9.85 14,245.37 0.082011 36.89 N/A N/A 52.06 26.99 9.99 14,051.58 0.082012 37.13 N/A N/A 51.56 26.73 10.14 13,783.11 0.082013 36.95 N/A N/A 51.59 26.55 10.16 13,695.44 0.082014 36.59 N/A N/A 52.97 26.09 10.06 13,817.48 0.082015 36.68 N/A N/A 53.40 26.18 10.10 13,981.46 0.082016 36.21 N/A N/A 54.07 25.71 10.17 13,901.22 0.082017 35.98 N/A N/A 55.74 25.48 10.15 14,203.49 0.082018 35.92 N/A N/A 56.35 25.42 10.14 14,327.45 0.08Sector Rank 10/24 N/A N/A 20/24 9/24 14/24 18/24 10/24Economy Rank 516/1272 N/A N/A 1199/1272 370/1272 750/1271 1216/1272 234/1272

Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)

Consumer Spending

(%)2005 17.7 12.5 5.6 6.2 8.1 N/A N/A 5.2 N/A 3.42006 8.2 8.2 5.7 3.5 9.9 N/A N/A 7.4 N/A 2.92007 6.2 10.9 7.7 3.4 9.4 N/A N/A 7.2 N/A 2.32008 3.4 0.8 4.8 2.2 11.5 N/A N/A 9.7 N/A -0.62009 -6.6 -15.7 -0.7 -0.2 -3.5 N/A N/A -2.9 N/A -1.92010 3.0 19.0 1.1 2.9 -5.1 N/A N/A 3.1 N/A 1.82011 3.1 2.0 2.7 2.3 4.2 N/A N/A 2.8 N/A 2.52012 3.1 3.8 2.6 3.5 4.1 N/A N/A 2.1 N/A 1.92013 2.6 2.0 2.3 3.1 2.5 N/A N/A 1.8 N/A 2.12014 4.1 3.1 2.4 1.9 1.4 N/A N/A 2.3 N/A 2.32015 2.9 3.2 1.7 1.9 2.1 N/A N/A 3.3 N/A 2.72016 4.3 2.9 2.3 3.4 3.0 N/A N/A 2.4 N/A 3.22017 4.4 3.8 1.5 1.8 1.3 N/A N/A 3.5 N/A 3.42018 3.6 3.5 2.6 3.2 2.5 N/A N/A 3.4 N/A 2.7Sector Rank 15/24 18/24 8/24 7/24 8/24 N/A N/A 17/24 N/A N/AEconomy Rank 703/1272 794/1272 381/1271 243/1271 403/1272 N/A N/A 684/1272 N/A N/A

Annual Change

Key Ratios

Industry Data



Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

Industry Jargon

IBISWorld Glossary

BABY BOOMERS The demographic of Americans born between 1946 and 1964.

FRANCHISE A store that uses a well-known firm’s business model, including their trademark and goods, for a fee. This is an alternative to chain stores, which share a brand and a central management.

POINT OF SALE (POS) A system used at checkout in retail stores using computers and cash registers to capture transaction data at the time and place of sale.


Jargon & Glossary

IBISWorld Glossarycontinued

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

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