What Does The Future Hold For Independent Coffee Shops?

by Russ Shumaker

As a specialty coffee shop owner, you’re part host, part mixologist and part business executive—all in one.

If you’ve been busy tending to your customers, pull up a stool, pour yourself a steamy latte, and get the skinny on your business forecast beyond 2020.

Hint: Despite the current pandemic, people love their coffee fix… and the forecast is much brighter than you think!

State of the Coffee Shop Industry

In December of 2019, forecasts predicted that the coffee shop industry would grow by $58.7B, with a compound growth rate globally of 4.1%. The surprising result is that despite lockdowns and shutdowns, the global coffee market is forecast to grow to over $237.6B by 2025.

Would you repeat that, please?

It’s true: Over 75,600 coffee shops exist in the US, and today they have generated $49B in annual revenue, nearly double what it was just over a decade ago. Despite the top eight companies making up 70% of total revenue, small coffee shops have discovered they can compete effectively by differentiating themselves with unique customer-centric experiences.

Two trends to watch:

  • Upscale products and creatively mixed coffee or tea-based drinks, serving up hyper-local experiences.

  • Convenient drive-throughs to compete with the ease of chains like Starbucks and McDonalds that dominate the commuter market.

Coffee Consumption by Income

Segmented by income, the largest consumer segment consuming coffee makes between $30k and $70k, followed by those making over $150k. What does this say about your customers? They might be young and part of the new workforce, taking their college coffee-drinking habits with them into their careers. Or they might be well-established and able to indulge in small luxuries that make life a joy. Either way, you can explore a multitude of ways to successfully market to these demographics using data and insights from your current customers and local demographics.

At Home vs In Store

On average, Americans consume 3 cups of coffee per day, and over 1/3rd of the US population drinks coffee. That’s impressive—it’s not just a drink that goes with your morning bagel anymore. Coffee concoctions that can be enjoyed after lunch, after work and even after hours (think coffee-rich ice cream or served “affogato” style) could generate all-day interest.

Even more impressive, over 79% drink coffee prepared at home, meaning that they likely purchase shop-quality beans at a coffee shop or store. Whether you roast your own beans on site, or contract with a good supplier, there’s clearly opportunities for additional sales in packaging your beans to-go.

Coffee Labor Statistics

Your shop may also play a role in helping recover the local economy. Think of this: According to the Bureau of Labor and Statistics, in 2019, average coffee shop employees made $11.06 per hour, and the industry employed 774,902 people. Growth is expected to trend upwards by 10% over the next ten years. With so many out of work or losing jobs, it’s good to know that a stable income and opportunities for employment abound because of your investment in coffee.

Growth Driven by 5th Wave Coffee Shops

According to Allegra, much new growth in the industry will be driven by 5th wave coffee shops, where customer experience is the focus, built on artisan coffee, scientifically roasted and crafted into signature beverages. Growth is driven primarily by the surge of specialty coffee shops dotting the national landscape. In virtually every town and in every urban center, the coffeeshop has become a place of gathering and community.

Still, the product with the highest sales continues to be roast coffee, with revenue coming in at $55.7M.

Impact of Covid

Covid-19 restrictions have caused most coffee shops in the US to restrict operations, or in some cases, shut their doors. As a result, 2020 revenue is down, and current year forecasts are likely to be inaccurate. However, growth trends are expected to continue and may reach the above forecasted goals by 2025 as covid vaccines become available.