IBISWorld Industry Report H4511b

FIND A SOLUTION AT Academic Writers Bay

Perfect pour: Australia’s vibrant coffee culture
has awoken industry revenue
This report was provided to
University of the Sunshine Coast (2133642413)
by IBISWorld on 20 July 2019 in accordance with their licence agreement with IBISWorld
IBISWorld Industry Report H4511b
Cafes and Coffee Shops
in Australia
May 2019 Bao Vuong
2 About this Industry
2 Industry Definition
2 Main Activities
2 Similar Industries
2 Additional Resources
3 IndustryataGlance
4 Industry Performance
11 Products and Services
12 Demand Determinants
13 Major Markets
14 International Trade
15 Business Locations
17 CompetitiveLandscape
17 MarketShareConcentration
17 Key Success Factors
22 Operating Conditions
22 Capital Intensity
23 Technology andSystems
23 Revenue Volatility
24 Regulation andPolicy
25 Industry Assistance
26 Key Statistics
26 Industry Data
11 Products andMarkets
11 Supply Chain
21 MajorCompanies
21 Retail Food Group Limited
www.ibisworld.com.au | (03) 9655 3881 | info@ibisworld.com
4 Executive Summary 17 Cost Structure Benchmarks 26 Annual Change
4 Key External Drivers 19 Basis of Competition 26 Key Ratios
5 Current Performance 20 Barriers to Entry
7 Industry Outlook 20 Industry Globalization 27 Jargon & Glossary
9 Industry Life Cycle
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019
SOURCE: WWW.IBISWORLD.COM.AU
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 3
Revenue vs. employment growth Realhousehold discretionary income
15 6
10 4
2
5


-2
-5
Year 11
Revenue
13 15 17 19 21
Employment
23 25
-4
Year 14 16 18 20 22 24 26
SOURCE: WWW.IBISWORLD.COM.AU
Establishments
6.2%
2.4%0.6%
TAS NT 1.7%
SA ACT
8.8%
WA
33.3%
NSW
18.0%
QLD
29.0%
VIC
SOURCE: WWW.IBISWORLD.COM.AU
Key External Drivers
Real household
discretionary income
Expenditure on
recreation and culture
Demand from restaurants
Consumer
sentiment index
p. 4
Market Share
There are no major
players in this
industry
p. 21
$9.9bn
Profit
2.5%
Wages
1.7%
20,781
Industry at a Glance
Cafes and Coffee Shops in 2018-19
Key Statistics
Snapshot
Revenue
$465.2m
Annual Growth14–19
$2.4bn
Annual Growth 19–24
Businesses
Industry Structure LifeCycleStage Mature
Revenue Volatility Low
CapitalIntensity Low
IndustryAssistance Low
Concentration Level Low
Regulation Level Medium
TechnologyChange Low
BarrierstoEntry Low
Industry Globalisation Low
Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 26
% change
% change
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 4
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
ExecutiveSummary Revenue for the Cafes and Coffee Shops
industry has grown moderately over the
past five years, supported by Australia’s
vibrant coffee culture. Industry revenue
is expected to grow at an annualised 2.5%
over the five years through 2018-19, to
$9.9 billion. This trend includes
anticipated growth of 1.3% in the current
year. Despite the industry’s positive
revenue performance over the past five
years, competitive pressures have pushed
profitability down over the period.
Australia’s coffee culture and its
growing number of speciality cafes and
coffee shops have contributed to high
industry competition, low barriers to
entry and low industry concentration. An
industry establishment’s customer
service, the price and quality of its
products, and the overall cafe experience
largely determine its success. Coffee
quality is crucial, with the coffee brand,
texture, temperature, milk and even
crema in an espresso becoming
increasingly important to customers.
Industry players that can understand and
cater to specific characteristics of
consumer demand are more likely to be
successful. However, some industry
businesses have found this requirement
challenging. Strong demand for coffee
has led to an influx of new operators,
with many artisan bakeries and
patisseries establishing cafe operations
over the past five years.
Industry revenue is projected to
continue growing over the next five
years. However, this growth is
anticipated to slow as the industry
reaches saturation. Consumer demand
for high-quality, convenient food and
beverages is anticipated to support
strong sales of other cafe products. As a
result, industry operators are anticipated
to focus on premium ingredients and
gourmet cafe-style meals in an effort to
boost sales of higher margin products.
Ongoing consumer interest in health and
ethical consumerism will likely also
support profit margins. However,
significant industry fragmentation will
fuel intense competition, which is
anticipated to cause profitability to
continue declining over the next five
years. Overall, industry revenue is
forecast to increase at an annualised
1.7% over the five years through 2023-
24, to $10.8 billion.
KeyExternalDrivers Real household discretionary income
Changes in real household discretionary
incomes directly affect the industry. As
the industry’s products are discretionary,
higher discretionary incomes enables
consumers to allocate more money
towards industry products. Conversely, a
decline in discretionary incomes tends to
reduce consumer spending capacity,
placing pressure on industry revenue.
SOURCE: WWW.IBISWORLD.COM.AU
80
Year 12 14 16 18 20 22 24 26
-4
Year 14 16 18 20 22 24 26
100
90

-2
130
120
2
110
4
6 140
Realhousehold discretionary income Expenditure on recreation and culture
% change
$billion
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 5
Industry Performance
Key ExternalDrivers
continued
However, the coffee segment is more
resistant to changes in discretionary
income, as many consumers perceive
coffee to be an affordable luxury.
Discretionary incomes are expected to
increase in 2018-19, providing an
opportunity for industry revenue to grow.
Expenditure on recreation and culture
Cafes are becoming increasingly popular
as places for consumers to spend their
leisure time, or to enjoy as part of other
leisure activities. Therefore, increasing
expenditure on recreation and culture
supports industry revenue growth.
However, cafes must still compete with
entertainment activities, and other
leisure and recreational pursuits for a
share of discretionary household
expenditure. Expenditure on recreation
and culture is expected to rise in 2018-19.
Demand fromrestaurants
Restaurants represent a significant
source of competition for industry
establishments. In many circumstances,
restaurants are a direct substitute for
cafes and coffee shops. Rising demand
for restaurants can place downward
pressure on demand for coffee shops and
cafes. Demand from restaurants is
expected to increase in 2018-19, posing a
threat to industry revenue.
Consumer sentiment index
The consumer sentiment index
measures how people feel about their
current financial situation and wider
economic conditions. When consumer
sentiment is positive, consumers tend to
be more willing to spend their
disposable incomes. However, when
consumer sentiment is negative,
consumers tend to curb spending on
non-essential items, such as coffees and
muffins. Consumer sentiment is
expected to decline, but remain positive
in 2018-19.
Current
Performance
Australia’s robust coffee culture has
driven the success of the Cafes and Coffee
Shops industry over the past five years.
Industry operators have benefited from
Australia’s love of quality coffee, which
has supported revenue growth over the
period. Industry revenue is expected to
grow at an annualised 2.5% over the five
years through 2018-19, to $9.9 billion.
This trend includes anticipated growth of
1.3% in the current year, as consumers
continue to seek out high-quality coffee.
Resilient consumer demand for
high-quality and convenient food and
drinks has fuelled the industry’s success.
While spending on cafe and coffee shops
is discretionary, many consumers
consider coffee an affordable luxury.
Therefore, consumers are often unwilling
to forgo their daily coffee. This trend
provides a stable underlying revenue
base for the industry. Increased interest
in fair trade and organic coffee and an
emphasis on premium-quality food have
also supported industry revenue growth
over the past five years.
Positivetrends Increases in family and work
commitments have driven demand for
industry products over the past fiveyears.
Many consumers are living busier
lifestyles, leading to greater demand for
fast and convenient food and dining
options. Cafes and coffee shops have
benefited from this trend, providingmore
on-the-go items and focusing on fast,
efficient service. Other industries in the
hospitality sector have also benefited
from this trend, with demand increasing
for fast food operators and restaurants
over the past five years. As a result,
industry operators have faced greater
competition for customers as other
hospitality industries have sought a
larger share of the cafe market.
Australia’s strong coffee culture has
supported food sales at cafes and coffee
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 6
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019
Industry Performance
Positive trends
continued
shops as many consumers purchase
meals or snacks with their coffee. As a
result, food sold by cafes and coffeeshops
has increased as a share of industry
revenue over the past five years.
Trends favouring premium food have
been reflected in the changing products
offered by cafes and coffee shops over the
past five years. Many industry operators
have repositioned their businesses to
target more discerning customers. Menus
have changed dramatically as basic
snacks and breakfast items have been
replaced with gourmet equivalents. This
trend has provided strong support for
industry revenue as operators have
pursued higher margins.
Artisan bakeries and patisseries have
increasingly sought to reposition
themselves as cafes, encouraged by solid
revenue growth and the profitability of
coffee sales in the Cafes and Coffee
Shops industry over the past five years.
These new industry entrants have aimed
to sell coffee alongside a range of
gourmet pastries, which has
dramatically improved the quality of the
industry’s food offerings. This trend has
contributed to growth in industry
enterprise numbers as businesses have
added profitable coffee services and
seating to their core operations.
Industry employment numbers have
also risen, particularly for part-time
workers, to help operators cope with
increasing demand.
Profitability Industry profitability has declined over
the past five years as strong competition
has restricted margins. However, solid
demand has limited these falls. The world
price of coffee fell sharply in 2014-15 after
reaching a peak in the previous year. An
oversupply in coffee in 2017-18 also led to
a sharp decline in the world price of coffee
in that year. These price declines have
helped ease pressure on profit. Weather
conditions in the world’s primary growing
areas can affect coffee prices, causing
margins on coffee sales to bevolatile.
Some industry operators have
struggled to maintain profit margins in a
fiercely competitive environment overthe
past five years. Many establishments,
particularly basic coffee shops, tend to
compete on price due to the industry’s
highly fragmented nature. Coffee’s low
cost and largely homogeneous nature
allow consumers to easily switch between
cafes. As a result, operators have been
forced to maintain competitive prices,
despite changing costs. This trend has
caused many operators to implement
stricter cost controls by minimising
wastage. Trends favouring premium
quality food have also supported margins
over the past five years, despite
profitability declining.
Coffee culture Australia’s vibrant coffee culture is a key
factor in the industry’s success. Coffeeis
generally considered an affordableluxury
and a daily ritual for some people. An
emphasis on quality across the industry
has led to independent coffee houses
growing at a faster rate than coffee
chains. Additionally, demand for quality
coffee has boosted demand for rare
blends, fair trade coffee and organic
coffee. Industry operators can charge a
premium price on all of these products.
Australia’s strong coffee culture has
supported higher industry revenue and
sustained demand for cafes and coffee
shops over the past five years.
Some operators have
struggled to maintain
profit margins in a fiercely
competitive environment
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 7
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019
Industry Performance
Industry
Outlook
The Cafes and Coffee Shops industry is
projected to continue growing over the
five years through 2023-24, as
Australians continue to value quality
coffee. However, industry revenue is
projected to grow at a slower rate
compared with the previous five-year
period, as the industry reaches
saturation. Consumer demand for
high-quality coffee and convenient food
products is anticipated to underpin
revenue growth. Industry revenue is
forecast to increase at an annualised 1.7%
over the five years through 2023-24, to
$10.8 billion. Trends in health
consciousness, premium foods and
ethical consumerism are projected to
drive this revenue growth. The
prevalence of small, specialty operators
and intense competition will continue to
affect the industry, requiring participants
to achieve greater operating efficiencies.
High demand for coffee and the
affordability of most industry products
are anticipated to support industry
revenue growth over the next five years.
Rising discretionary incomes are
anticipated to encourage further industry
revenue growth as households continue
to spend on discretionary products such
as coffee, snacks and meals from cafes
and coffee shops. Increasing demand will
likely support growth in industry
enterprise numbers over the period,
albeit at a slower rate than the previous
five-year period due to competitive
pressures. Industry employment
numbers are also projected to grow over
the next five years, due to an emphasison
quality service. However, some industry
operators will likely limit employment
growth to control wage costs and support
profit margins. Trends favouring smaller
establishments could also limit
employment growth. Despite operators
reducing staff hours through hiring more
casual employees, the industry will
remain highly labour-intensive. This
trend will likely lead operators to seek
greater cost savings elsewhere.
Convenience Consumers are anticipated to spend more
on eating out over the next five years,
which benefits industry operators.
Demand for convenient food and
beverages will likely help drive industry
demand, as many consumers are living
increasingly busy lives. Consequently,
cafes are anticipated to provide a wider
range of fast and convenient meals,
particularly catering to lunchtime traffic.
Cafes are anticipated to take some
market share from restaurants as many
consumers move away from formal
dining, towards more convenient cafestyle meals and snacks. The quality of
food served by many cafes is anticipated
to rise, encouraging more consumers to
eat at industry establishments rather
than traditional restaurants. Many
restaurants are anticipated to expand
their cafe-style operations in an effort to
win back customers, resulting in strong
competition for industry operators.
Consumer demand for healthy and
premium food and beverages is projected
to also support the industry’s
performance. Cafes offering diverse
menus that emphasise fresh and premium
ingredients are anticipated to be the best
performers, as discerning consumers
search for quality. The industry’s focus on
quality will be particularly intense for
Industry revenue
6 4 2 0
-2
Year 11 13 15 17 19 21 23 25
SOURCE: WWW.IBISWORLD.COM.AU
% change
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 8
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019
Industry Performance
Convenience
continued
coffee products as coffee enthusiasts
become increasingly discerning.
Consumers can easily access review
websites, such as Zomato, to rate cafes for
their quality and service. This trend is
anticipated to encourage operators to
allocate funds to higher quality coffee
blends and premium ingredients in meals.
Competition Small and specialised operators are
anticipated to remain popular over the
next five years. Franchised operations will
likely struggle, as consumers generally
associate quality, ambience and
experience with smaller independent
cafes. Consequently, the industry will
likely remain highly fragmented, with
larger chains struggling to expand their
market share. Operators will seek to
differentiate themselves to drive sales,
with competition focusing on price and
quality. Industry operators will need to
control expenses to support profit
margins, as price competition tends to
limit revenue growth and demand for
quality products causes costs to rise. Many
industry operators will seek to minimise
wage and purchase costs, and reduce
wastage. Efforts to increase profit will also
result in a stronger focus on highermargin
products. Demand for coffee is anticipated
to remain solid, with cafes focusing on
selling quality meals and enhanced
breakfast and lunch offerings. Despite this
trend, strong competition is projected to
cause profit margins to fall slightly over
the next five years.
Opportunities Niche markets will provide opportunities
for industry operators over the next five
years, with ethical consumerism trends
being particularly prominent. Many
industry players will promote their
ethical business practices by using fair
trade coffee and food products. Fair trade
products aim to ensure that multinational
corporations are not exploiting coffee
growers and food producers in the
developing world. Fair trade growers and
farmers typically have better working
conditions, obtain higher prices for their
product and receive education about
sustainable agricultural practices.
Ethically sourced products are
anticipated to become increasingly
popular and attract premium prices as
consumers become more concerned
about food and beverage origin. This
trend is anticipated to support industry
revenue growth over the next five years.
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 9
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019
Industry Performance
LifeCycleStage
Industry value added is growing at a
slower pace than the overall economy
Enterprise numbers have increased
over the past five years
Technology improvements are improving efficiency
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 10
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019
Industry Performance
IndustryLifeCycle The Cafes and Coffee Shops industry is
currently in the mature stage of its life
cycle. Industry value added, a measure of
the industry’s contribution to the overall
economy, is projected to grow at an
annualised 2.2% over the 10 years
through 2023-24. This represents an
underperformance relative to the
economy, with GDP forecast to grow at
an annualised 2.6% over the same period.
The industry’s slower growth is typical of
a mature industry.
The industry’s low rate of
technological change, which has largely
focused on efficiency gains, supports the
industry’s mature life cycle. The industry
has also turned to technology for
marketing and promotion, with
operators cultivating a strong online
presence through company websites and
social media. Online review websites,
such as Zomato, have also changed the
operating landscape. Consumers are
increasingly using online sources to
choose cafes, with the ability to quickly
access information such as operating
hours, prices, menus and reviews.
Industry establishment numbers have
risen over the past five years, supported
by strong demand for coffee. The number
of industry products has also increased
over the same period. Industry operators
have opportunities to capitalise on new
consumer preferences. Organic products
and fair-trade coffee are becoming more
widespread, driven by trends in health
consciousness, ethical consumerism and
an increased focus on product
provenance. Industry operators can
charge a premium for these products as
consumers become more concerned with
ethical sourcing.
This industry
is Mature
WWW.IBISWORLD.COM.AU Cafes and Coffee Shops in AustraliaMay2019 11
Provided to: University of the Sunshine Coast (2133642413) | 20 July 2019

YOU MAY ALSO READ ...  Research design proposal
Order from Academic Writers Bay
Best Custom Essay Writing Services

QUALITY: 100% ORIGINAL PAPERNO PLAGIARISM – CUSTOM PAPER