The Coffe Business

The Coffee Business | December 9

2010

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This essay aims to tackle some of the key issues behind the rapid growth of the coffee industry. Furthermore, we look at some of the key factors influencing both the internal and external environments of large coffee chains, with key examples from Starbucks’ history of performance | An insight into the rapid growth of the coffee industry |

Coffee is a major global commodity. It has been around for centuries and, today, has become the drink of choice for millions around the world. According to the British Association of Coffee in 2007, consumers in the UK spent £720 million on coffee and over 70 million cups were consumed daily. It is the second most traded commodity after oil.

Like coffee, coffee bars have been around dating as far back to the early 16th century, with historical evidence pointing to the first coffee shops being in the Arabian Peninsula. In England, the first coffee shop opened in Oxford in 1651 and by the end of the century, there were over 3000 coffee shops in London alone. Some of London’s trademark institutions (for example the London Stock Exchange and Lloyds Insurers) originally started out as coffee shops.

However, over the last 2 decades, the coffee shop has become a haunt for the ‘young professionals,’ predominantly 16-40 year old students and white collar professionals. The 21st century era of coffee shops can be clearly seen to segment to this target market.

The rise in demand for coffee and coffee shops has been a direct result of the increase in perceived value of both coffee and the ‘coffee shop experience.’ Perceived value is a combination of ownership costs and price, taken away from perceived benefits. The average cost of a coffee is approximately £2.65. There are no ownership costs associated with coffee but the perceived benefits are vast. Table 1.1 overleaf attempts to summarise the critical factors that contribute to this value placed on coffee by consumers

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