Coffee Shop Business Plan

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Market Analysis Summary

U.S. coffee consumption has shown steady growth, with gourmet coffee having the strongest growth. Coffee drinkers in the Pacific Northwest are among the most demanding ones. They favor well-brewed gourmet coffee drinks and demand great service. Eugene, OR, with its liberal and outgoing populace and long rainy winter, has traditionally been a great place for coffee establishments. Java Culture will strive to build a loyal customer base by offering a great tasting coffee in a  relaxing environment of its coffee bar located close to the bustling University of Oregon campus.

4.1 Market Segmentation

Java Culture will focus its marketing activities on reaching the University students and faculty, people working in offices located close to the coffee bar and on sophisticated teenagers. Our market research shows that these are the customer groups that are most likely to buy gourmet coffee products. Since gourmet coffee consumption is universal across different income categories and mostly depends on the level of higher education, proximity to the University of Oregon campus will provide access to the targeted customer audience.

The chart and table below outline the total market potential (in number of customers) of gourmet coffee drinkers in Eugene, OR.

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Students and Faculty 2% 18,000 18,360 18,727 19,102 19,484 2.00%
Teenagers 1% 3,000 3,030 3,060 3,091 3,122 1.00%
Office workers 2% 8,000 8,160 8,323 8,489 8,659 2.00%
Other 0% 5,000 5,000 5,000 5,000 5,000 0.00%
Total 1.63% 34,000 34,550 35,110 35,682 36,265 1.63%

4.2 Target Market Segment Strategy

Java Culture will cater to people who want to get their daily cup of great-tasting coffee in a relaxing atmosphere. Such customers vary in age, although our location close to the University campus means that most of our clientele will be college students and faculty. Our market research shows that these are discerning customers that gravitate towards better tasting coffee. Furthermore, a lot of college students consider coffee bars to be a convenient studying or meeting location, where they can read or meet with peers without the necessity to pay cover charges. For us, this will provide a unique possibility for building a loyal client base.

4.2.1 Market Needs

General trend toward quality among U.S. consumers definitely plays an important role in the recent growth in gourmet coffee. Additionally, such factors as desire for small indulgencies, for something more exotic and unique, provide a good selling opportunity for coffee bars.

4.3 Industry Analysis

Coffee consumption has shown a steady 2.5% growth rate in the United States over the last decade. In 1994, total sales of coffee were approximately $7.5 billion with gourmet coffee representing 33% (or $2.5 billion) of that. The retail coffee industry is flourishing in the U.S. Pacific Northwest. The local climate, with a long rainy season, is very conducive for the consumption of hot non-alcoholic beverages. At the same time, hot dry summers drive people into cafes to order iced drinks. Further, coffee has really become a part of the lifestyle in the Pacific Northwest. Its discerning coffee drinkers are in favor of well-prepared, strong coffee-based beverages, which they can consume in a relaxing environment.

4.3.1 Competition and Buying Patterns

Competition

According to the 1997 Oregon Food service Statistics (NAICS 72), Eugene had 45 established snack & non-alcoholic beverage bars (NAICS 722213) with total sales of $14.2 million. Among other establishments that offer coffee drinks to their customers are most of Eugene's limited- and full-service restaurants. Java Culture's direct competitors will be other coffee bars located near the University of Oregon campus. These include Starbucks, Cafe Roma, The UO Bookstore, and other Food service establishments that offer coffee. Starbucks will definitely be one of the major competitors because of its strong financial position and established marketing and operational practices. However, despite of Starbuck's entrenched market position, many customers favor smaller, independent establishments that offer cozy atmosphere and good coffee at affordable prices. Cafe Roma is a good example of such competition. We estimate that Starbucks holds approximately 35% market share in that neighborhood, Cafe Roma appeals to 25% of customers, The UO Bookstore caters to another 10%, with the remaining market share split among other establishments. Java Culture will position itself as a unique coffee bar that not only offers the best tasting coffee and pastries but also provides home-like, cozy and comfortable environment, which established corporate establishments lack. We will cater to customers' bodies and minds, which will help us grow our market share in this competitive market.

Buying Patterns

The major reason for the customers to return to a specific coffee bar is a great tasting coffee, quick service and pleasant atmosphere. Although, as stated before, coffee consumption is uniform across different income segments, Java Culture will price its product offerings competitively. We strongly believe that selling coffee with a great service in a nice setting will help us build a strong base of loyal clientele.