Market Analysis Summary
Inspirational Grounds is faced with the exciting challenge of being the first-mover in the Minneapolis/St. Paul Christian coffee house and roaster market. The consistent popularity of coffee and specialty drinks, combined with the ever growing and ever profitable Christian bookselling and music market, is a winning concept and will produce overwhelming results. Our target market includes coffee drinkers, spiritual seekers, Christians seeking fellowship (and snacks), and local neighborhood residents.
4.1 Market Segmentation
Census data, religous adherent research, and coffee consumption statistics were used to determine market share for Inspirational Grounds. Recent census data shows that there are 38,860 persons in the 55407 zip code, and 1,126,944 persons in Hennepin county. Coffee Research Institute data shows that 54% of the population drinks coffee daily, and 25% drink coffee occasionally. The Glenmary Research Institute shows that 64.9% of the Minnesota population are self-professed religous adherents. Minnesota ranks 5th in the nation for percentage of population religiously affiliated. National statistics show that most persons do not travel more than 20 minutes to eat or listen to entertainment; we are using a conservative 10%. The following is a breakdown of target customers:
|AGE||% of Population|
|INCOME||% of Population|
55407 market = (38,860 x 68.6% 15-64 year olds, x 74.1% in targeted income bracket, x 54% coffee drinkers) + (38,860 x 68.6% x 74.1% x 25% occasional coffee drinkers)
The formula takes the total 55407 population and then multiplies that number by the percentages in order of importance, that figure is multiplied by the percent of persons who drink coffee daily. The next formula is calculated the same except it uses the percentage of person who drink coffee occasionally.
Hennepin County Market
|AGE||% of Population|
|INCOME||% of Population|
Hennepin County Market = ((1,126,944 – 38,860) x 69.1% x 72.3% x 64.9% x 54% x 10%) + ((1,126,944 – 38,860) x 69.1% x 72.3% x 64.9% x 25% x 10%))
The formula takes the total county population minus the 55407 population and then multiplies that number by the percentages in order of importance, that figure is multiplied by the percent of persons who drink coffee daily multiplied by the percentage of the population likely to travel to Inspirational Grounds. The next formula is calculated the same except it uses the percentage of person who drink coffee occasionally.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Religious Adherent – Henn County||1%||19,731||19,928||20,127||20,328||20,531||1.00%|
4.2 Target Market Segment Strategy
The customers will be between 15-64 years old. The income level is between $15,000 and $99,000 annually. They live in the 55407 zip code, the proposed area for Inspirational Grounds. The Hennepin county customer is between 15-64 with income levels ranging from $15-99K annually. They live in the Hennepin county area and are self-professed religious adherents. A limited number, estimated at about 10,000 will come from other areas out of curiosity or to see a particular entertainer or poetry reading. A majority of the customers will be persons who enjoy a relaxing atmosphere, reading, reflection, and excellent coffee.
4.2.1 Market Trends
The specialty beverage market will continue to grow as younger people are opting for non-alcoholic beverages and wholesome entertainment. Religious book retail sales grew 2.3% in 2002. In 2000 they represented 5.25% of all book sales resulting in $1.25 billion in revenue. In 2001, these sales grew 4.7% to $1.3 billion and market share grew to 5.5%. With the increasing interest in spirituality, sales and market share will increase steadily.
4.2.2 Market Growth
The Hennepin County area is expected to grow .8% annually. The 55407 zip code area is expected to grow 1% annually. These estimates are based on most recent census data and projected growth rate for the the Minneapolis area.
4.2.3 Market Needs
Current trends and historical sales data both indicate that the high demand for coffee will remain constant over the next five years. The Christian book and music business is expected to continue to grow as contemporary Christian artists rival secular music. In addition to the increased sales in these areas, Generation X’ers are more religious than their parents, according the GlenMary Research Institute.
The needs of this market are decidedly soft in nature. The soft needs of this market include, but are not limited to, a general feeling of acceptance, a place of belonging, and non-judgmental atmosphere.
4.3 Industry Analysis
The retail coffee industry in the Twin Cities experienced rapid growth at the beginning of the 90’s and is now moving into the mature stage of its life cycle. Many factors contribute to the demand for excellent coffee and specialty beverages in Minneapolis. The climate in Minneapolis is extremely conducive to coffee consumption; coffee consumption increases in colder months. Current trends in the Midwest reflect the popularity of fresh, quality coffee and specialty drinks, Minneapolis/St. Paul boasts sophisticated coffee lovers.
The popularity of Christian entertainment is growing immensely as people are searching for meaning during these uncertain times. Those who are familiar with Christian music and book trends and sales are looking for authors and performers to keep up with the seemingly insatiable demand.
Due to competition, cafe owners must look for ways to differentiate their place of business from others in order to achieve and maintain a competitive advantage. The founder of Inspirational Grounds realizes the need for differentiation and strongly believes that combining freshly roasted coffee, a cafe, spiritual books and music, and entertainment are the keys to success. The fact that no other such cafes are established in the Twin Cities presents Inspirational Grounds with a chance to enter the window of opportunity and take hold of a very profitable niche market.
4.3.1 Competition and Buying Patterns
Inspirational Grounds will face competition on two fronts: coffee retailers and book & music stores. The good news is that Inspirational Grounds does not currently face any direct competition from other cafes in the market. There are no independently operated Christian cafes in the Twin Cities. Christian based coffee houses are either located within, or owned by a church.
Heavy competition in the Twin Cities area creates an industry where cafes face the same costs. There is a direct relationship between price and quality of coffee. Some fresh roasted coffee retails from $12/lb while other more exotic beans may sell as high as $40/lb. Wholesalers sell green (unroasted) beans to retailers at an average of 50-75% discount. For example; a pound of Columbian Supremo beans wholesale for $3.06 and retails for $12.85. As in most industries, price decreases as volume increases.
4.3.2 Main Competitors
The main competitor in the retail coffee segment is Dunn Bros, as they also sell freshly roasted beans. In fact, the largest part of Dunn Bros’ revenue is generated from the sale of the roasted beans to the consumer. The difference is Dunn Bros. does not roast their beans on-site, nor do they have the ability to custom roast for their customers.
Dunn Bros. – Uptown
Local chain cafe that boasts freshly roasted beans. The bulk of these sales are in the form of roasted beans sold to the consumer. The cafe caters to customers who want fresh beans and brewed coffee. The atmosphere is homey, the prices are competitive, no entertainment is provided. They are known for good quality coffee. The stores are clean and well managed.
Vera’s – Lynn/Lake
A nice specialty coffee cafe with an atmosphere that caters to the “Green Peace” crowd. They have competitive prices, good quality coffee, and an excellent location. The cafe has three rooms; one with tables and chairs, one with couches and over-stuffed chairs, the third “room” is an outside patio. Vera’s doesn’t offer entertainment, on-site roasted coffee, or books and music.
Boathouse Coffee – 42nd & Cedar Ave South
Serves specialty coffee drinks, sandwiches, soft drinks, and ice cream. The street is busy, there is not a lot of foot traffic, and there is no parking lot so the location doesn’t allow for easy access. The shop is clean and prices are competitive. The Boathouse Coffee Cafe has several tables, and a couch. It can accommodate about 25 patrons.
4.3.3 Industry Participants
There are countless coffee wholesalers who could conceivably do business with Inspirational Grounds. These wholesalers distribute coffee and espresso beans to restaurants and retailers. Competition in this industry creates an even amount of bargaining power between buyers and suppliers resulting in competitive pricing.