Coffee Industry Analysis Coffee Retailing Thesis

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S. versus the loyalty to Dietrich's Coffee in Southern California. Differentiating on specific types and flavors of drinks, smaller coffee shops and larger, more globalized chains seek to define their brand and unique value proposition primarily through the use of unique drinks. Despite these efforts however, new product development is a weakness in this industry. The lack of new product development expertise often leads coffee retailers to offer enhanced services including WiFi internet access (Clark, 19-20). In summary the customer for retail coffee is changing to be more discerning regarding service while also being loyal not so much on price but on the total in-store experience.

Strong Dependence on the Supply Chain for Profits

The entire retail coffee industry is highly dependent on the very volatile commodity of green coffee beans, which routinely have tariffs imposed on their export by South American nations. In addition to this dependency on coffee beans, the industry is highly dependent on the price of dairy products and milk specifically, which is used in many of the industry's higher-margin drinks including cappuccinos and lattes.

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Raw milk prices globally are expected to rise significantly this year due to the economic downturn, which will directly impact the profitability on a per-drink basis.

Summary

Despite a global economic downturn coffee consumption continues to grow at an 8% rate through 2008 (Perlik, 43). The industry's dynamics are being redefined through the increasing expectations of customers who now want services such as free WiFi in addition to new drink products, and dependence on global supply chains directly impacting the industry's profitability as well. The bottom line is that the industry continues to experience global growth yet must manage its supply chains, retailing operations and value-added services effectively if it is to stay profitable globally......

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