The Market Summary is a key element within the business plan but many people are confused about what to include when it comes to actually writing it.
The purpose of the Market Summary section is to describe the current state of the industry specific to your particular location and how your product or service will have relevance due to current or upcoming trends. Unlike the Executive Summary or Company Summary sections – this is the point in the business plan where you can pull in some data points to convince the reader that your plan is solid and your business meets a legitimate need in the marketplace.
Below is an actual Market Summary section from a coffee shop business plan I wrote that you can use as a reference, or Save Time and Grab The Full Business Plan including the editable Word version and financial templates that you can use to just plug in your data.
Business Plan Market Summary: Coffee Shop
According to a nation-wide survey conducted by the National Coffee Association, among all beverages consumed in the U.S., coffee ranked third in daily consumption. Only two beverages, water and soft drinks are consumed more on a daily basis. Coffee is no longer considered a drink for older generations who “like it black.” Now, over half of the adult population drinks coffee everyday. One in ten 17- and 18-year-olds rated coffee as their top beverage of choice. As a result, several major coffee companies reported first-quarter earnings well over $100 million.
“The industry trade group Specialty Coffee Association of America (SCAA) reports that the industry is not even set to peak until the year 2015.”
Starbucks, a leader in the coffee industry, reported a net income earning of $xxx.x million in its first quarter for 20xx. To ensure year-round success, the company provides holiday specials and flavors, gift cards, and desserts. Our coffee shop will follow trends and employ many of these same proven business strategies.
The traditional cup of coffee is still popular with many, but the consumption of gourmet, or specialty coffee, drinks is on the rise. Specialty coffee sales are increasing by around 20% per year, and make up nearly 8% of the 18 billion dollar U.S. coffee market. The NCA reported that as many as 127 million members of the adult population 62% said that they drank gourmet coffee occasionally. With specialty coffee drinks ranging in price from $x.xx to over $x.xx in some cases, one can see that this is an extremely profitable industry. The average Starbucks’ customer, visiting the store between 15 and 18 times a month, is said to spend at least $x to $x per visit, according to CEO Orin Smith.
The coffee industry is still growing nationwide as more and more people are beginning to try gourmet coffee and tea. ABC City is poised for growth in the coffee industry, and should continue to experience growth through preferred demographic shift, increased exposure in town, and increased premium coffee drinking in nearby XYZ City.
According to demographic information provided by DemographicsNow SRC, LLC., the numbers of households in ABC City zip code xxxxx total 14,963. The average household income in this area is $52,063 with 19.6% in the range of $50,000 – $74,999 which is the highest category by percentage. Projections over the next five years indicate growth in this category by 7.8%, as well as growth in the $75,000 – $99,999 category by 27.2%. Wealth categories above $100,000 are projected to grow over 30% in the next five years.
Population for xxxxx is 33,783 with the largest category 14.5% of those between the ages of 25-34. 35-44 and 45-54 comprise the next two largest segments of the population at 13.8% and 13.5% respectively.
Educational attainment for households in the immediate area include 20.6% with some college, and 28.2% of the population with some form of higher education degree (Associates, Bachelors, or Graduate Degree). Another 24.8% have a high school diploma.
According to the SCAA, educational attainment has a direct bearing on coffee consumption. Individuals who finished college bought 49% more gourmet coffee on average, and those finishing with a post-graduate degree bought 71% more. The SCAA describes their typical customer as “an educated urban resident with disposable income to spend on fine coffee.”
This information about the neighboring community shows favorable trends for expendable income and growth within the immediate area, especially over the next five years.
Exposure for the premium coffee market is already starting in ABC City, as demand for a fresh cup of coffee is now being filled at ABC Mall. At least 5 other coffee shops in ABC City have been sustaining business as more people continue to find a way to satisfy their coffee craving here in town. Increased exposure and competition has a positive effect on sales because most coffee shops do not compete on price, but rather on coffee quality, atmosphere, and customer service.
With the exposure created by some of the larger national chains, consumers generally expect to pay a premium for a cup of specialty coffee. By leveraging the current exposure from nearby XYZ City, ABC City will soon expand the premium coffee drinking base, and growth in the market will continue. With over 40 coffee shop establishments in XYZ City, the number of coffee drinkers in the area continues to rise.
Part of this is due to the fact that the coffee business or more accurately the espresso business can be very profitable. Espresso is the “base” used in most specialty coffee drinks like a “latte” or “mocha”, in fact the cost of the ingredients in a 12 oz. latte is around .xx cents, according to Acorto coffee and equipment supplier. With customers already accustomed to paying $x.xx on average for a specialty coffee drink, profits can be substantial, for the dozens of espresso based drinks.
With more and more businesses and restaurants finding their way into ABC City, a relaxing coffee shop in which customers can unwind and finish off a night out of the house is inevitably in demand. However, in our area, there are relatively few coffee shops in existence. With such favorable trends and lack of market penetration, a coffee shop will create the perfect blend of business opportunities.
Our coffee shop will provide a relaxing, eclectic environment that will attract consumers of all ages. To maintain a loyal customer base, our coffee shop will sell an assortment of specialty drinks and coffee while differentiating itself from all competition by serving fresh baked pies and desserts. National trends are showing a long-term pattern of consumers purchasing decadent desserts, especially those containing chocolate, according to the U.S. Foodservice Market. By incorporating this niche into our coffee shop and providing high quality desserts, our shop will not only be a relaxing retreat from a hectic day, but it will also provide a boost to the bottom line, and remain a must-have staple for one’s sweet tooth.
About the Author
Craig is a small business marketer, author and entrepreneur with over 15 years of experience in business management and marketing.