Growth Industry
An industry's overall prospects for the future are important to consider when determining which business to enter. For most industries, this type of analysis can be summarized by determining where an industry lies within its life-cycle. This life cycle begins when an industry is young with few competitors and limited barriers to entry. Next, an industry moves into its growth stage, which is typified by increased competition. In time, most industries approach maturity. Many firms in this stage of development will find it difficult to compete. Entering an industry at this point is difficult and oftentimes not wise. An industry can remain at maturity for many years, or move quickly into decline. Decline marks the last stage of an industry's life cycle. Fortunately, the specialty coffee industry is in a period of rapid growth. The specialty coffee industry has developed in direct response to a growing consumer demand for quality experiences. According to the Specialty Coffee Association of America (SCAA), this industry will continue to grow, and is not expected to peak until the year 2015.

Sales of specialty coffee sold for home consumption are projected to reach 3 billion dollars by 1999. Retail food service sales of specialty coffee beverages are anticipated to reach 1.5 billion. The SCAA believes specialty coffee retail business sales will be 6 billion dollars at the century mark. According to research conducted by the SCAA in January of 1995, the specialty coffee industry employed 70,000 people, including 50,000 in entry-level retail positions. More than half of the jobs were created between the years 1990 and 1995.

Factors Fueling Rapid Growth
According to reports published by the SCAA, coffee caféés (including espresso bars, drive-thrus, kiosks, and carts) are experiencing the fastest rate of growth of any coffee distribution channel.

Three factors have fueled this rapid growth:

• High gross profit margins in selling coffee by the cup.
• Consumers cannot easily duplicate espresso-based beverages at home.
• Existing food service locations will be slow to upgrade their product to the quality level of specialty coffee establishments.

The four major trends that have forged the foundation of the SCAA's "bullish" forecast for the '90s, and the next century, include:

1. When compared to all other channels of distribution for specialty coffees, coffee caféés will continue to experience the fastest rate of growth. This will be due to the opportunities that exist resulting from strong consumer demands, and the modest costs associated with entering the business.
2. Specialty coffees will solidify their niches in all product categories.
3. Retail micro-roasters will become a driving force in the coffee industry-growing in numbers from 100 in 1990, to a projected 1,400 by 1999.
4. Consumers will continue a two-tiered philosophy when shopping. [Two-tiered shopping is the practice of making a portion of one's purchases from large multiunit discount stores, and the other portion from small specialty retailers.]

Coffee caféé Trends
Coffee chain outlets will continue to open new stores in the nation's primary markets because of the abundance of opportunity that exists. Most chains possess the capital and key personnel resources necessary for continued expansion. Finding good retail locations for coffee caféés will be a challenge as chains compete with expanding franchise groups for the available space. Independent store owners will experience difficulty in finding good locations in primary as well as secondary markets...due to the competition from these two groups.

The SCAA has estimated that by the year 1999, the average annual sales for each of the following retail coffee service venues will be: coffee cafées; $300,000; espresso bars;$150,000; carts-$75,000. Furthermore, the total retail sales in this distribution channel will reach $1.5 billion annually.

Specialty Coffee Product Trends
Specialty coffee will be in competition for consumer dollars with all other segments of the beverage industry. The advantages of specialty coffee are the variety of variables and combinations within the category. They include: roasts, single origin coffees, blends, processes, and a wide variety of beverage offerings. These variables make this product category unique.

Major trends within this niche are: •An increased move towards "estate" coffees. These are coffees grown and processed at a district farm or "finca."

• Dark roast coffees will remain popular for espresso-based beverages.
• Local roasters will blend coffees to suit the flavor preferences of their market.
• Decaféfeinated coffees will maintain their market share, and consumers will be able to choose from a broader range of products.
• Flavored coffees will continue to increase in total market share. •The market for organically grown coffee will increase significantly. The one limiting factor to growth will be a limited availability.

Retail Roaster Trends
According to the SCAA, the most fundamental change in the coffee industry will be the continued increase of "micro-roasters." In 1969 there were approximately 20. By 1979 the number had doubled, and in 1989 there were 385 micro-roasteries in operation. Since 1990, the number of micro-roasteries opening annually has increased by increments of 100. This growth rate is projected to continue, with estimated numbers approaching 1,400 by 1999. The SCAA believes that retail roasters will have a major influence on shaping consumer opinion. Because of their daily face-to-face encounters with the consumer, retail roasters will be the first to discover which product developments will create the greatest demand. These roasters will be able to adjust their product lines rapidly to meet changing consumer desires. Because the retail roasters will need to differentiate their products from those in the supermarkets (including competitors within the specialty coffee industry), they will need to achieve higher levels of product quality, innovation, offer distinctive "estate" coffees, and raise the standards of freshness through better handling and packaging. The success of the micro-roaster will reverse a 50-year trend of consolidation in the coffee roasting industry. Smaller roasting firms will take advantage of the expanding niche markets. Large roasters will see their market share erode as consumers change their consumption habits by switching to coffees with unique and distinctive characteristics.

Consumer Purchasing Trends
Supermarkets are the leading distribution channel for coffee purchases of all types. This trend is projected to continue into the immediate future. The SCAA believes that by 1999, one-third of all specialty coffee sales will occur in supermarkets. Demographically, those areas of the country where the populations typically possess higher levels of education and income represent the greatest potential to consume specialty coffee. Based upon this fact, there are many areas of the country which still have significant potential for specialty coffee retail businesses.

Overall Coffee Market
Globally, the total green coffee traded in 1995 was valued at $14 billion, of which mild Arabica coffees represented approximately $6.7 billion. Coffee-producing nations are now realizing the potential that exists within the explosive specialty coffee markets. Demand for high-quality coffees has motivated many producing nations to improve their methods, allowing a larger supply of high quality coffees.

Green coffee imports of more than 21 million bags are expected for the year 1999, with 3.5 million bags meeting specialty coffee standards. The SCAA expects that by 1999, specialty coffee will account for approximately 30% of household consumption, and 8% of food service consumption.

Information in this article was obtained from Ted R. Lingle, executive director of the SCAA.