III. Industry Analysis
The Donut Shop industry is expected to continue to grow over the next five years, reaching over $13 billion. A number of factors are expected to help this industry growth including:
- Positive conditions in the overall economy place upward pressure on consumer spending.
- Industry players are expected to introduce more health-conscious choices, such as low-fat doughnuts or beverages that contain fruit. As new firms enter the Doughnut Stores industry, they will similarly need to provide healthy options to potential patrons.
- Per capita coffee consumption is projected to remain steady over the five-year period, at about 9.5 pounds. Doughnut stores have already caught on to the coffee trend, expanding their beverage options beyond basic coffee. This move is placing the industry in direct competition with major coffee chains.
- Other beverages offered by doughnut stores include an assortment of shakes, ready-to-drink beverages and fountain sodas. These offerings will continue expanding as stores attempt to attract more customers by strengthening their beverage product portfolios. Moreover, such low-cost, high-profit menu items offer a quick way for companies to increase revenue and fatten their bottom line.
- The majority of independent doughnut shop operators rely on personalized customer service to drive revenue. In fact, labor intensity is likely to rise for many operators that seek to increase their coffee offerings due to the time and skill required to make espresso coffee drinks.