Industry

Description
Coffee shop industry has been a huge success since the Western countries introduced it in the Philippines. The primary reason for its growth is the adapting of local consumers to the lifestyle in the Western world. This growth became beneficial in stabilizing the local economy, increasing employment, and contributing to the revenue of other industries.

Start of Industry
Though coffee shop seems to be a Western idea, it actually originated in Turkey in 1475. The first coffee place established is named Kiva Han, which serves strong and black coffee in line with the Turkish preference. As colonization spread across the world, coffee as a part of culture and tradition also passed through the globe. When Spaniards colonized the Philippines, Spanish friars also introduced planting of coffee beans in Lipa, Batangas. The idea spread to the other regions of Batangas until Cavite started to export their products. In fact, Philippines became the fourth largest coffee bean exporter during the 1880s mainly because of Cavite. The reign of Batangas in terms of producing coffee beans was hampered by the pest infestation in 1889, which shifted the focus of planters into other crops like rice and cassava. When the Americans conquered the Philippines, the coffee industry went to its commendable growth. Coffee was commercialized instead of just a household consumption. Variety of coffee mixtures aside from black and strong coffee was introduced. First local coffee shop called Botica Boie was established in Escolta while the first franchise of a foreign coffee shop, Figaro Coffee Company, hit the Philippine market in the early 1990s. In 1980, Philippines became a member of International Coffee Organization. Being a part of this organization promotes knowledge and diversification among its members.

Size and Growth

Based on the latest Survey of Tourism Establishments in the Philippines, cafes together with restaurants and fast food centres comprised the biggest number of establishment engaged in food and beverage

service activities. It has 10, 282 enterprises or 78.4% of the total while cafes alone have around 400 or 3% of the food and service industry in the Philippines.

While based on the revenue earned, it still has the highest revenue with Php 153, 435.1 million or 94.9% of the total.

Percent Distribution of Food and Beverage Service Activities Establishments

15.2% 0.1% 0.6% 5.8% Restaurants, cafes, and fastfood centres Bars and cocktail lounges Day and night clubs Refreshment stands, kiosk, and counters 78.4% Other eating and drinking places

Distribution of Total Revenue for Food and Beverage Service Activities Establishments

Restaurants, cafes, and fastfood centres (Php 153,435.1 M) Bars and cocktail lounges (Php 2,686.6 M) Day and night clubs (Php 310.4 M) Refreshment stands, kiosk, and counters (Php 5,128 M) Other eating and drinking places (Php 46.8 M)

Source: www.census.gov.ph/2009-survey-tourism-establishments-philippines-step-food-and-beverageservice-activities

According to Steve Benitez, a coffee shop proprietor, Philippines offers a huge opportunity for coffee shop industry to grow because its market is not yet saturated and due to the potential of local production. According to Gos Brewing Boardroom Battle, the industry is under a 20% growth rate. In Metro Manila, there is a strict competition to both local and foreign coffee houses especially within the universities and business districts such as Quezon City and Makati City. Businessmen like Mr. Benitez consider the rural areas as potential market and a location for expansion of business. Though the growth of coffee shop industry in the rural areas is relatively slow, people are already adapting to the urban lifestyle.

Major Industry Contribution

The changing lifestyle of Filipino consumers is the primary reason on the growth in the coffee shop industry since 2000. They are hugely influenced by the culture of drinking coffee in the Western part of the world especially in United States. Before, Filipinos are just drinking coffee in the early part of the day

but due to Westernization they adapted to the idea of drinking coffee in anytime of the day which hugely contributes to the success of coffee shop industry in terms of revenue.

Importance
Coffee shop industry helps in the lifestyle of its consumers through providing an avenue for them to relax and through providing the optimum health benefits of coffee. Due to urbanization, people are becoming busy with work and study and coffee places give way for them to do their jobs and in the same time make themselves pampered through drinking coffee. Coffee shops are also giving their best effort to provide what is good for the health of their customers.

The industry also takes part in strengthening the economy through providing jobs, business opportunity, and revenue. Cafes, together with restaurants and fastfood chains, provide around 209,000 jobs according to latest Government Census. This will help in eradicating the 7.1% unemployment rate in the Philippines. Coffee shops are also one of the in-demand businesses for new entrepreneurs; hence it is an avenue for supporting the growth of small-medium enterprises (SME). Cafes, restaurants, and fastfood chains contributes Php 153, 435.1 million in the Philippine gross revenue.

Linkage to other industries

One major beneficiary of success of the local coffee shop industry is the agricultural industry. Most local cafes get their coffee beans in the local market. This provides employment to 27,000 farmers in the provinces.

As seen on the previous part of this feasibility study, coffee shop also helps in improving the economy of food and service industry.

TARGET MARKET
This part of the feasibility study aims to determine the acceptance of the potential customers to the services provided by the proposed business. These services are the following: 24-hour operations Study area Noise reduction policy Photocopy and printing services

Student-friendly price of coffee

The chosen target market of the first branch of the proposed business is the students within the University Belt but as soon as the enterprise becomes stable, it will custom-fit its branches and services based on the composition of the population in that location.

The proponents used *Slovens Formula to determine the sample size based on the population of approximately 750, 000 students in the University Belt. Population size: 750 000 Margin of error: 10% Sample size =

*Though Slovens formula is no longer an accepted technique of determining a sample size, the proponents still used it because of the enormous sample size given by other techniques but the group is still confident in the credibility of the data produced by the samples.

DEMOGRAPHIC ANALYSIS

Figure TM-1: Age of Target Market

Number of Respondents 40 30 20 10 0 15 - 17 18 - 20 21 - 23 Age Bracket 24 - 26 27 - 30

Figure TM-2: Gender of Target Market

Female Male

35% 65%

Figure TM-3: Frequency of Target Market's Visit in a Coffee Shop

1% 16% 26% Everyday 2 - 3 times a week Once a week 28% 29% Once a month Almost never

Figure TM-3 shows how often the target market visits a coffee shop. It tells that a student in the University Belt visits a coffee shop at least once a week. There is almost no one who visits a coffee shop daily. This shows that coffee or the services that a coffee shop offers is not that staple in the perspective of the target market. A good coffee shop owner can encourage its customers to visit his shop everyday if he provides a quality service with a reasonable price.

Figure TM-4: Frequency of the Target Market Studying in a Coffee Shop

7% 23% Always Sometimes Never 70%

Graphical representation TM-4 presents how often the sample studies in a coffee shop. It shows that 70% of the target market sometimes studies in a coffee shop and 23% does not study in it. This seems a not favourable thing because students might not absolutely appreciate a coffee shop intended for students. Through analyzing the status quo of coffee shops, students might not be encouraged enough to study in cafes because most of the coffee place today is not intended for people who are working or studying because most of them does not offer a study area or follows a noise reduction policy. If you provide a conducive environment for the students, they might visit your shop much more often.

Figure TM-5: Target Market's Appreciation for a Study Area in a Coffee Shop
17%

They want it They do not want it

83%

Figure tells whether the target market wants a study area in a coffee shop or not. It shows that majority of the sample wants a study area in a cafe. This works appropriately for the proposed feature of the coffee shop.

Figure TM-6: Target Market's Appreciation for Noise Restriction Policy in a Coffee Shop
16%

They want it They do not want it

84%

Figure TM-6 shows whether the sample wants a quiet coffee shop or not. It presents that majority of the target market demands for a coffee shop that is peaceful and conducive for them to relax or to study.

Figure TM-7: Target Market's Appreciation for a Free WIFI in a Coffee Shop
6%

They want it They do not want it

94%

Aside from good coffee, it is already a necessity for a coffee shop to provide a WIFI to its customers in order to provide them absolute satisfaction in your product or service.

Figure TM-8: Study Habits of the Target Market

Morning

Afternoon

Evening

Late night to Early Morning 0 5 10 15 20 25 30 35 40 45 50

Figure TM-8 shows the time when the target market studies. It tells that majority of the students work during evening and late night to early morning. A 24/7 coffee shop will provide all of the needs of the target market studying in this time of the day. It can provide coffee to keep them mentally alert and prepared for a long night of reading. It can also provide a place that is conducive and free from destructions.

Figure TM-9: Target Market's Appreciation for Printing & Photocopy Services of a Coffee Shop

33% They want it They do not want it 67%

Almost majority of the target market find the photocopy and printing service useful since they no longer have to go outside while they are studying if they need to print or copy some reading materials.

Figure TM-10: Target Market's Daily Allowance for Food

33% Below Php 100 Above Php 100 67%

The average price of the coffees offered by the proposed cafe is around Php 100 and Figure TM-10 shows that majority of the target market can afford this based on their daily allowance for food. The

remaining 33% cannot afford this; hence the business must undergo cost-reduction techniques in their value-chain.

DEMAND
According to Philippine Coffee Board (PCB), coffee consumption by Filipinos is expected to grow by five percent. Also, the domestic demand is forecasted to grow by 25,000 metric tons from the 75,000 metric tons last 2010. PCB also estimated that the Phillippines coffee consumption is at 6.5 million cups per year while per capita consumption is 620 grams compared to Indonesias 870 grams .

Based on the survey conducted in some of the coffee shops in Makati and Quezon City, their major consumer are the office workers (specifically, call center agents) and college students. These are the composition of population responsible for the growth in the demand of coffee.

The following graphical representation shows the demographics of coffee consumers in the past three years.

Coffee Consumption
80 70 % Consumption 60 50 40 30 20 10 0 18 - 24 24 - 39 40 - 59 60 + Consumers by age bracket 2010 2011 2012

Source: Coffee Research Organization

It shows that the age bracket of 60 and above consumes the most of coffee but these consumers are most likely patronizes household coffees and not gourmet coffees found in the cafes. It also shows that the age bracket of 18 24 is the least consumer of coffee. Since their allowance is limited or they dont still have a high-paying job, their expenditure for coffee is also restricted by their budget.

In terms of growth in the consumption, the rest of the age brackets are almost the same except for the 18 24 years old. They are the ones who are greatly affected by trends so their drinking preference can also be easily altered by certain events or some substitutes for coffee.

Based on the conducted survey, these are the events or occasions that increase or decrease the consumption of coffee of the target market.

Occasions When the Target Market Visits a Coffee Shop

Near examination period Near project deadline When meeting someone Holidays Others 0 5 10 15 20 25 30 35 40

% of Target Market

Figure shows that 37% of the students studying in the University Belt visit a coffee shop when it is their examination period. Examination period is well-distributed along the months of June to March. This period is an opportunity for coffee shops to increase their income.

While during holidays or vacations, only 11% of the target market visits a coffee shop. This period starts from April to May, half of October, early week of November, and half of December. Holidays are not preferred in the coffee shop business unlike other types of businesses.

Sources: http://starbuckspinas.blogspot.com/2010/03/coffee-industry-in-philippines.html http://www.oocities.org/zerissa/cindy.html http://www.census.gov.ph/2009-survey-tourism-establishments-philippines-step-food-and-beverageservice-activities http://business.inquirer.net/119019/long-way-for-ph-coffee-brew-to-go-global http://philcofeeboard.com http://www.franchisedirect.com/coffeefranchises/coffeefranchiseindustryresearchbusinessreporti/74/2 20