Quantitative Analysis Coffee Shop Leederville Team 13

Since European immigrants arrived in Australia after World War II the caf and coffee industry has continued to grow and in recent years there has been a marked increase in consumer demand for high quality gourmet coffee (IBISWorld Australia, 2013). Coffee sales have remained strong during economic downturns and coffee continues to draw people to cafes and coffee shops around Australia (Euromonitor, 2013). According to a report by IBISWorld Australia (2013) revenue from Australias cafs and coffee shops industry is forecast to grow 3.5 percent annually over the next five years and the increased demand is due to rising incomes, busier lifestyles and a strong, vibrant coffee culture. Western Australia has been one of the fastest growing states in this industry over the past five years due to population growth and the mining boom (IBISWorld Australia, 2013).

Our Target Market

Our target market is young working people aged twenty five to thirty four years old who live in and around Leederville. Leederville is located within the Town of Vincent which also includes the suburbs of Highgate, Mouth Hawthorn, North Perth, Mount Lawley, West Perth and Perth. Demographics in Leederville align with our target market in terms of age and the majority of people work fulltime and many do not have children (Australian Bureau of Statistics, 2013).

The populations age distribution has remained fairly constant in The Town of Vincent since 2008 as demonstrated in the table below. The average age in Leederville in 2008 was 37.18 years and the standard deviation was 42.65. The standard deviation measures how spread out the age groups are in relation to the average age. For example, if the standard deviation in 2011 was much lower than the standard deviation in 2008 it would indicate that the ages were less spread out (less extreme ages in the data set) but as the standard deviation is similar for both years we can be fairly confident that our target markets presence in the Town of Vincent will remain steady (Berenson, et al., 2012).

Key factor to success Income

We do face competition in Leederville as there are several cafs and coffee shops in the area but new businesses have succeeded in this competitive market by offering superior products, a high level of customer service, good prices and by understanding and catering to demand (IBISWorld Australia, 2013). One of the key factors driving demand in the caf and coffee shop industry is income and we have chosen Leederville as the location for our coffee shop as it is an affluent area with incomes well above the state and national averages and a large proportion of the population in our target agegroup are working full-time (Australian Bureau of Statistics, 2013).

Employment Status of Couple Families

Labour force status not stated Other Both not working One employed part-time, other One employed full-time, other One employed full-time, one Both employed, worked part-time Both employed, worked full-time 0 10 20 Percent (%) 30 40 Australia Western Australia Leederville

As shown in the table below there is a strong positive linear relationship between real household discretionary income and expenditure on hotels, cafs and restaurants in Australia (IBISWorld 2013). The positive population covariance (849.4) indicates a positive relationship between these two variables but the correlation coefficient is more valuable for expressing the relationship as it does not depend on the two (different) measurement units (Berenson, et al., 2012). As the correlation coefficient (.97) is high (close to +1) this indicates a very positive relationship between income and expenditure, i.e. as income increases so too does expenditure on hotels, cafs and restaurants (Berenson, et al., 2012).

As average incomes are high in Leederville and the Town of Vincent we feel confident that residents are very likely to continue to spend time and money at cafs in the area.

Industry growth
The caf and coffee industry has shown consistent growth over the long term and this trend is forecast to continue as outlined in the graph below which shows a decline in the number of transactions in bars, pubs and juice bars since 2006 but a steady increase in the number of transactions in cafs and coffee shops (Euromonitor, 2013).

Number of Transactions 2006-2016 - Australia

1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

no. transactions ($ millions)

Pubs/Bars Cafs Juice/Smoothie Bars Spec. Coffee Shops

Year

Reference List
IBISWorld Australia 2013, Cafes and Coffee Shops in Australia, September 2013, viewed 1 October 2013, IBISWorld, H4511b Australian Bureau of Statistics 2013, National Regional Profile: Vincent (T) (Local Government Area). Cat. no. LGA58570, ABS, viewed 1 October 2013, ABS Database. Australian Bureau of Statistics 2013, 2011 Census QuickStats - Leederville. Cat. no. LSSC50434, ABS, viewed 1 October 2013, ABS Database. Euromonitor International. (2012, August). Cafes/Bars in Australia. Retrieved from http://euromonitor.com/ Berenson, M. L., Levine, D. M., Kriehbel, T. C., Watson, J., Jayne, N., Turner, L. W & OBrien, M., (2012). BES1200 Business Knowledge Development. Pearson Australia, Frenchs Forest.