INTRODUCTION

Coffee is a globally popular beverage and source of energy for students and employees
and has become an integral part of daily life. According to Business Insider, coffee is the world's
second most valuable commodity, with a market value of more than $100 billion. Through the
forecasting period, the coffee industry is expected to grow at a significantly high compound
annual growth rate of approximately 5.5 percent (2019-2024), and the most rapid expansion is
anticipated in China and the United States (Mordor Intelligence, n.d.). Over half of all adults in
the United States over the age of 18 consume coffee daily. This equates to more than 150 million
people who consume alcohol on a daily basis. Each day, 30 million adults in the United States
consume specialty coffee beverages such as mocha, latte, espresso, café mocha, cappuccino, and
frozen/iced coffee beverages (E-Imports, 2022).
The public's desire for coffee has a significant impact on the growth of the coffee shop
industry. In the United States, the coffee shop industry comprises 20,000 locations with a
combined annual revenue of approximately $11 billion. Starbucks, Dunkin' Donuts, Caribou,
Coffee Bean and Tea Leaf, and Diedrich (Gloria Jean's) are all significant companies. The
industry is highly concentrated at the top and highly fragmented at the bottom: the industry's top
50 companies account for more than 70% of sales. Coffee shops sell a variety of beverages as
well as complementary food items. Sweetened coffee and tea; espresso beverages (cappuccinos,
cafe lattes); cold blended beverages; bottled water; soft drinks; and juices are available. Pastries,
baked goods, desserts, sandwiches, and candy are all examples of food products. Numerous
coffee shops sell whole or ground coffee beans to take home. Certain coffee shops sell
equipment for brewing coffee or espresso, grinders, mugs, and other accessories. The majority of
coffee shops serve specialty coffee, which is high-quality, premium coffee (Altmann, 2008).
Coffee shop industry is also growing in the Philippines. The number of specialty coffee
shops has continued to grow in recent years. Specialty coffees, also known as third-wave coffees,
are coffees that are grown, harvested, and processed in a unique manner to preserve their natural
characteristics. Coffee shops accredited by SCAE or SCAA are now open in Metro Manila.
Several of these locations double as barista training facilities. Supply and education are
inextricably linked. The Philippines is a country known for its coffee production. The public is
developing a greater appreciation for coffee. Specialty coffee is a topic that can be discussed
openly. However, Metro Manila lags developed countries such as Australia and Singapore in
terms of specialty coffee. Cosimo stated in an interview that the Philippines is a reflection of the
global coffee trend.
Entrepreneurs are now focusing their efforts on developing novel processes that will
ultimately add value to the final product. Consumers are increasingly interested in flavor
profiles, aroma, and other natural characteristics. Customers are increasingly seeking unique
interpretations of coffee. Pampanga is best known as the culinary capital of the Philippines,
owing to its gastronomic traditions and delectable kitchen inventions. However, a recent influx
of unique coffee shops, particularly in the vibrant City of Angeles, demonstrates that the
province deserves to be recognized for its coffee-making abilities as well. Angeles City,
Pampanga, is brimming with breathtakingly beautiful hangout spots that serve delectable coffee
and are also totally Instagrammable and reasonably priced. (Layug, 2021).

REVIEW OF RELATED LITERATURE

Coffee shops

In the last decade, coffee shops have grown in popularity because of the relaxing atmosphere
they provide. It's even more pronounced when you compare coffee shops to restaurants, pubs,
and fast-food restaurants. Coffee shops provide a unique opportunity for people to catch up with
loved ones over a cup of something warm. (Anderson, 2017).

https://esquirescoffee.co.uk/news/why-coffee-shops-so-popular/

Over half of all Americans over the age of 18 drink coffee every day. This equates to more than
150 million daily drinkers. Every day, 30 million American adults consume specialty coffee
beverages such as a mocha, latte, espresso, café mocha, cappuccino, frozen/iced coffee
beverages, and so on. (E-Imports, 2022).

https://www.e-importz.com/coffee-statistics.php#:~:text=Coffee%20Consumption%3A%20Over
%2050%25%20of,%2Ficed%20coffee%20beverages%2C%20etc.

In 2020, approximately 3.3 million 60 kg bags of coffee were consumed in the Philippines. This
reflects a long-term rise in coffee consumption. (Statista research development, 2021)

https://www.statista.com/statistics/314989/philippines-total-coffee-consumption/

According to a study conducted by Kantar Worldpanel Philippines, Filipinos have shifted from
moderate to heavy coffee drinkers. The study, released on October 19, found that coffee sales
increased 10% in June 2015, up from 4% in June 2014, outpacing the overall beverage segment's
growth of 5%. Heavy coffee drinkers shop for coffee products three times a week, or 126 times a
year, and spend an average of R28 per trip. Regular coffee drinkers shop twice a week, or 81
times a year, and spend an average of R22 per transaction, according to the study. (Marinduque
News, 2019).

https://marinduquenews.com/2019/06/20/everything-you-need-to-know-about-the-coffee-
culture-in-the-philippines/#google_vignette

Millennials, as is true around the world, are the age group driving demand for coffee shop coffee,
and in 2018, this group was willing to pay 100 Philippine pesos ($1.90 per cup) for a single
serving of coffee. Although this may not appear to be much when compared to countries such as
the United States, the average monthly disposable salary in the Philippines is one-tenth of that in
the United States. (Macdonelle, 2022).

https://coffeeaffection.com/coffee-shops-in-the-philippines-statistics/
Women are more likely to spend more money in a coffee shop once they are there. Men are more
likely to visit during the morning rush and women in the afternoons, according to research
consultancy Allegra Strategies. Women typically spend several hours in a coffee shop, often
multiple times per week, whereas men may visit on a daily basis. Women are also more likely to
try a new drink or food item, whereas men are more likely to stick to their favorite drinks.
(Newton, 2020).

https://perfectdailygrind.com/2020/06/how-to-meet-the-needs-of-todays-coffee-shop-customer/

Atmosphere

Coffee shops are places where people can meet, work, and drink. Aesthetics can help you not
only attract more customers, but also create a space where they can savor both their coffee and
their experience in your establishment. (Truic, 2022).

https://howtostartanllc.com/coffee/importance-of-coffee-shop-atmospherics

Customer nowadays are requesting for additional elements such as store environment instead of
food quality. Cafes with pleasant store environment are more likely to attract walk-in customers
which trigger their revisit intention. (Hussain & Ali, 2012).

https://www.matec-conferences.org/articles/matecconf/pdf/2018/09/
matecconf_mucet2018_05074.pdf

Lighting elements of store have great impact on the customer intention to visit the retailer for
repurchase action. Moreover, the customers believe that the pleasant lighting in the café indicates
the quality of the service provider. (Ryu & Jang, 2008).

https://www.matec-conferences.org/articles/matecconf/pdf/2018/09/
matecconf_mucet2018_05074.pdf

Service quality

Like a fast food or quick service restaurant, coffee shops have a focused menu displayed above
the counter, and primarily serve coffee and espresso-based drinks, along with a small selection of
snacks or pastries (Bauer, 2019).

https://blog.serviceideas.com/coffee-service-self-serve-or-behind-the-counter

Park and Yoon have developed a service quality measurement tool that can be used in coffee
shops. The tool was then called the Coffee SERV mode and have five dimensions that has an
important factor that measures the quality of service in coffee shops due to the coffee taste,
quality, variety, consistency, and nutrition in the coffee industry (Park & Yoon, 2016).

https://www.turcomat.org/index.php/turkbilmat/article/download/4279/3653

Product quality

Coffee shop design and quality of offered services are the first to impress visitors, and the quality
of products can be regarded as of secondary priority (Chen & Hu 2010).

https://business-essay.com/coffee-shop-design-services-product-quality/

Customer satisfaction

Customer satisfaction covers both tangible and intangible elements of product offerings. In these
product offerings, perceived service quality and value are found to be significant in customer
satisfaction in service firms e.g. coffee shops, restaurants and hotels as being service providers
(Duman, 2020).

https://ijiasos.penpublishing.net/makale/1724

Previous research that was conducted by Cha and Seo (2018) on factors that influence customer
satisfaction with and revisiting coffee shops where taste, pricing, brand, and atmosphere were
investigated when customers chose coffee shops.
https://www.koreascience.or.kr/article/JAKO201813639172172.page

Price

Price directly affects the profitability of your cafe, so setting the right prices is crucial to success.
Cafe pricing strategies need to take into account not only your costs, but also the style of your
cafe, and your target market (Magloff, 2022).

https://smallbusiness.chron.com/cafe-pricing-strategy-2722.html