The Coffee Market in Newberg - A Research Paper

In Newberg, there are more than ten coffee shops; some operate 24 hours while others close before midnight. Some of the best coffee shops include Caravan Coffee shop located at 2750 E 9th St., Chapters Book & Coffee store located at 701 E 1st St., Starbucks Coffee store located at 2401 Portland Rd., Java the Hut Coffee store located at 2900Hawarth Ave., and Coffeehouse Cafe. Other coffee shops include From Russia with Love located at 3777 Portland Rd; Sip City situated at 2000 Portland Rd., Dutch Brothers Coffee shop located at 701 Deborah Rd., Coffee Barn Co located at 118 N Everest Rd., and The Human Bean located at 206 Villa Rd. Most of these coffee stores are located near the busy street near learning institutions such as universities and colleges. This is because most of their target market are young generation especially the college students. For example, there are many coffee shops located near Willamette University. Some few coffee stores are located at the city center and operate for even 24 hours especially during weekends and these stores target the working class.

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The price of coffee differs across different coffee stores in Newberg, and some of the prices in major coffee shops are represented in the table below.

Chapters Starbucks Human Bean Bridge Cafe

Drip (small cup of coffee) $1.65 $ 1.8 $ 2.00 $1.75

Small cappuccino $2.5 $ 2.35 $ 3.65 $3.2

Small latte $2 $ 2.35 $ 3.65 $ 3.8

The average price for a small cup of coffee is $1.8, for a small cappuccino is $2.88, and the average price for a small latte is $2.75. The Human Bean coffee shop sells its small cup of coffee and small cappuccino at the highest price while Bridge Cafe sells it small latte at the highest price. Chapters Book & Coffee store has the lowest price in drip category, Starbuck has the lowest price in cappuccino category, and Chapters Book & Coffee store sells its small latte at the lowest price. The difference in every category is not very large across all the coffee shops.

The type of market that best characterizes coffee shops in Newberg is monopolistic competition. This is because many buyers and sellers do not have perfect information about what other joints are offering. Moreover, there is no entry and exit cost that the store will incur in the long run. In most cases, the products that these stores are offering can be differentiated due to their taste and prices. The market also has many stores offering the same beverages. Lastly, the stores have the market power of making the decision independently.

The coffee shops have some degree of market power, and this enables them to make their prices. The price settings suggest to the consumers that the higher the price, the higher the quality of coffee and other services being offered at the store. The price setting is done for an individual shop to segregate its target market. Additionally, these stores, add different flavors, operates at different hours, and offer services such as delivery as a way of competing.