Coffee Chains And Startups Compete For Retail Space And Consumer Loyalty – CoffeeTalk

Coffee is a highly competitive and compressed industry, with around 2.5 billion cups consumed daily. With nearly 40,000 Starbucks stores worldwide, including 18,000 in North America, the coffee market is highly competitive. The coffee shop franchising subsector remains buoyant, with at least 44% of coffee drinkers getting takeaway coffee from franchise cafés several times a week. Corporate coffee chain sales grew 10% from June 2021 to June 2022, nearing pre-pandemic levels.

In recent years, private equity and venture capital have driven the sector, providing opportunities for growth and returns. Starbucks remains the industry leader with $27.5 billion in sales, followed by Dunkin’ at $11.2 billion. There are 29 national players, including big-name national coffee chains and smaller regional businesses.

Starbucks plans to open 17,000 new stores globally by 2030, focusing on international markets and achieving a 4% annual growth rate in the U.S. market. Regional chains like Caribou Coffee and Scooter’s Coffee are also growing, with the former adding 159 new stores in 2023 and planning similar growth this year.

Starbucks maintains a 40% share of the coffee market in terms of number of outlets, with more than 16,000 locations in the U.S. Next is Dunkin’ with 9,000 locations, Dutch Bros Coffee with over 900 units, and Tim Hortons with approximately 640.

On-market listings between 2018 and 2024, Starbucks reigns supreme with 55%, followed by Dutch Bros Coffee (15%), 7 Brew Coffee (12%), Scooter’s Coffee (7%), and Dunkin’ (3%). Other brands make up 8% of on-market listings.

Cap rates in the coffee sector have generally fluctuated in the last few years, with Starbucks having an average cap rate of 5.32% in 2019, 5.05% in 2020 when the pandemic hit, 4.84% in 2021, 4.78% in 2022, 5.29% in 2023, and 5.60% in 2024.

Starbucks commands the highest rents of any chain, with its average rent of $145,593 in 2024 being more than 40% higher than Dunkin’s average rent of $86,381 this year. Higher construction costs translate to higher rent, which can impact Starbucks’ ability to sell if the market interprets the rent to be unsustainable.

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