Small Coffee Chains Nipping At The Heels Of Larger Brands Forcing Giants Like Starbucks And Dunkin' To Reconsider Strategy – CoffeeTalk

Small coffee chains, such as Diesel in Somerville, Massachusetts, are seeing their market share of longer visits increase, while legacy chains like Starbucks and Dunkin’s competitors have seen a disproportionate benefit. Visits to coffee chains of all sizes have grown by 29% over the past five years, according to Placer.ai data. Small and medium-sized coffee brands have seen a disproportionate benefit, while industry titans like Starbucks and Dunkin’ lagged. Small chain visit share rose from 3.2% in 2019 to 4.4% in 2024, while medium-sized brands like BIGGBY Coffee and Dutch Bros saw visit share grow from 10.8% to 17.6% in the same time.

Starbucks and Dunkin’s combined share of coffee visits remains vast — 77.9% according to Placer.ai — and visits have increased in absolute terms. However, the erosion of visit share could signal vulnerability for coffee category leaders. Consumer behavior at stores also sheds light on shifts in coffee’s competitive landscape. Visits lasting longer than 10 minutes increased 13.4% at small coffee chains from 2023 to 2024, and fell at Dunkin and Starbucks by 8.9%. Short visits and long visits increased at medium-sized brands.

This consumer shift toward smaller and medium-sized chains as coffee-oriented “third places” could help explain why Starbucks is returning its focus to in-store experience under CEO Brian Niccol. This move may be necessary to preserve the brand’s position in the market from competition from smaller, more local-feeling coffee shops.

Coffee traffic growth slowed in late 2024, which could signal a plateau in consumer demand. If demand does plateau or tariffs increase the cost of coffee, competition within the coffee sector for each individual consumer visit will increase. Dunkin’ and Starbucks and competitors among larger medium-sized brands, like Dutch Bros. and Caribou, would maintain their pricing advantages and scale. However, consumers may feel an experiential coffee occasion at a smaller location gives better value for a high-priced good.

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