Coffee Shop Wars Push Chains Big and Small to Grow

Coffee remains one of the world's most traded commodities alongside oil, with global consumption reaching 2.5 billion cups daily and coffee chains across the United States are rapidly expanding as they compete for market share, according to an article by CSA.

Starbucks, the industry leader, plans to add 17,000 new stores globally by 2030 while maintaining steady 4% annual growth in the U.S. With over 16,000 U.S. locations and $27.5 billion in sales, Starbucks currently holds 40% market share of coffee outlets nationwide.

But smaller chains are rapidly gaining ground. Dutch Bros Coffee has become a serious contender, achieving a 39% sales growth in early 2024. Regional players like Caribou Coffee are also making moves, having added 159 new stores in 2023 with similar expansion planned this year.

Recent data shows Starbucks dominates new market listings at 55%, followed by Dutch Bros at 15% and newcomer 7 Brew Coffee at 12%. However, size doesn't always guarantee success. Smaller chains like Shipley's Do-Nuts and The Coffee Bean & Tea Leaf actually lead in location success rates, with 80% of their listed units being sold between 2018 and 2024.

Space comes at a premium for these coffee giants. Starbucks typically requires larger stores, averaging 2,411 square feet compared to under 1,000 square feet for competitors like Scooters and Dutch Bros. This size difference shows in the rent - Starbucks pays an average of $145,593 annually per location in 2024, more than 40% higher than second-place Dunkin' at $86,381.

The coffee shop sector continues to recover from pandemic disruptions, with corporate chain sales growing 10% from mid-2021 to mid-2022. The market remains attractive to investors since about 60% of Americans drinking coffee daily and 44% regularly visiting franchise cafes. Private equity and venture capital firms continue pouring millions into promising coffee startups, betting on the next big success story.

by Alex Bailey | December 18, 2024 | SHARE