Starbucks, the industry leader
Starbucks started over 50 years ago with a single location in Seattle, Washington. Since then, it has experienced phenomenal growth and is now the largest coffee shop chain in the world.
From its humble beginnings as a Seattle-based coffee roaster, Starbucks has strived to create a “second home” for consumers where they can stop on the way to work. Over the past few years, the company has invested heavily in its physical locations by expanding its food options, remodeling its restaurants and revamping its rewards programs.
Like many other retail or restaurant businesses, Starbucks has been negatively affected by business restrictions put in place for COVID-19. On March 4, 2020, Starbucks suspended the use of personal cups and restricted business travel companywide. Eleven days later, Starbucks temporarily switched to drive-thru only for the United States. As a result, worldwide store sales decreased by 14% and consolidated net revenues decreased by 11.3% between 2019 and 2020.
However, 2021 turned out to be a very strong year. Global store sales were up 20% year over year, driven by a strong 22% average increase in sales across all North American stores. Consolidated net revenues increased 24% to $29.1 billion for the year. At the end of 2021, Starbucks shares were trading at $116.97; at the time of writing, the company’s stock price had fallen below $82.
Today, Starbucks continues to innovate through new sustainable practices and commitments. Starbucks is committed to providing easy access to reusable to-go cups for various orders by 2025, implementing electric vehicle charging stations across the United States, and reducing waste nationwide. business by 50% by 2030.
With big plans for the future for its product and future growth of its already existing 34,000 stores, here’s how the company stacks up against its competitors.
Key points to remember
- Starbucks remains the leading company in the coffee industry with $29.1 billion in annual sales in 2021.
- Starbucks operates more than 34,000 stores and is committed to aggressive measures to reduce waste and product efficiency.
- Dunkin’ Donuts was acquired by Inspire Brands in 2020 and now has the ability to leverage economies of scale.
- McDonald’s now offers 23 different beverages as part of its McCafe line and generated more than $23 billion in company-wide sales in 2021.
- Folgers and Maxwell House rival Starbucks with home coffee products, although their rivalry is limited due to a lack of storefronts.
Dunkin’ Donuts, owned by Dunkin’ Brands, has coexisted peacefully with Starbucks for decades. When the company’s advertising campaign spokesperson retired in the late 1990s, however, Dunkin began to move away from coffee and into donuts. In the early 2000s, the company launched its first line of specialty coffees and slowly began to make a name for itself as a destination cafe.
Dunkin’ Donuts has over 11,300 locations in 36 countries. In the United States, Dunkin’ Donuts operates in 41 different states.
In 2006, Dunkin’ upped the ante and declared war on Starbucks by launching its “America Runs on Dunkin'” advertising campaign. While Starbucks has created an intentionally chic and upscale environment, Dunkin’ Donuts presents itself as an all-American brand.
In December 2020, Inspire Brands completed an $11.3 billion acquisition of Dunkin’ Brands Group, Inc. This acquisition included the purchase of other brands, including Baskin-Robbins. The move allows both restaurants to join an already diverse portfolio that includes Arbys, Buffalo Wild Wings, Jimmy John’s and SONIC Drive-In..
Because Inspire Brands is privately held, many financial metrics are not required to be publicly disclosed. However, it reports global sales of over $30 billion with over 650,000 employees worldwide. With the potential to capitalize on a diverse management team and economies of scaleDunkin’ Donuts continues to rival Starbucks in the coffee industry.
McDonald’s has long been known as a fast food restaurant, but the global franchise joined the emerging coffee craze by introducing flavored and iced coffees in the mid-2000s. “I’m Lovin’ It” For more than 10 years, McDonald’s has recently pivoted to embrace the everyday American with a focus on people from all educational and cultural backgrounds.
McDonald’s operates more than 36,000 restaurants in 100 different countries. There is a storefront in every state in America, although Montpellier is the only state capital without McDonald’s.
In 2021, McDonald’s surpassed $23.2 billion in sales worldwide, though that includes revenue from its entire food line. After being negatively impacted by COVID-19, McDonald’s revenue grew 21% year over year. The McCafe product line has expanded to 23 different beverages. To further compete with Starbucks baking, McDonald’s also offers an independent product line of McCafe baked goods.
McDonald’s remains committed to the long-term success of its coffee line. In the company’s 2020 annual report, McDonald’s said it was “committed to the core by tapping into customer demand for…burgers, chicken and coffee.” However, the company also admits to “facing intense and sustained competition from… cafes”.
Maxwell and Folgers House
Starbucks has also entered the coffee bean and ground coffee market by distributing its product line to retailers and grocery stores around the world. In the process of expanding its retail segment, Starbucks gained two new competitors: Maxwell House and Folgers.
Kraft Heinz has already assessed whether or not to sell the Maxwell House product line. For now, the subsidiary remains with the company.
Maxwell House is one of Kraft Heinz’s most recognizable subsidiary brands. Kraft was the exclusive manufacturer to license and distribute its McCafe coffee to retail outlets, but McDonald’s opted for a new long-term deal with Keurig in 2019.
Kraft Heinz reinvented Maxwell House products to compete with Starbucks in the eco-friendly products business. In 2020, Maxwell House launched a 100% compostable coffee pod. The company has also reduced packaging material inputs to New Zealand to save 28 tonnes of material per year. However, Maxwell has not been able to achieve success in the market in recent years. Kraft Heinz recently recognized a $140 million write-down of the Maxwell House brand.
Acquired by The JM Smucker Company in 2008, Folgers also offers a diverse product line that prides itself on convenience. Its diverse product line includes ground coffee canisters, K-Cup pods, instant coffee jars and individual sachets. Folgers also doesn’t have a physical storefront.
In Smucker’s first three fiscal quarters, US Retail Coffee generated $661.8 million, an increase of 6% over last year with a segment profit margin of 32.2%.
Who is Starbucks’ biggest international competitor?
With physical locations around the world, Starbucks competes with McDonald’s and Dunkin’ Donuts in dozens of international storefronts.
How does Starbucks differentiate itself from its competitors?
Starbucks differentiates itself by creating a “third home” value proposition. In addition to home and work, the company strives to have a welcoming and warm place where customers can consume their products. Alternatively, competitors like McDonald’s and Dunkin’ Donuts are pushing for lower prices for products that are more likely to be consumed off-site.
How much more popular is Starbucks than its competitors?
Starbucks is the largest coffee company in the world. With an annual revenue of over $29 billion, it sells more products than McDonald’s (with an annual revenue of $23.2 billion).