Coffee businesses showed remarkable resilience over the last 12 months in the face of soaring costs, dampened consumer confidence and heightened geopolitical risks, with most major markets achieving solid sales and outlet growth. Meanwhile, many operators renewed their focus on business development, acquisitions and international expansion as the pandemic faded...
The stage is set for a year of cultural cross-pollination, digital innovation and new ways of doing business | Photo credit: via Shutterstock
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Acquisitions raised the stakes for global influence
2023 saw major acquisitions across the global coffee industry as businesses sought to catalyse opportunities across the branded coffee chain, specialty and ready-to-drink (RTD) segments.
In February, Sucafina North America fully acquired pioneering specialty green coffee importer Sustainable Harvest in a move both companies said would ‘drive sustainability and innovation’ across the global coffee industry.
In March, Arkansas-based Westrock Coffee acquired California’s Bixby Roasting Co. in a bid to tap into the opportune under-30s market for specialty coffee in the US. Shortly after, UK-based café, bar and dining group Grind acquired Bottleshot Coffee to make strides in the ‘underdeveloped’ UK RTD coffee market.
June saw Neumann Kaffee Gruppe (NKG) take a majority stake in Oslo-based green coffee trader Nordic Approach, including its small batch specialty coffee sourcing division, Tropiq. In July, JAB Holding-backed JDE Peet’s announced its planned acquisition of Brazilian Coffee and Tea business Maratá to increase its scale and national coverage in Brazil. Further underlining significant opportunities in the US RTD coffee market, in July Florida-based Beliv acquired a majority stake in Texas-based High Brew.
November saw New York-based investment firm General Atlantic agree to acquire a majority stake in Joe & The Juice in a deal that will see the exit of Valedo Partners from the Danish business.
It was also a significant year for Philadelphia-based La Colombe Coffee Roasters. In July, JAB Holding-backed Keurig Dr Pepper (KDP) took a minority stake in the company. However, in December 2023 US dairy and oatmilk producer Chobani acquired the specialty coffee roaster and café chain for $900m, including exchange of KDP’s minority stake into Chobani equity.
The US branded coffee shop market bounced back
In October World Coffee Portal’s Project Café USA 2024 report found the $49.5bn US branded coffee shop market reached 104% of its pre-Covid market value. The market is now around 7% above its pre-pandemic size following robust 4% annual outlet growth to surpass 40,000 stores. Sales momentum and outlet growth are both forecast to continue in 2024, with 58% of industry leaders surveyed anticipating improved trading conditions. The total market is expected to exceed 41,300 outlets in 2024, with coffee-focused operators leading growth.
China overtook the US as the world’s largest branded coffee shop market by outlets
In December, World Coffee Portal’s Project Café East Asia 2024 report revealed China had overtaken the US as the world’s largest branded coffee shop market by outlets in 2023, growing 58% to exceed 49,690-plus stores over the last 12 months. China is also the fastest growing market across East Asia, ahead of Malaysia (28%) and the Philippines (15.3%). Overall, six of the largest 10 markets by outlets achieved double-digit outlet growth over the last 12 months.
2023 saw Luckin Coffee post its first ever annual profit and open its first international store in Singapore | Photo credit: Luckin Coffee
Luckin Coffee surged ahead – and saw a rival gain ground
2023 saw China’s largest coffee chain by outlets turn a corner from its 2020 financial controversy to post its first ever annual profit, exceed 10,000 locations and open its first international store in Singapore. Sustaining record-breaking revenue and outlet growth throughout the year, perhaps the only fly in Luckin’s ointment was the rapid rise of a major rival, Cotti Coffee. Founded by ousted Luckin Coffee executives Charles Lu and Jenny Qian in August 2022, Cotti competes directly with Luckin on price and speed of service. The chain now operates more than 6,000 stores across China and has also expanded to South Korea, Indonesia, Japan, Hong Kong, Vietnam, Thailand and Malaysia.
A new era for the JAB Holding coffee empire
Luxembourg-based conglomerate JAB Holding Company appointed Joachim Creus as its next CEO in November 2023, succeeding Olivier Goudet who held the role for 12 years. Credited as playing a critical role in establishing the investment firm’s focus on consumer goods, Creus is now responsible for JAB’s $50bn investment portfolio, which includes $23bn of hospitality and coffee brand assets including Peet’s Coffee, Panera Bread, Caribou Coffee, Pret A Manger, Espresso House and Keurig Dr Pepper (KDP), among others.
A key move early in his tenure will be supporting an expected Panera Brands IPO in 2024. The fast-casual group, which operates the Panera Bread, Einstein Bros. Bagels and Caribou Coffee chains, unveiled José Alberto Dueñas as its new CEO in May 2023, named IPO veteran Paul Carbone as Chief Financial Officer three months later and appointed former Krispy Kreme CEO Michael Tattersfield to its Board of Directors in September 2023.
Most European branded coffee chains achieved strong growth
In April, World Coffee Portal research found that 31 out of Europe’s 40 largest branded coffee shop markets added outlets over the previous 12 months. The total market grew 3.3% to exceed 42,800 outlets, led by the UK with more than 9,800 stores, while Romania was the fastest growing market by net new outlets, expanding 29% during the period.
Germany, Europe’s second largest branded coffee shop market with around 6,800 stores, and prominent Scandinavian markets Sweden, Norway, and Finland all contracted by outlets – highlighting the impact of reduced consumer spending amid higher inflation. World Coffee Portal forecasts the total European branded coffee shop market will exceed 44,100 outlets by March 2024, with the UK set to surpass 10,200 stores in early 2024.
Blue Tokai opened more than 30 net new outlets in 2023 to reach 87 sites | Photo credit: Blue Tokai Coffee Roasters
Domestic operators gained share in India’s fast-developing coffee shop market
Prominent Indian operators garnered new investment to fuel outlet growth and stay ahead of the competition amid a growing contingent of major international brands. In January Blue Tokai Coffee Roasters raised $30m to grow its Indian store footprint to 200 sites and further develop its B2B channel. The Gurugram-based specialty coffee roaster and café chain opened more than 30 net new outlets in 2023 to reach 87 sites. New Delhi-based Barista has similarly ambitious growth plans and is investing Rs 100 Cr ($12.1m) grow from nearly 400 stores at the end of 2023 to 500 across India by 2025.
Additionally, two digital-focused Indian coffee chains raised funds to facilitate rapid outlet expansion with Bengaluru-based Third Wave Coffee raising $35m in September and Mumbai-based abCoffee obtaining $2m in seed funding a month later.
India also became a key growth market for international coffee chains, with Starbucks and Costa Coffee reaching approximately 350 and 150 stores respectively. Meanwhile, Canada’s Tim Hortons has reached 26 sites in just over 12 months while UK-based Pret A Manger has opened nine sites since its Mumbai debut in April 2023.
Starbucks reimagined its Reinvention Strategy
In November Starbucks unveiled an update to its long-term growth strategy dubbed the ‘Triple Shot Reinvention’, which set out goals to generate $3bn in savings over the next three years and grow its US footprint with ‘purpose-defined’ stores. The Seattle-based coffee chain, under the leadership of CEO Laxman Narasimhan since March 2023, said approximately $2bn of the planned savings will come from the cost of goods sold with the remaining third coming from efficiencies generated through optimised store formats
Earlier in the year Chief Financial Officer Rachel Ruggeri said Starbucks was exploring ways to meet growing consumer demand for convenience, including drive-thru, delivery-only sites and the further roll-out of pick-up locations. Starbucks, which currently operates more than 38,000 outlets across 86 markets globally, achieved full-year sales of $36bn in 2023.
A Pret A Manger store in London, UK | Photo credit: Pret A Manger
Pret A Manger entered six markets and returned to profitability
After being hit hard by the pandemic, 2023 saw Pret A Manger on a firm footing for growth. The UK-based coffee and food-to-go chain entered six international markets – Luxembourg, India, Italy, Spain, Greece and Qatar – in addition to signing an agreement to triple the size of its US business within five years.
Alongside international expansion, Pret’s in-store subscription has been crucial to the chain’s post-Covid recovery. Revamped to include a food discount alongside five beverages per day, ‘Club Pret’ debuted in the UK in April 2023 and was later rolled out in the US and France, with plans for a global launch announced in August.
2023 also saw the JAB Holding-backed chain post its first annual profit in five years, with CEO Pano Christou saying the business is ‘tracking ahead’ of its 2021 target to double in size by 2026.
McDonald’s introduced a new competitor to the US branded coffee shop market
December saw the fast-food giant bring the competition to US branded coffee chains Starbucks, Dunkin’ and Panera Bread with the launch of indulgence-focused café concept, CosMc’s. Offering a menu of frappé coffees, blended iced smoothies and sweet treats, CosMc’s will operate separately from the chain’s McCafé range, which was added to McDonald’s US menu in 2009.
While there are no standalone McCafé stores in the US, the CosMc’s launch indicates McDonald’s sees long-term growth opportunities in the $49.5bn US branded café segment.
Saudi Arabia’s Barn’s set sights on IPO and 1,000 stores globally by 2030
Saudi Arabian coffee chain Barn’s announced plans to launch an IPO and has set its sights on 1,000 stores globally by 2030. Founded in 1992 by the Al Amjaad Group, Barn’s currently operates more than 640 stores across Saudi Arabia and is set to open its first international store in Bahrain in the first quarter of 2024. The coffee chain is expected to enter several neighbouring Middle East and North African (MENA) markets over the next few years and has mooted plans to open outlets in the UK, US and Malaysia.