- Operators remain resilient in the face of sustained trading pressures
- Allegra World Coffee Portal estimates the US branded coffee shop segment to be valued at $36bn, a decline of 24% over the last 12 months predominantly due to Covid-19 disruption
- The total US branded coffee shop segment comprises 37,189 outlets, a net decrease of 208 over the last 12 months, contracting by -0.6%
- Combined, the two market leaders, Starbucks and Dunkin’ control 66% of the total US branded coffee shop market
The US branded coffee shop segment is valued at $36bn, a decline of 24% over the last 12 months predominantly due to Covid-19 disruption | Graphic: World Coffee Portal
Project Café USA 2021, World Coffee Portal’s industry-leading report on the US branded café segment, reveals the $36bn market suffered an $11.5bn sales decline over the last 12 months, with the total number of outlets contracting 0.6% to 37,189. Despite severe market turbulence, the US remains a source of innovation for the global coffee industry, with operators rapidly adapting to Covid-19 trading pressures with drive-thru, digital integration and new trading formats.
US coffee shops see fortunes transformed in 2020
While top rent paying operators in prime city and transport hub locations endured a catastrophic drop in trade in 2020, some suburban and rural locations experienced significant upswings in sales during the pandemic as customers stayed home and shopped locally.
Reflecting the huge challenges all US café businesses face, just 38% of industry leaders surveyed by World Coffee Portal believe current trading is positive – down from 65% in 2019. Those operators reporting losses due to Covid-19 estimate the cost at approximately $32,500 per store, per month. Nevertheless, 81% of industry leaders surveyed believe there is still plenty of growth potential for branded coffee shops in the US.
Drive-thru trade picks up pace
Drive thru, which now accounts for 37% of all US branded café outlets, is becoming an increasingly attractive strategy to mitigate the impact of Covid-19. The proportion of US consumers surveyed favouring drive-thru over entering a coffee shop has increased from 48% in 2019 to 63% in 2020.
With 6,391 sites, Dunkin’ is by far the largest drive-thru operator in the US, ahead of Starbucks’ 3,900 locations and Panera Bread’s 840.
Covid-19 quickens digital integration in US cafés
Covid-19 store closures have compelled many major US coffee chains, including Starbucks, Dunkin’ and Peet’s Coffee, as well as boutique operators, such as Bluestone Lane and Intelligentsia, to dramatically accelerate the roll-out of digital tools, including mobile ordering, curbside pick-up, delivery and e-commerce platforms for retail coffee.
Indicating the commercial potential of delivery during the pandemic, 45% of US consumers surveyed by World Coffee Portal indicate they would regularly order drinks for delivery if the option were available. Faster delivery, lower fees and spill-proof packaging are the top three areas consumers cited for improvement.
Ethical coffee continues to gain ground
While the pandemic has forced operators to temporarily pause some sustainability initiatives, such as the use of re-usable cups in-store, US consumers continue to embrace ethically sourced coffee. 57% of those surveyed indicate it is important for them to purchase ethically sourced beverages where possible, up from 48% in 2019.
Operators optimistic for swift post-pandemic recovery
With the prospect of a vaccine rollout under the incoming Biden administration, World Coffee Portal forecasts the branded coffee shop segment will return to pre-pandemic sales levels by 2023 – 65% of US industry leaders surveyed believe coffee shop trading conditions will improve over the next 12 months.
World Coffee Portal forecasts the USA branded coffee shop segment will exceed 40,900 outlets by the end of 2025, displaying five-year growth of 2% CAGR.
The total market is projected to recover to $40bn sales over the next year and exceed $50bn by 2025 at 7% CAGR.
Commenting on the report findings, Allegra Group Founder and CEO, Jeffrey Young, said:
“The US coffee shop market is enduring the worst trading environment in living memory, with the Covid-19 pandemic piling extraordinary pressure on hospitality businesses across the country.
However, with a changing political situation, the prospect of mass vaccinations and operators rapidly adapting with new trading formats, there is now light at the end of the tunnel after an incredibly challenging year.
Despite ongoing market turbulence, coffee shops will remain a vital part of the US economy and social framework for many years to come. We expect trading to begin stabilizing from summer 2021, however it will take a number of years for operators to fully readjust to the ‘new normal’.”