The $45.5 billion US branded coffee shop market is nearing full recovery from Covid-19

Project Café USA 2023, the World Coffee Portal’s definitive report on the US branded coffee shop market, shows that the $45.8 billion segment has grown by 10% over the past 12 months and represents 96% of the market value regained before the pandemic.

However, rising living costs, supply chain disruptions and ongoing staff retention issues will pose major challenges to the market over the next 12 to 24 months

The US branded coffee shop market has recovered to 96% of its pre-pandemic value | Copyright: Ian Baldwin

  • The $45.8 billion US branded coffee shop market is recovering to 96% of its pre-pandemic value, posting a better-than-expected $4.5 billion sales recovery in 2022
  • The US market, in terms of outlets, surpasses pre-pandemic levels, growing 2.8% to 38,411 stores
  • Persistent staff shortages and a looming cost-of-living crisis pose major short- to medium-term challenges for the industry
  • The World Coffee Portal predicts that the total revenue of the US branded coffee shop market will reach $55.9 billion by fall 2027, led by a projected $8.1 billion increase in revenue from the coffee-centric segment
  • The US market is expected to surpass 41,900 outlets by September 2027, showing five-year outlet growth at a CAGR of 1.8%

US $45.8 billion branded coffee shop market recovers to 96% of pre-pandemic value

After more than two years of business disruption due to the Covid-19 pandemic, US coffee chains posted a robust sales recovery of $4.5 billion in 2022, representing 10% trailing-12-month sales growth.

The total US branded coffee chain market is now valued at $45.8 billion, having recovered to 96% of its pre-pandemic value. In addition, the number of stores has exceeded the level of 2019 and has increased by 2.8% over the past 12 months to 38,411 stores. The country’s three largest operators, Starbucks Coffee Company, Dunkin’ and Panera Bread, have all expanded their US presence to 15,650, 9,262 and 2,173 stores, respectively.

Most operators have achieved annual growth, with 46% seeing revenue growth of 5% or more. Nearly half of industry leaders are optimistic about the current retail environment, with 80% optimistic about the sufficient growth potential for branded coffee shops in the US, compared to 63% before the pandemic.

Starbucks extends its dominance in the US market as broader drive-through growth accelerates

Starbucks continues to make an impact on the US coffee shop market, opening 302 net new stores in the last 12 months to achieve an overall market share of 41%.

The Seattle-based company has focused on smaller format stores and plans to further accelerate the growth of its US stores through high-yield drive-thrus. The US has the most developed drive-through coffee shop market in the world and the format is proving lucrative for several chains.

Dutch Bros, which operates 603 stores in the United States, had sales of over $1 billion for the 12 months ended June 30, 2022. The Oregon-based company is now the fastest growing major US brand chain at 28%. Franchise drive-through operators Scooter’s Coffee and Biggby Coffee have seen similar growth over the past 12 months, reaching 490 and 320 stores, respectively.

Preferences such as pre-order, delivery and drive-thru are said to remain post-pandemic | Photo credit: AIRIZ

Younger consumers are changing US coffee shop culture

The desire for coffee out remains strong after two years of enforced lockdowns and operational restrictions. However, the way customers consume coffee is evolving, led by a younger clientele demographic.

Preferences that have gained popularity during the pandemic, such as pre-order, delivery and drive-thru, are likely to remain as consumers retain an increased desire for convenience. A growing appetite for iced beverages, product adjustments and the notable take-up of espresso-based beverages among younger consumers are driving the US coffee shop recovery.

With industry leaders optimistic about future growth potential, new US operators are also being encouraged in their quest for expansion. Blank Street Coffee, for example, has opened 40 stores in New York City and Boston since launching in May 2020, more than any locally-owned competitor. Backed by private equity funding, the start-up aims to have 100 locations in the US by the end of the year.

Rising cost of living amplifies concerns about employee retention

Hospitality staffing shortages remain a major challenge for US operators following the easing of Covid-19 restrictions. Many of the industry’s highly skilled coffee workers have reconsidered their careers during the pandemic, weakening the talent pool available to hospitality businesses looking to revitalize their operations post-pandemic.

With candidates already perceiving the industry as poorly paid, the rise of cost-of-living concerns has the potential to further weigh on the retention crisis.

Additionally, industry leaders have cited rising inflation as the most pressing near-term concern as operating costs are expected to rise while consumers’ disposable incomes fall.
These factors could force operators to raise prices, reduce operating hours or potentially close stores over the next 12 months.

Strong opportunities on the horizon for US coffee shops

Looking ahead, World Coffee Portal forecasts that US branded coffee chain sales will surpass US$55.9 billion in 2027, growing at a CAGR of 4.1%, as US consumer demand for premium coffee products for out-of-home sales continues unabated.

The market is forecast to surpass 41,900 outlets by September 2027, representing five-year growth of 1.8% CAGR. The coffee-focused segment is expected to grow at CAGR 1.8% to over 34,200 stores over the next five years, while the food-focused segment is expected to grow at CAGR 1.6% to over 7,600 stores.

Commenting on the report’s findings, Jeffrey Young, Founder and CEO of Allegra Group said:
Notwithstanding the tremendous pressures our industry is facing, particularly rising costs and increasing staff shortages, this detailed study shows that the US coffee shop market remains buoyant and is expected to grow at a solid pace over the next decade as younger consumers drive demand for premium specialty coffees in the United States Forward States.”

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