The US coffee shop market continued to grow in 2017, with competition from branded coffee-focused and food-focused chains, independent coffee shops and other channels.
The branded chain sector is estimated at over 34,000 outlets and has driven the growth, increasing by 3.6% in outlets and 5.7% in revenue to reach $44 billion annual turnover.
The Project Café USA 2018 Report from Allegra World Coffee Portal reveals that the branded coffee chain landscape is dominated by the sector’s top three operators, with Starbucks Coffee Company operating 13,532 outlets and Dunkin’ Donuts and Panera Bread operating 8,828 and 2,036 outlets respectively.
Together, the top three chains compromise over 70% of the branded coffee shop outlet share and an estimated 75% market turnover share.
The changing marketplace and the rising influence of ‘5th wave’ boutique chains
The US has a highly developed coffee culture with continued market growth, but existing consumption patterns are challenged by the rapid rise of influential artisan vendors who have raised coffee standards.
Although the artisanal independent segment represents a small share of the market, Allegra contends it has become a significant driver of the changing coffee culture and consumption patterns.
This artisan scene that developed in the mid-2000s has become widespread and the market is now entering a new era of exceptional professionalism – dubbed the ‘5th Wave, the business of coffee’.
The 5th Wave is a compelling combination of all four previous waves demonstrated by a more advanced set of business practices, delivering high quality boutique concepts at scale.
In the future, market leading chains will need to demonstrate a capacity for innovation and an adaptability in order to survive in an increasingly competitive marketplace.
Brands such as La Colombe, Bluestone Lane and Joe Coffee have continued to scale their business in 2017, posing a challenge to the status quo.
Equally, the execution of Caffe Nero in Boston and the impressive Reserve boutique concept by Starbucks signifies a new and dynamic marketplace.
These together with the recent high profile M&A activity such as the majority acquisition of Blue Bottle Coffee by Nestlé and JAB’s acquisition of Panera Bread, highlights the future growth potential for the market and continued investment opportunity.
Allegra predicts that successful small chains featuring high end artisan concepts will continue to attract investment in the coming years.
The future marketplace
Prospects for the US coffee shop market remain healthy and Allegra World Coffee Portal is optimistic for further growth over the coming 10-year period.
The branded coffee shop market is forecast to exceed 46,000 outlets and turnover of $78 billion by 2027, growing at steady 3% annual outlet rate.
The ‘5th Wave’ will become a major force for the global coffee industry over the next decade and will see the leading brands compete on excellence in an environment where winning is everything.
‘We are entering an exciting new era of leadership in the industry, one that is based on a culture of excellence,’ says Jeffrey Young, CEO of Allegra Group. ‘Addressing these rapidly changing market dynamics is a business imperative and leading chains will need to adapt or risk getting left behind.’
