Starbucks is the most delicious, rich and flavored coffee and the largest coffeehouse chains in the world.
This is their official missions statement:
“To inspire and nurture the human spirit–one person, one cup and one neighborhood at a time.”
With 23,043 stores worldwide, Starbucks is the #52 most valuable brand in the world.
Question: why is Starbucks market shrinking? Who are Starbucks’ competitors?
Who are those fearless companies, daring to challenge the coffee giants? Well, the thing is, that Starbucks has been competing with several companies for a long time. Though, the competition has become more fierce in the past years.
Before we start discussing the real competition between Starbucks and its competitors, let’s take a look at what happened in 2008:
Starbucks announced it would close 900 stores. Since then, it has closed 507 stores in the United States and 64 stores in other countries. – NY Times
Starbucks closing stores? Did I miss something? Aren’t they the industry leaders? Is the coffee business dying?
Yes they’re closing stores. Yes, you missed something. They might be handing over the leadership. And the coffee business isn’t dying.
McDonald’s and Dunkin’ Donuts are the sharks trying take over the coffee business, which resulted in Starbucks’ market shrink.
The phenomenal Starbucks’ rein and monopoly has ended and the new era of coffee industry has begun.
It’s even more entertaining to hear that Starbucks is slowly losing the title of “Coffee King”.
Starbucks Competitors: The Big Three
Coffee – the mornings heaven for some and the daily ritual for many.
For a long time, high quality coffee was labeled – expensive. People walked in the coffee-shop and without a word of complaint, they paid 4$ for a cup. These were the great years.
Then, the unbelievable happened. The economy started to fall, prices rose, and a 4$ coffee became sort of unattainable.
So, the fast food giant McDonald’s and the “America runs on Dunkin“, entered the “premium coffee” race.
They offered “cheaper, but almost the same quality coffee”.
This was the beginning of the Coffee Wars.
Was it beneficial for the customer? The question remains unanswered, but the battlefield has changed forever.
In 2004, when Dunkin’ began selling premium coffee drinks, it was a direct attack on Starbucks.
In 2009, another front broke: McDonald’s launched McCafé. A “a game changer” and another direct attack on Starbucks.
Second Cup and Tim Hortons were also keeping up the race.
Starbucks competitors were becoming more and more powerful.
1. Dunkin’ Donuts
Let’s be clear on this, in the beginning, Dunkin’ Donuts business model wasn’t “right”.
In 1950s, when the first donuts store opened, their only focus was donuts. They didn’t care about anything else, especially for the coffee.
As time passed, Dunkin’ was losing business to its competitors.
It was only in 1990s, when Dunkin’ shifted from the donut first to the coffee first model.
Then, everything changed, the business started to take off.
And it was only in 2006, when Dunkin’ officially declared war against Starbucks.
Dunkin’ Donuts introduced new drinks, richer product line, higher quality and a marketing strategy that changed a lot.
This was relevantly “new” for Starbucks, because they mostly relied on “Word of Mouth” marketing, while Dunkin’ chose the traditional advertisements, representing itself as a brand for all-American consumers.
The focus of Dunkin’ was to become “the-cost-effective premium coffee seller”, to offer the same quality product with more reasonable prices.
Internationally, in 32 countries, Dunkin’ has been successfully serving its customers and the rapid growth of Dunkin’ is a result of its store consistency and franchises.
Plus, despite its name, most of Dunkin’ Donuts revenue comes from selling coffee.
In short, Dunkin’ is the best choice for price-conscious customers. Most of Dunkin’ Donuts coffee consumers, are those who are unhappy with Starbucks customer service and their stingy prices.
Psst… Don’t Forget The “Starbucks Competitors” Presentation
McDonald’s revenue in 2015 (over $26 billion) was higher than Starbucks’ and Dunkin’ Donuts.
It might sound unusual and misleading, when we listed McDonald’s as Starbucks’ top competitor, because, traditionally, McDonald’s is known for its food chain (they’re rather unknown for their coffee).
Though, when the iced and flavored coffee was introduced McDonald’s coffee started to gain popularity.
When McCafé was launched, Starbucks and Dunkin’ war was in its early stages.
So, McDonald’s had to figure out a way that would give them the upper hand over their competitors.
What did they do?
hot or iced coffee costs $1.
McCafé’s lattes are $2 cheaper than Starbucks.
Despite the price advantage, a lot of customers shifted from Starbucks to McCafé saying, that the lighter taste of McCafé was more attractive. Plus, saving money is an added bonus.
It’s Convenient and Faster
One of the biggest perks of McDonald’s?
It takes less than five minutes to get your number called.
On the other hand, Starbucks’ line is booring, it takes about 10 minutes to pick up your order.
Still, despite McDonald’s and Dunkin’ Donuts stealing Starbucks’ market share, it’s technically impossible for them to become the industry leaders.
Most successful companies aren’t meant to offer “all kinds of things” .
On the contrary, top brand have narrow product line, they are good at few things and they concentrate on improving those few skills.
McDonald’s is the fast-food industry leader, Dunkin’ is the top donuts chain and Starbucks is the best coffee chain in the world.
Neither of these three brands are good at anything outside their distinctive competencies.
As a result, Starbucks will never be seriously damaged from Dunkin’ Donuts Coffee and McCafé.
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