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 and is expected to continue to grow.
The branded chain sector, which is estimated to number around 34,000 outlets, has driven the growth, which increased by 3.6 per cent in number of outlets and 5.7 per cent in revenue to reach US$44 billion annual turnover, according to Allegra Group.
The Project Café USA 2018 Report from Allegra World Coffee Portal reveals that the branded coffee chain landscape is dominated by the sector’s leading operators. Starbucks Coffee Company has 13,532 outlets and Dunkin’ Donuts and Panera Bread operating 8,828 and 2,036 outlets, respectively. Together, the top three chains account for more than 70 per cent of the branded coffee shop outlet share and an estimated 75 per cent market turnover share.
Allegra said the changing marketplace and the rising influence of ‘5th wave’ boutique chains will be significant in the coming years. “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,” it said. “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.
“The 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.’
Allegra describes the 5th Wave as a 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 adaptability in order to survive in an increasingly competitive marketplace,” Allegra said, noting that brands such as La Colombe, Bluestone Lane and Joe Coffee have continued to scale their business, posing a challenge to the status quo.
Equally, Caffe Nero in Boston and the Starbucks’ Reserve boutique concept 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.
Allegra believes that the prospects for the US coffee shop market remain healthy. It anticipates that the branded coffee shop market will exceed 46,000 outlets and turnover of US$78 billion by 2027, growing at steady 3 per cent annual outlet rate.
“We are entering an exciting new era of leadership in the industry, one that is based on a culture of excellence,”’ said 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.”