The company that revolutionized coffee culture in the United States remains America’s biggest player, with nearly 17,000 stores in the US and plans to open hundreds more. But it faces unprecedented competition, which will make it difficult to win back the customers it has already lost.

Starbucks’ share of spending on all US coffee shops falls in 2024 and 2025; it now stands at 48%, up from 52% in 2023, according to Technomic, a food industry consulting firm. Dunkin’ ‘, a perennial rival that just opened its 10,000th US store, has gained market share in the same years.

Starbucks has other challenges, such as fast-growing drive-thru chains 7 Brew, Scooter’s Coffee and Dutch Bros. Luckin coffee and Mixue are opening stores in the US. High-end coffee shop Blue Bottle, which has 78 stores in the US, has opened two more since the start of the year. Even McDonald’s and Taco Bell strengthening their drink offerings.

“People have not yet fallen in love with Starbucks, but they are now polyamorous in their coffee choices,” said Chris Kayes, chair of the management department at the George Washington University School of Business. “People are now experimenting with other coffees, and they’re seeing what’s out there.”

Caffeine country

Americans love coffee. By 2024 and 2025, an estimated 66% of Americans will report drinking coffee daily, up 7% from 2020, according to the National Coffee Association, an industry trade group.

Coffee chains are racing to capitalize on that demand. The number of chain coffee shops in the US has jumped 19% to more than 34,500 in the past six years, according to Technomic, a consulting firm that researches the food service industry.

Seattle-based Starbucks was a small, regional chain when the former CEO Howard Schultz it was acquired in 1987. Today, other small chains are seeing explosive growth. Nebraska-based Scooter’s Coffee will have 200 locations by 2019; it now has more than 850. Arkansas-based 7 Brew, which had 14 locations in 2019, now has more than 600.

“There is too much supply relative to demand,” said Neil Saunders, a managing director and retail analyst at consulting firm GlobalData Retail.

Saunders said The size of Starbucks a small disadvantage, because it has little ability to grow sales by opening new locations.

“Actually, they’re pretty saturated,” Saunders said. “They are a mature business.”

From grande to venti

Starbucks is fearless. In a conference for investors on Thursday, the company said that a continuous effort to service development while making stores warmer and more welcoming boosted store traffic in the US. It plans to add 25,000 seats its US cafes this fall.

“Growth doesn’t require us to be new. It requires us to be very good at what we already are,” said Starbucks Chief Operating Officer Mike Grams.

Starbucks expects to open more than 575 new stores in the US over the next three years. It developed a small form shop which is cheaper to build but still has indoor seating, drive-thru lanes and mobile pickup. The company said the downsizing will allow Starbucks stores operating locations they couldn’t before.

Starbucks is also adding new products, such as updated pastries and snackable foods in abundance protein and fiberin an attempt to win back customers.

What’s on the menu

The lack of menu change is one reason Starbucks is struggling, especially with younger consumers who want something new and will try new places to find it, Saunders said.

Arizona-based Dutch Bros, for example, added protein coffee drinks in January 2024, nearly two years before Starbucks. Energy drinks make up 25% of Dutch Bros’ business nearly 14 years after the chain introduced them. Starbucks is offering an iced energy drink for a limited time in 2024; Executives said Thursday that customizable energy drinks will appear on the Starbucks menu soon.

Dutch Bros, led by former Starbucks executive Christine Barone, has more than 1,000 stores in the US and hopes to double that number by 2029. It’s betting that customers want speed and convenience; almost all of its stores are drive-thrus with walk-up windows.

Dutch Bros also focuses on value. In a recent meeting with investors, Barone pointed out that Dutch Bros ‘ medium drink is 24 ounces; at Starbucks, a medium drink is 16 ounces.

Luckin, whose app is full of coupons and promotions, also focuses on value. On a recent afternoon, one of the nine stores in New York was buzzing with customers taking mobile orders. The small shop has no seating.

Xunyi Xie, who was visiting New York from her home in Delaware, said she stopped in to try the Velvet Latte because Luckin had a $1.99 drink promotion. Xie said he usually brews his own espresso, but when Luckin opens a shop on his way to work, he goes there.

For Starbucks? “I think it’s overpriced,” Xie said.

future of Starbucks

In 2024, the average customer will spend $9.34 at Starbucks, compared to $8.44 at Dutch Bros and $4.68 at Dunkin’, according to an analysis by investment research company Morningstar.

Starbucks is not raising prices in the 2025 fiscal year and has promised to be cautious about future increases. But Ari Felhandler, an equity analyst at Morningstar, said it would be a mistake for Starbucks to try to win over customers with discounts because competitors often cut prices.

“Keep your prices the same and try to justify them,” Felhandler says. He believes the Starbucks store redesign and new menu items will bring traffic back.

Grams, chief operating officer of Starbucks, said the company firmly believes in this best way forward not drive-thru-only stores or mobile pickup kiosks. It’s building cafes with comfortable seating — the “soul of Starbucks,” as he says — that also serve mobile, drive-thru and delivery customers. Sometimes customers want something convenient, and sometimes they want to live, he said.

“There’s always going to be competition. We’re aware of it, we’re watching it for sure, but we’re not going to try to be them,” Grams told The Associated Press. “We’re offering something that most people don’t, which is a legitimate place to sit, enjoy and use it for a variety of different reasons.”

But Kayes, of George Washington University, wonders if that strategy will be enough to keep Starbucks on top, or if customers who want a comfortable or premium experience have moved on to independent coffee shops or upscale chains like Blue Bottle.

“In some ways, I think they’re a victim of their own success,” Kayes said. “I think the aura of Starbucks as something special and unique and exciting is no longer there.”