Founded in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker, Starbucks has grown from a small coffee roasting shop in Seattle’s Pike Place Market to become a global giant with more than 32,000 stores across the world. With such a significant presence worldwide, it faces competition from numerous players in different markets. In the robust coffee industry alone, it competes with notable companies like McDonald’s, Tim Hortons, and Dunkin’ Donuts.
Despite these challenges, Starbucks earned an estimated $32.914 billion in revenue in 2022 and plans to have over 55,000 stores by 2030. Its popular contenders include McDonald’s, Dunkin’ Donuts, Tim Hortons, McCafé, Peet’s Coffee, Lavazza, Folgers, Costa Coffee, The Coffee Bean, and Global Tea Brands, among others.
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Starbucks Competitors and Alternatives
McDonald’s
McDonald’s is a large global company with numerous competitive advantages over Starbucks, including the incredible scale of its operations. With 80 years of experience and 40,031 restaurants worldwide in over 100 countries, McDonald’s has one of the largest customer bases of any restaurant chain. Since McDonald’s financial resources also far exceed those of Starbucks, it can devote more money to marketing campaigns, invest more heavily in product development and research, and provide better deals than even its most intense competitors.
One key strategy McDonald’s uses to compete against Starbucks is its McCafé line of coffee-related products. In 1993, the first McDonald’s store offering premium coffee opened in Australia. Currently, there are more than 15,000 locations across the world providing both hot and cold beverages made from premium beans.
In addition, since the company has already built out an extensive infrastructure for regular restaurants, it can easily deploy these units without needing to make major investments (as would have been needed if starting from scratch). The fast-food titan also offers special deals like any size premium-roast coffee for only $1, which many customers find attractive compared to higher priced items at Starbucks cafés.
Dunkin’ Donuts
Over the years, Dunkin’ Donuts has established itself as a major competitor to Starbucks. While Dunkin’s annual revenue is much smaller compared to the Seattle-based coffee giant, they still compete fiercely in both the local and national arenas. Dunkin’ Donuts is currently owned by Inspire Brands after their purchase of Dunkin’ Brands. They operate more than 11,500 restaurants worldwide and more than 8,500 locations in the United States alone. The company also has strategic partnerships with several brands, including Coca-Cola.
The main differentiator between Dunkin’ Donuts and Starbucks lies in product selection. Dunkin’s menu includes breakfast sandwiches and frozen beverages (smoothies) alongside its signature donuts and coffee products. Starbucks focuses on specialty coffees that have become popular around the world; from pumpkin spice lattes to cold brews and frappuccinos, they offer a wide array of drinks that are surprisingly difficult to find at other cafés.
In addition to their product selection differences, pricing is another area where the two companies differ significantly. Starbucks generally offers higher prices compared to other cafés like Dunkin’. Although price can be an important factor for customers looking for inexpensive daily coffee products, many consumers find it convenient enough to pay more for quality ingredients or special recipes offered by Starbucks while sacrificing cost savings provided by competitors such as Dunkin’ Donuts.
Tim Hortons
Tim Hortons is a major competitor of Starbucks, particularly in Canada, where it enjoys an iconic status. Established in 1964, the company has quickly become one of the largest Canadian-based multinationals, with nearly 5,000 quick-service restaurants located across 14 countries. Tim Hortons’ product offerings include coffee, donuts, muffins, cookies, pastries, bagels, and Greek yogurt mixed with berries.
One key advantage for consumers when choosing Tim Hortons over Starbucks is their affordability. A small cup of Caffe Latte at Tim Horton’s costs $2.49, while Starbucks charges $2.95. This makes it appealing to budget-conscious customers who can still enjoy a quality cup of coffee at a lower price point than Starbucks.
In addition to its restaurant locations, Tim Hortons also provides customers with its “Tims At Home” line of products so that they can enjoy the same quality and flavor of the food they love right in the comfort of their own homes. These products consist of everyday staples such as instant tea and coffee mixes, hot chocolate mixes, soup mixes, and granola bars, which come packed in convenient resealable containers allowing consumers to make snacks easily at home or while on the go.
By stocking these convenience items in grocery stores and other retail outlets, the company can reach a broader customer base than just their physical locations and online stores, giving them further access beyond traditional restaurant settings. This increased market penetration helps boost overall demand for their products, providing them with a competitive advantage over Starbucks.
McCafé
McCafé is a subsidiary of McDonald’s that specializes in espresso-based beverages and competes with Starbucks. McCafé was founded in 1993 in Melbourne, Australia, and it has since spread around the world; there are now McCafés operating in more than 30 countries on five continents.
The brand has taken extra steps to establish itself as an integral part of the coffee market, investing $381 million for expansion in 2020 alone. By the end of 2023, McCafé plans to have over 3,500 stores open in China — allowing it to compete with Starbucks both in the U.S. and in China.
McCafé focuses on providing high-quality espresso drinks like cappuccinos and lattes with a variety of flavor options. Many locations also offer cold brews and other take-out offerings, such as pastries and muffins. They offer loyalty programs that reward repeat customers with free drinks or discounts, which helps build additional customer loyalty for their already popular cafés.
To draw attention to their products, McCafé often features limited edition flavors or products throughout its stores worldwide; this can range from seasonal specials like caramel waffle Lattes during Christmas to new takes on classics like Nutella chocolate available all year long.
Peet’s Coffee
Founded in 1966 in California, Peet’s Coffee is a retail company that specializes in coffee roasting. The company was founded by Alfred Peet, who had been referred to as the “Grandfather of American specialty coffee”. Peet developed his signature dark roast style and supplied Starbucks with its own beans when it opened its doors in 1971. Since then, Peet’s has grown to become one of the most well-known competitors for Starbucks in the premium coffee market.
The company is executing a robust strategy by investing significantly in digital touchpoints for customers at various stages of their journey. This includes the addition of online ordering platforms such as DoorDash & GrubHub, the Peetnik Rewards membership program with low-friction payment options like Apple Pay & Google Pay integration, and subscription services via the Peets website or Amazon Prime subscriptions.
By actively maintaining a presence that is smaller in scale than industry giants like Starbucks, while also developing its omnichannel capabilities, Peet’s Coffee is able to maximize its agility while retaining higher margins due to fewer outlets being operated and maintained than bigger competitors — making them quite a formidable competitor within the global coffee and beverage market.
Lavazza
Founded in 1895 in Turin, Italy, Lavazza is a popular Italian coffee brand with stores located across Europe and now recently entered the U.S. market. The company has been on the rise over the past few years, attempting to compete with Starbucks and other coffee giants around the world. Lavazza’s offerings go beyond just pre-ground coffee for moka pot brewing; it also provides professional-grade espresso machines and single-serve capsule systems designed specifically for offices.
In particular, Lavazza’s Blue Professional capsules system allows office managers to purchase a Lavazza professional capsule machine and enjoy award-winning Gourmet blends of their favorite coffees at the click of a button. This program requires an initial purchase of 200 capsules from Lavazza. Still, it comes with a low price tag — making it an incredibly affordable option for offices that want quality espresso without having to buy multiple machines or leave the comfort of their own building.
Ultimately then, while still relatively unknown compared to some bigger names such as Starbucks, Lavazza should not be underestimated when considering potential competitors in terms of taste experience versus affordability ratio factor, especially when considering its innovative capsule system and coffee flavors.
Costa Coffee
Costa Coffee is well-positioned to compete with Starbucks in the coffee market globally. As one of the largest and most successful coffee brands in Europe, Costa Coffee has grown significantly since its inception in 1971 as a wholesale roaster.
In addition to its 2,121 stores located primarily within the United Kingdom, Costa Coffee has also expanded into over 41 other countries through franchise locations. The company successfully benefited from being acquired by Coca-Cola at the start of 2019 for $4.9 billion, which helped bolster its presence across international markets and accelerate strategic initiatives.
At the time of the acquisition, Costa Coffee was already established as a major player in Britain’s retail coffee market, generating more than $1.3 billion annually — far more than Starbucks’ UK sales at that point. Alongside competing with Starbucks for market share in other countries internationally, too, Costa Coffee always aspires to provide convenient solutions even outside regular store hours when it comes to serving customers.
Costa Coffee’s expansive menu features traditional espresso-based drinks, such as cappuccinos, as well as its signature creations, like its very own Costaccinos. In addition to beverages, the company offers a range of food items, including pastries, cakes, sandwiches, and salads.
Essentially, Costa Coffee has managed to successfully challenge Starbucks’ presence worldwide in terms of product selection and market share, particularly through its strong foothold in Europe.
Folgers
Folgers has long been a rival of Starbucks in the coffee market. Although Folgers is better known for its pre-ground coffee, it has also branched out into the ground and whole-bean offerings over the years.
Starbucks primarily offers drip coffee, espresso drinks, and cold brew beverages, while Folgers provides customers with classic coffee varieties like Colombian, French Roast, Dark Roast, Breakfast Blend, and many more. Folgers products are also widely available; customers are able to purchase their coffee from popular grocery stores such as Walmart, Target, or Kroger for a much cheaper cost than at Starbucks locations.
Those who don’t want to commit themselves to buying large bags may find that purchasing cheaper and smaller packages of Folgers’ ready-to-brew coffees is a great way to save both time and money compared to having a barista make an individual cup every morning at one’s local café.
In addition, there are advantages when it comes to convenience: No waiting in line or measuring portions — all one needs is hot water, and they’re set.
The Coffee Bean & Tea Leaf
Since its inception in 1963, The Coffee Bean has seen tremendous growth and now boasts over 1,000 self-owned and franchised outlets across more than 27 countries. In 2019, the company was acquired by the Philippine company Jollibee Foods Corp. for $350 million. This success can be credited to their unique brewing process, which uses freshly ground Arabica beans and cold brews each cup at a rate of two tablespoons per cup — giving every batch its own unique flavor profile instead of pre-ground or instant coffees utilized by competing chains.
The Coffee Bean also prides itself on providing an exceptionally high level of customer service where employees have been trained not just in making quality drinks but also in developing relationships with customers through regular conversational interactions. At the same time, they wait for their order — something that many feel sets them apart from Starbucks’ notoriously quick counter service system.
Despite The Coffee Bean’s success as an international business in the small-chain coffee shop sector, it is still dwarfed by more prominent players like Starbucks. However, with proper management, its potential for growth is undeniable, given its many successful locations around the world and the opportunity to capitalize on existing successes instead of investing in high-risk new ventures that may not be profitable immediately.
Independent Coffeehouses
Independent coffee houses are increasingly becoming a significant competitor to Starbucks. Local neighborhood cafés, unlike Starbucks and other multinational chains, provide customers with unique blends of coffee in addition to a more personal service experience. This is an advantage over the large chain stores because customers appreciate feeling special and valued when they visit a local café.
The number of independent coffee shops around the world has skyrocketed in recent years. Notably, London saw an 800% growth from 50 outlets in 2010 to over 400 ten years later — outstripping the 57% rise of retail chains such as Starbucks.
These smaller businesses have certainly gained popularity due to both their taste-driven focus on providing unique blends that appeal to customers’ individual preferences, as well as their commitment to ensuring a great customer experience with friendly baristas and comfortable atmospheres that make visitors feel at home without intimidating them or having high prices.
The pressure is on for Starbucks — these independents do not need large marketing budgets or heavy advertisement spending; instead, they rely heavily on word-of-mouth recommendations based on positive experiences. They also benefit from being widely available online via third-party delivery services.
Conclusion
Starbucks has many competitors in the coffee industry, but it remains the dominant player among them. Despite this, Starbucks’ rivals have still managed to carve out a strong presence in the market due to their ability to differentiate themselves from Starbucks in terms of product offerings, pricing strategies, and locations.
Companies like Dunkin’ Donuts and McDonald’s offer a wide variety of coffee drinks at lower prices than those offered by Starbucks. In addition, independent coffee shops provide customers with specialty coffees and a more personal experience than what can be found at larger chain stores like Starbucks.
In the end, if consumers are looking for an alternative to Starbucks products or services that best meets their needs, there are plenty of options available in today’s market, including both large corporate chains and small, independently-owned businesses.