Starbucks is an American coffee chain company that has established itself in many other parts of the world. It was incorporated in Seattle, Washington in 1971. Currently, it operates in 28,218 locations around the world. It is the largest coffeehouse worldwide. The chain has diversified its business away from coffee to small pizza’s and other eatables. It recorded revenue of $22.387 billion in 2017.
Due to its global presence, Starbucks competitors are bound to be many. In the recent past, Starbucks has had a fierce battle with a number of market giants for top position in the world retail coffee industry. Its strategy is designed to focus on customer desire and preference, expansion of menu options and physical store locations. With this strategy, Starbucks aims to improve their customer service, expand their customer base and snatch consumers from their competitors.
Starbucks’ competitors list can be long. It is dominated by major players with reputable capability to influence for a good competitive position in the industry. Some of them are direct competitors while others are indirect competitors. The main Starbucks competitors’ analysis consists of the following brands:
Direct Starbucks Competitors
This is one of Starbucks’ biggest competitors. It is ranked as the second largest coffeehouse in the world after Starbucks and it is the largest in the United Kingdom. Costa coffee is a British multinational which was founded in 1971. By March 2018 it had made total revenue of £1.29 billion. It operates the highest number of outlets in the entire European Coffeehouse market. It currently runs a total of 2,422 outlets in the UK.
McCafe is fast coming up as one of the Starbucks competitors and market share challenger. It has a high number of stores across the globe. As one of Starbucks direct competitors, the coffeehouse has diversified beyond coffee to other foods and beverages such as Strawberry Banana Smoothie and Mango Pineapple Smoothie.
McCafe was founded in Australia in the year 1993. In the year 2015, it was among the three leading coffee sellers with over $1.4 billion sales from slightly more than 4,500 outlets. This performance level is expected to improve after the coffeehouse upgraded its equipment to ensure consistency in the taste of its coffee. McCafe is now ranked as the largest industry player in New Zealand and Australia.
This is an American doughnut company and coffeehouse that has spread its operations globally. It was founded in 1950 and it has its headquarters in Canton, Massachusetts. Dunkin Donuts is one of Starbucks key competitors and it is the eighth-largest fast foods restaurant chain by number of locations in the world. It has more than 12,000 restaurants in 36 countries. It is well-known form a wide range of products that include baked goods, hot beverages, iced beverages, frozen beverages, sandwiches, and soft drinks among others. In 2016, its revenue record was US$828.9 million.
4.Café Coffee Day:
Café Coffee Day (abbreviated as CCD) is another of Starbucks’ global competitors. It is an Indian café chain owned by Coffee Day Global Limited, a subsidiary of Coffee Day Enterprises Limited. It was founded in 1996 and its headquarters is in Bangaluru, Karnataka, India. CCD offers a diversified range of products that include coffee, tea, patries, cappuccino beverages and smoothies. This product diversification contributes to Starbucks’ competitive dynamics. Café Coffee Day’s revenue in 2015 was US$190 million.
Indirect Starbucks Competitors
5.Independent Fast food chains and Bakeries:
There are hundreds of local bakeries and small coffee centers that also sell coffee. They compete with Starbucks indirectly and they serve a significant part of Starbucks competitors’ market share. They pose a challenge to Starbucks competitive edge because they offer more personalized service and their friendly workers are well known to customers. Because there are many independent fast food chains and bakeries, they are responsible for most of Starbucks competitive challenges.
This is an American Fast foods store that was founded in 1940. It is one of the largest hamburger restaurant chains in the world with over 3700 outlets in over 100 countries. Due to Starbucks’ diversification into small pizzas and other foods that accompany coffee, it has become an indirect competitor of McDonalds.
7.Kentucky Fried Chicken (KFC):
KFC specializes in fried chicken. It is the largest restaurant chain in the world. It is based in Kentucky USA and it has over 20,000 outlets in more than 120 countries around the world. KFC was founded in 1952 with a mission to market fast food chicken by use of franchising and advertising methods. Due to preference for diversification strategy in the food and beverage industry, KFC’s product niche has become part of Starbucks’ competitive factors. Further diversification and the application of other macro marketing strategies is bound to create a new set of Starbucks future competitors.
Tazo Company is based in Portland city in US state of Oregon. The company sells some of the most preferred tea brands that are used as substitutes to coffee. One of its popular products is herbal tea. While undertaking Starbucks competitors’ comparison, such indirect competitors do not usually miss. Tazo tea is competitive because of its special taste, aroma and medicinal value. In 2010, Tazo revenues were at an estimate of $1.3 billion. Presently, Tazo serves customers in more than 46 countries with more than 17,000 outlets under Starbucks able management.
Twinings is probably one of the oldest players in the beverages industry. It was founded in 1706 and it is owned by the British Food Association. It sells a brand of tea that has gained worldwide popularity because of its concentration, flavors, and aroma.
The tea brand is high in caffeine that acts as a stimulant thereby helping customers to remain active throughout the day. In 2017, the level of its consumption was high to an extent that it was voted as one of the best tea brands globally. Twinings has more than 198 unique tea blends and an annual sales turnover of $8.5 million. This performance level is threatening to challenge Starbucks competitive rivaltry in the market.
This is one of the major Starbucks competitors around the world. It is one of the largest tea companies in United Kingdom and second largest tea producer globally. It produces over 65 different tea flavors. It was estimated to have about 6.6 million consumers in the UK alone. The brand was bought by Tata group in 2006 and thereafter branded to Tata tea.
Its operating profits increased by 60% after the branding. It has also introduced fruit tea variants and high margin green tea. The value of Tetly’s annual production averages $22billion. Tetly is another brand that is posing a serious challenge to Starbucks competitive position.
This is a tea company that was established in 1974 in Sri Lanka. It later entered into the Indonesian, Turkish and other 90 international markets. It has been reported that Cylon tea which is Dilmah’s parent company is the 6th largest in the world with estimated sales revenue of $7.92 billion. Other brands associated with the company include green tea, flavored tea, masala chai, Ceylon tea, herbal infusions, and iced tea among others.
12.The Republic of Tea:
This brand is produced from readily available organic products. The packaging is done in loose tea bags that differentiate flavors and colors. Rebranding and advertising strategies have made the brand gain global accreditation and an annual sales revenue of about $20 million. Some of its best selling products include hot apple cider, pumpkin spice black tea, ginger peach and comfort, joy black tea among others.
This is a retail company that specializes in coffee roasting. It was founded in 1966 and it is based in San Francisco Bay Area in the state of Califonia, USA. Peet’s introduced the United States to its darker roasted Arabica coffee in blends that include French roast and grades appropriate for espresso drinks. The retailer also offers freshly roasted beans, brewed coffee and bottled cold brew. Peet’s coffee retails in over 14,000 grocery stores across the US. In 2016, the retailer recorded sales revenue of $800 million.
This is a Canadian-based multinational fast food restaurant popular for its coffee and donuts. It is Canada’s largest quick service restaurant chain with a total of 4,613 restaurants in thirteen countries. Its sales revenue in 2016 was $3 billion.
15.The Coffee Bean:
This is an American coffee chain founded in 1963. As of 2017, the chain had more than 1,000 self-owned and franchised outlets in the US and 31 other countries. It specializes in coffee, tea and food. The chain’s revenue as at January 2013 was $500 million.
Some of the above Starbucks indirect competitors such as Tazo, Twinings, Tetly, Dilmah and The Republic of Tea are preferred tea brands that are in the market as an alternative to coffee. Considering both direct and indirect Starbucks competitors, it is clear that Starbucks enjoys distinct competitive advantage. But, is Starbucks competitive advantage sustainable? To understand this, one has to analyze Starbucks sales compared to competitors and consider Starbucks competitive disadvantage.