Project Café USA 2021, World Coffee Portal’s report on the US branded café segment, reveals that the US$36 billion market suffered an US$11.5 billion decline in sales decline over the last 12 months, with the total number of outlets contracting 0.6% to 37,189.
However, despite severe market turbulence, the US remains a source of innovation for the global coffee industry, with operators rapidly adapting to Covid-19 trading pressures with drive-thru, digital integration and new trading formats.
The report said that, although top rent paying operators in prime city and transport hub locations endured a ‘catastrophic’ drop in trade in 2020, some suburban and rural locations experienced significant upswings in sales during the pandemic as customers stayed home and shopped locally.
Reflecting the huge challenges all US café businesses face, just 38% of industry leaders surveyed by World Coffee Portal believe current trading is positive – down from 65% in 2019. Those operators reporting losses due to Covid-19 estimate the cost at approximately US$32,500 per store per month. Nevertheless, 81% of industry leaders surveyed believe there is still plenty of growth potential for branded coffee shops in the US.
Drive thru, which now accounts for 37% of all US branded café outlets, is becoming an increasingly attractive strategy to mitigate the impact of Covid-19. The proportion of US consumers surveyed favouring drive-thru over entering a coffee shop has increased from 48% in 2019 to 63% in 2020. With 6,391 sites, Dunkin’ is by far the largest drive-thru operator in the US, ahead of Starbucks’ 3,900 locations and Panera Bread’s 840.
The report found that Covid-19 store closures have compelled many major US coffee chains – including Starbucks, Dunkin’ and Peet’s Coffee, as well as boutique operators, such as Bluestone Lane and Intelligentsia – to dramatically accelerate the roll-out of digital tools, including mobile ordering, curb-side pick-up, delivery and e-commerce platforms for retail coffee.
With the prospect of a vaccine rollout under the incoming Biden administration, World Coffee Portal forecasts the branded coffee shop segment will return to pre-pandemic sales levels by 2023. 65% of US industry leaders surveyed believe coffee shop trading conditions will improve over the next 12 months. It forecast that the US-branded coffee shop segment will exceed 40,900 outlets by the end of 2025, displaying five-year growth of 2% CAGR. The total market is projected to recover to US$40 billion in sales over the next year and exceed US$50 billion by 2025 at 7% CAGR.