Starbucks Confronts Unprecedented Rivalry in Evolving US Coffee Landscape
The iconic coffee chain Starbucks, which fundamentally transformed American coffee culture, is now navigating a fiercely competitive market as numerous rivals vie for the attention of US consumers. While Americans are consuming more coffee than they have in decades, a smaller proportion of those beverages are being purchased from Starbucks, signalling a significant shift in consumer behaviour.
Market Share Erosion Amid Proliferating Competition
According to data from the food industry consulting firm Technomic, Starbucks' share of spending at all US coffee shops has experienced a notable decline. It fell in both 2024 and 2025, currently standing at 48%, down from 52% in 2023. This erosion occurs as perennial competitor Dunkin', which recently celebrated opening its 10,000th US store, gained market share during the same period.
The competitive field has expanded dramatically. Fast-growing drive-thru chains such as 7 Brew, Scooter's Coffee, and Dutch Bros are capturing customer interest. International players are also entering the fray, with Chinese chains Luckin Coffee and Mixue establishing US presences. Even established fast-food giants like McDonald's and Taco Bell are enhancing their beverage offerings to capitalise on the coffee boom.
"People haven't fallen out of love with Starbucks, but they're now polyamorous in their coffee choices," observed Chris Kayes, chair of the management department at George Washington University's School of Business. "People are now experimenting with other coffees, and they're seeing what's out there."
A Nation of Coffee Drinkers Fuels Chain Expansion
The National Coffee Association reports that an estimated 66% of Americans drank coffee daily in both 2024 and 2025, a 7% increase from 2020. This sustained demand has triggered a race among chains to expand their footprints. Technomic data indicates the number of chain coffee stores in the US surged by 19% to over 34,500 in the last six years.
This growth mirrors Starbucks' own origins as a small regional chain before its acquisition by former CEO Howard Schultz in 1987. Today, newer chains are experiencing explosive expansion. For instance, Nebraska-based Scooter's Coffee grew from 200 locations in 2019 to over 850, while Arkansas-based 7 Brew exploded from 14 to more than 600 locations in the same timeframe.
Neil Saunders, a managing director and retail analyst at GlobalData Retail, noted the market is becoming crowded, stating, "There's too much supply relative to demand." He further highlighted that Starbucks' immense scale presents a unique challenge, as its ability to grow sales by opening new locations is more limited due to market saturation. "Honestly, they're pretty saturated. They're a very mature business," Saunders added.
Strategic Responses: Store Redesigns and Menu Innovation
Starbucks is responding to these challenges with a multi-faceted strategy. The company recently told investors that efforts to improve service while making stores warmer and more welcoming are boosting US store traffic. It plans to add 25,000 seats to its US cafes by autumn and expects to open more than 575 new US stores over the next three years.
A key innovation is the development of a smaller-format store that is cheaper to build but retains indoor seating, drive-thru lanes, and mobile pickup capabilities. This design aims to allow Starbucks to operate in previously inaccessible locations.
"Growth doesn't require us to become something new. It requires us to be exceptionally good at what we already are," said Starbucks Chief Operating Officer Mike Grams.
Menu innovation is another critical battleground. Analysts point to a lack of novelty as a reason for Starbucks' struggles, particularly with younger consumers. Competitors have been quicker to introduce popular items; for example, Dutch Bros added protein coffee drinks in January 2024, nearly two years before Starbucks. Energy drinks now constitute 25% of Dutch Bros' business.
Starbucks is countering by adding new products, including updated pastries and high-protein, high-fiber snackable foods, and has announced plans to introduce customizable energy drinks soon.
The Value Proposition and Experience Debate
Competitors are aggressively targeting value and convenience. Dutch Bros, led by former Starbucks executive Christine Barone, operates nearly all its over 1,000 US shops as drive-thrus with walk-up windows, focusing on speed. Barone recently highlighted to investors that Dutch Bros' medium drinks are 24 ounces, compared to Starbucks' 16 ounces for a medium. Luckin Coffee also emphasises value, with an app full of coupons and promotions.
Morningstar analysis reveals the stark difference in average customer spend: $9.34 at Starbucks in 2024, compared to $8.44 at Dutch Bros and $4.68 at Dunkin'. While Starbucks did not raise prices in its 2025 fiscal year and vows judicious future increases, analysts caution against competing on discounts.
"Keep your prices the same and try to justify them," advised Ari Felhandler, an equity analyst with Morningstar, who believes Starbucks' store redesigns and new menu items will help restore traffic.
Starbucks' leadership remains committed to its core identity. COO Mike Grams emphasised that the company's path forward is not through drive-thru-only stores or mobile kiosks, but by building cafes with comfortable seating—the "soul of Starbucks"—that also serve mobile, drive-thru, and delivery customers.
"There's always going to be competition. We're aware of it, we keep an eye on it for sure, but we don't try to be them," Grams told The Associated Press. "We offer something that most people don't, which is a legitimate space to sit down, enjoy and use it for a variety of different reasons."
Questioning the Future of the Coffee Giant
Despite this confidence, some observers question whether this strategy is sufficient. Chris Kayes wonders if customers seeking a cozy or premium experience have already migrated to independent shops or upscale chains like Blue Bottle, which has 78 US stores and opened two more since the start of the year.
"In some ways, I think they are a victim of their own success," Kayes reflected. "I do think that the aura of Starbucks as being something special and unique and exciting isn't there anymore."
As the US coffee market continues to fragment and evolve, Starbucks faces the dual challenge of defending its massive market share while reigniting the distinctive appeal that once made it a revolutionary force in American daily life.
