Coffee is the most popular beverage in the world. The world consumes over 2.25 billion cups of coffee a day, and it has become one of the world’s most important commodities. Brazil is one of the largest producers of green coffee, with over five million Brazilians working in the coffee-related industry. Coffee is so critical to many economies in the world that is also publicly traded in the market. More than half of the Western-world drinks coffee on a daily basis. For many local restaurants and convenience stores, coffee represents over 80% of their hot beverage sales.
Coffee typically costs a retailer 20 cents per cup, and they in turn resell that to consumers for at least four to five times that amount. Prices vary depending on multiple factors, including store ambiance, flavor, bean, roast, and store location. A regular cup of coffee can range from $1 to $5. Specialty coffees such as cappuccinos and lattes can be as pricey as $7 a cup. Small coffee chains can earn revenues as high as $2 million.
Often, coffee shop owners will own multiple stores as a means to grow their wealth. Many coffee shop owners insist that service and convenience are key drivers in increasing coffee sales. Owners will use take-out counters and drive-thrus to drive sales and reduce the need for tables and chairs.
Despite coffee’s global demand, the competition for coffee producers and coffee shops is incredibly tough. Even the leading coffee shop chains are challenged in their efforts to improve the coffee buying and drinking experience. More and more coffee shops open daily across the globe, and major corporate coffee chains have used emerging markets to grow their business. In the last few years, coffee shop chains have even developed smartphone apps to make coffee purchasing easy and seamless.
Coffee’s future is not dark at the very least, but rather bright and full of promise as competitors chomp at each other for a slice of the market share. Here are the world’s top 5 coffee shop chains.
McCafe -1,300 Locations
As a distant fifth, McCafe can easily become the biggest threat to the top 4 coffee shop chains. It currently sits at just 1,300 locations. Operated and owned by McDonald’s, McCafe is best positioned to expand its number of store locations. As an extension of McDonald’s, McCafe typically operates jointly with McDonald’s fast food restaurant leveraging shared store locations.
McCafe was first introduced to the US in 2001. By that time it already had over 300 locations. McCafe sells specialized coffee such as latte, espresso, and cappuccino. It is growing in popularity, in particular across parts of Eastern Europe.
Costa Coffee – 1,700 Locations
Originally founded by Sergio and Bruno Costa in the early 70s, this unassuming roasted coffee supplier would eventually become the largest coffee shop chain in the UK. Today, the company has over 1,700 locations in over 35 countries. More than half of their stores are located in the UK. The brothers held onto the company for nearly 25 years before selling to Whitbread.
Costa Coffee uses partnerships to extend its footprint, building small outlets in bookstores, hotels, cinemas, and even pizzerias. Costa Coffee serves specialized coffees and employs the only three Italian Master Roasters in the UK. Gennaro Pelliccia, one of Costa Coffee’s employees, is responsible for taste-testing their coffee. His tongue is insured for £10 million.
Tim Hortons – 4,300 Locations
Tim Hortons is Canada’s largest food service operator, even larger than McDonald’s. It was originally founded in 1964 under the name “Tim Horton Donuts” by former NHLer Tim Horton.
The company had three locations before partner Ron Joyce bought the company from the Horton family. By this time, Horton had died in a car accident, and Joyce was adamant on expanding aggressively. By 1991, Tim Hortons opened its 500th store. Today, Tim Hortons has over 4,300 locations across North America and parts of the Middle East.
Over 80% of their stores are located in Canada. The company continues to expand aggressively and during the last two decades has experienced very little hardship. In 2012, the company recorded $3.12 billion in revenue and employed close 100,000 people. In addition to coffee and donuts, the company grew its sales with the introduction of a healthier menu and hot meals. Purchasing a Tim Hortons chain consists of a rigorous application and training process. Franchisee candidates are carefully selected, and only the most ideal candidates are taken.
Dunkin Donuts – 10,000 Locations
Dunkin Donuts was for many years regarded as the largest coffee chain in the world. Today, it has over 10,000 restaurants in over 37 years. Despite its name, coffee represents over half of Dunkin Donuts’ sales.
During the late 90s, Dunkin Donuts experienced significant hardship in Canada and Japan. In Canada, rival Tim Hortons gained significant ground over Dunkin Donuts with a healthier menu and a more welcoming ambiance. Over 200 stores closed across Canada as a result of poor marketing and promotion. Stores in Japan suffered a similar fate and by 1998, Japan did not have a single Dunkin Donuts store. Today, Dunkin Donuts continues to experiment with marketing campaigns geared towards their coffee products.
Starbucks – 20,000 Locations
The mega giant of the coffee world is undoubtedly Starbucks. It has over 20,000 stores and resellers in over 61 countries. The company employs over 150,000 workers. American Starbucks employees earn an average of $8.80 per hour and can have access to health insurance and stock options. Over 65% of the stores are located in the US.
It was founded in 1971 as a coffee-bean roaster and retailer. In 1987, the original owners sold the Starbucks chain to former employee Howard Schultz, who rebranded his Il Giornale coffee outlets as Starbucks and then began an aggressive expansion campaign. By 1989, 46 stores were established across the US and a small part of Western Canada. When Starbucks initially went public, its revenue was approximately $73 million. In just a few years, the company’s stock rose by 70%.
Starbucks would use acquisition as one of its primary growth strategies. In a short while, it acquired Seattle’s Best Coffee, Coffee People, and Torrefazione Italia. In addition to buying coffee outlets, Starbucks acquired Tazo, Teavana, and Ethos to bolster its product line. Today, Starbucks serves 40 million customers per week and sells over four billion coffees a year. Although Starbucks offers reselling licenses, it has never sold a franchise and never plans to.
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