The Project Café USA 2021 report has found that the United States branded café segment declined in sales by US$11.5 billion over the last 12 months, with the total number of outlets contracting 0.6 per cent to 37,189. It estimates the market to be worth US$26 billion, down 24 per cent on 2019.
Despite severe market turbulence, the report says 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
US coffee shops see fortunes transformed in 2020
While the report says 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 per cent of industry leaders surveyed by the report believe current trading is positive – down from 65 per cent in 2019. Those operators reporting losses due to COVID-19 estimate the cost at approximately US$32,500 per store, per month. Nevertheless, 81 per cent of industry leaders surveyed believe there is still plenty of growth potential for branded coffee shops in the US.
Drive-thru trade picks up pace
Drive thru, which now accounts for 37 per cent 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 per cent in 2019 to 63 per cent in 2020. x
With 6391 sites, Dunkin’ is by far the largest drive-thru operator in the US, ahead of Starbucks’ 3900 locations and Panera Bread’s 840.
COVID-19 quickens digital integration in US cafés
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, curbside pick-up, delivery and e-commerce platforms for retail coffee.
Indicating the commercial potential of delivery during the pandemic, 45 per cent of US consumers surveyed by the report indicate they would regularly order drinks for delivery if the option were available. Faster delivery, lower fees, and spill-proof packaging are the top three areas consumers cited for improvement.
Ethical coffee continues to gain ground
While the pandemic has forced operators to temporarily pause some sustainability initiatives, such as the use of re-usable cups in-store, US consumers continue to embrace ethically sourced coffee. Fifty-seven per cent of those surveyed indicate it is important for them to purchase ethically sourced beverages where possible, up from 48 per cent in 2019.
Operators optimistic for swift post-pandemic recovery
With the prospect of a vaccine rollout under the incoming Biden administration, the report forecasts the branded coffee shop segment will return to pre-pandemic sales levels by 2023 – 65 per cent of US industry leaders surveyed believe coffee shop trading conditions will improve over the next 12 months.
The report forecasts the US branded coffee shop segment will exceed 40,900 outlets by the end of 2025, displaying five-year growth of 2.0 per cent compound annual growth rate (CAGR).
The total market is projected to recover to US$40 billion sales over the next year and exceed US$50 billion by 2025 at 7 per cent CAGR.
Image credit: Dunkin’ (the largest drive-thru operator in the US)