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Rising coffee tide lifts boats of Starbucks, Dunkin', Dutch Bros, data shows

·Reporter, Booking Producer
·6-min read
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Americans have started grabbing their morning cup of coffee outside the house again, according to new data, in the latest signal that consumers are slowly reverting to pre-pandemic normalcy.

Research from data analytics firm Placer.ai shows that foot traffic at chains like Dunkin', Starbucks (SBUX) and Dutch Bros. Coffee (BROS) topped the dining sector's in 2021. The firm referred to the morning coffee routine as a "proven necessity" based on customers' visits during the COVID-19 pandemic, despite shifts in daily schedules, and many white-collar professionals working from home.

Foot traffic at the top ten performing coffee chains was up 2.8% compared to two years ago in June 2021, Placer.ai found, but dining visits were down 4.6%. By the end of last year, the contrast grew more apparent: In November, the coffee space saw an 8.4% jump in foot traffic compared to 2019 levels, while December saw a 7.5% increase.

Meanwhile, the dining sector saw a decline of 6.4% and 1.8% compared to 2019, reflecting the rise of new COVID-19 variants.

"The numbers reveal that necessity and convenience are not the only two drivers of coffee shop foot traffic," Placer.ai said, with many customers opting to pay for a cup of joe outside of their homes.

"For the many coffee-drinkers working from home, making coffee in their kitchen is no replacement for the experience of a trip to the coffee shop," the report added.

However, at-home coffee brands like Dunkin' and Cafe Bustelo from J.M. Smuckers (SJM) have also seen a boost from customers opting to drink their coffee at home.

In an interview in late November, CEO Mark Smucker told Yahoo Finance the "entire business benefits from folks having stayed at home and continuing to stay at home as we go back to a new normal, where folks will probably work more time from home than away from home or in the office."

Dutch Bros muscles its way into the coffee convo

(Courtesy: Placer.ai)
(Courtesy: Placer.ai)

When comparing foot traffic levels to 2019, newcomer Dutch Bros may be giving well-known players like Dunkin' and Starbucks a run for their money according to Placer.ai. Throughout 2021, the Oregon-based coffee chain saw a major spike in monthly visits compared to 2019, a jump that hit a high of 160% in December of 2021.

Starbucks and Dunkin', meanwhile, only saw foot traffic increase by less than 20% throughout March to December, with declines in both January and February.

Ethan Chernofsky, CMO of Placer.ai, told Yahoo Finance LIVE in a recent interview that "beyond seeing visits going up over time, we see that visits per location number going up, which really indicates that loyalty" for the Dutch Bros brand.

"They're really focused on getting the product out in a really positive way, drive-thru and a fast service model that enables them to grow really quickly in a really efficient manner," he added.

In the past five and half years, Dutch Bros expanded its presence from 250 stores to nearly 500 stores, with plans to reach 800 stores by 2026.

However, "expansion isn’t having a significant impact on visits to the current kings of coffee," Placer.ai noted in its report. Despite a smaller jump in foot traffic for the major brands throughout March to December compared to Dutch Bros, both companies have topped pre-pandemic levels.

(Courtesy: Placer.ai)
(Courtesy: Placer.ai)

According to Placer.ai's white paper, the "significant increase" in visits last March may be attributed to the release of spring menus. On top of that, warmer weather may have spurred cravings cold beverages which "often require special equipment and ingredients" that they may not have at home.

Starbucks — where cold drinks currently dominate sales — continues to benefit from "pumpkin spice latte season." Foot traffic at the coffee giant was up 14.6% last November, the start of a holiday surge marked by the return of seasonal red cups.

Placer.ai believes that the overall well-being of major brands proves that the "the days of one coffee brand monopolizing a given region are drawing to a close." Dunkin' is seeing major growth in California, and Starbucks has gotten a boost in New York compared to two years ago.

"The coffee demand is strong enough that it can sustain several national leaders," the firm noted. "In fact, the data shows that multiple chains can be part of a single individual’s coffee mix by providing different values and products depending on the demand."

Late morning effect

NORWELL, MA. - MARCH 17:  A Dunkin' worker hands a coffee out of a drive-thru window wearing gloves and a mask as the Coronavirus continues to spread on March 17, 2020 in Norwell, Massachusetts. (Staff Photo By Matt Stone/MediaNews Group/Boston Herald)
NORWELL, MA. - MARCH 17: A Dunkin' worker hands a coffee out of a drive-thru window wearing gloves and a mask as the Coronavirus continues to spread on March 17, 2020 in Norwell, Massachusetts. (Staff Photo By Matt Stone/MediaNews Group/Boston Herald)

One lasting "COVID-induced shift" is late morning visits to coffee shops. Last quarter, 26.2% of consumers visited their go-to coffee shops during the hours of 9 AM-12 PM, Placer.ai found. But in Q1 of 2020, a little more than 23 percent of customers visited during that time, with more customers opting to go midday (12 PM-3 PM), or in the late afternoon (3 PM-6 PM).

The report noted that in Q4, "this rise in late morning visits seems to come at the expense of visits in the late afternoon – between 3 PM and 6 PM" which have yet to return to pre-pandemic levels.

This could have potential for coffee chains to rethink their offerings, depending on what they may crave.

"Early morning coffee seekers may look for different products and a different spatial layout than late afternoon and evening ones," the report indicated. It could allow chains to identify the needs of customers currently compared to the needs of what Placer.ai calls "pre-pandemic patrons," giving them a possible "leg up on the competition."

As the world looks to return to work, the concept of the "third place" may see a boost long-term as workers seek hybrid work models.

"As more people looked for ways to meet with friends and family outdoors, buying a coffee to-go and sitting on an outdoor bench transformed from a lame date idea to a popular rendezvous concept," the report noted.

Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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