A coffee comeback

As Way back when Starbucks first started sprouting up across the nation, the chain brought with it the promise of a new place to hang out with friends and family. The coffee shop became our third place.

But today, we’re less likely to linger at our local café. I often make a mobile order from the car, run in for my pickup and then drive away on the next errand. I guess you could say that now, our new third places are our phones. 

Quicker coffee runs

When the lockdowns hit in 2020, our dwell times at coffee shops fell. And even though restrictions have lifted, our visits are still shorter than they used to be.

According to a report from Placer.ai, Starbucks median visit lengths dropped from 34 minutes in Q1 2020 to 26 minutes in Q2 2020. Other chains saw similar drops, but none of the chains have yet seen a return to median visits that were as long as they were before the pandemic. 

Even before the lockdowns, chains had begun to pivot toward speed and convenience with drive-thrus, pick-up only stores, mobile apps and smaller stores with less dwell space.

2021 was comeback year

Coffee chains took a hit in 2020, but the lockdowns were just a speed bump. Now, more people are making coffee runs; millions of office workers are working from home and clamoring for a coffee run to break up the routine. Starbucks, for example, saw its average sales per store shoot up to $1.9 million in 2021.

Starbucks Americas – Average Sales Per Store (Millions)
 

Room for unit growth

Coffee shops have continued to grow, even as many chains have shifted their strategies. After dipping nearly 1.0% in 2020, overall coffee and snack shop unit growth in the U.S. was 4% in 2021, according to data from IBISWorld.

Coffee & Snack Shops in the US - Establishments (Units)
 

Starbucks opened about 800 new U.S. stores and closed just as many in its fiscal year ending September 2021. It replaced closed stores with better-located, smaller ones, often with drive-thru lanes and better-designedto fulfill mobile orders. Starbucks plans to open 500 U.S. stores in FY 2022.

Dutch Bros. may be unknown to those east of the Mississippi, but that may change. The chain has nearly 500 locations and plans to add another 300 within five years. Dutch Bros. is tailor-made for speed and efficiency. At stores of only 400 square feet, drinks are exclusively purchased via a walkup window or drive-thru. The chain plans to open at least 112 new units in 2022. 

Dunkin’ - which as of 2019 had over 9,100 location in the US -  also continues to grow in expansion markets via a robust franchise program. Other chains like Black Rifle, Illy, Cutters Point and Bigby also continued to open stores through the pandemic and have plans for more locations in the future.

How much would you pay for a cup of joe?

With the explosion of coffee culture, consumers have proved willing to spend much more than a buck for a custom-crafted espresso drink.  But how far might they go? As cost of coffee beans rise, thanks to increased demand from countries like China and Russia, the cost of drinks will likely rise too.

World Price of Coffee Beans – Annual Change 
 

But the cost of coffee has been growing for more than a decade, and demand for the increasingly costly beverage has yet to diminish. There’s little reason to believe that our craving for java will decline any time soon. And as masking and social distancing measures fade into the past, I think we’ll see those dwell times grow.  After all, it’s nice to get out and visit that third place again.