Starbucks has been fighting its competitors – Dunkin' Donuts and McDonald's – for the top position as coffee king for several years. The company, which began close to 50 years ago with a single location, has experienced phenomenal growth and success. In Q4 2018 alone, the company opened 604 new locations, bringing the coffee behemoth's global store count to over 29,000. With a Starbucks on every corner, the company is often considered the go-to coffee place to work and socialize, a concept that corresponds to the company's marketing approach.
From its humble beginnings as a Seattle-based coffee roaster, Starbucks has strived to create a "second home" for consumers, where they can stop on their way to and from work. In recent years, the company has invested heavily in its brick-and-mortar locations by expanding its food options, remodeling its restaurants, and revamping its rewards programs. If Q4 2018 earnings were any indicator, the company's efforts seem to be working.
Starbucks shares soared on November 2, 2018 after the company delivered an upbeat earnings report that beat Wall Street estimates. The company reported $6.3 billion in revenues that quarter, compared to $5.7 billion over the same period in 2017. With no end in sight for Starbucks' growth, here's how the company stacks up against its competitors. (For related reading, see "The Top 4 Starbucks Shareholders")
Dunkin' Donuts Giving Starbucks a Run for its Money
Dunkin' Brands-owned Dunkin' Donuts peacefully co-existed with Starbucks for decades. When the spokesman for the company's ad campaigns retired in the late 1990s, however, Dunkin began to transition away from coffee and in the direction of donuts. By the early 2000s, the company had introduced its first specialty coffee line and slowly began to make a name for itself as a destination coffee shop.
In 2006, Dunkin' upped the ante and declared war against Starbucks when it launched its "America Runs on Dunkin'" ad campaign. While Starbucks has created an intentionally chic and upscale environment, Dunkin' Donuts represents itself as an All-American brand. The tactic helped bolster Dunkin's Q3 2018 earnings, but the company's $350 million in revenues still fell significantly short of Starbucks' $6.3 billion that quarter. By November 2018, Dunkin Donuts operated 11,300 locations to Starbucks' 29,000.
McDonald’s Joins the Coffee Battle
McDonald's has long been known as a fast food restaurant, but the global franchise joined in on the emerging coffee craze by introducing flavored and iced coffees in the mid-2000s. With fiscal year 2017 revenues of $22.82 billion, McDonald’s outperformed both Starbucks and Dunkin' Donuts that year, though this was in large part because of the restaurant franchise's expanded menu.
After leaning on the "I'm Lovin' It" advertising campaign for more than 10 years, McDonald's recently found the slogan was not performing as well as it had when first introduced. New commercials and advertisements are slotted to roll out throughout 2019 and will fall in line with Dunkin' Donuts' approach, pushing McDonald's as a brand for the every-day American with emphasis placed on embracing people of every educational and cultural background.
Maxwell House and Folgers
Starbucks has also entered the coffee beans and ground coffee market by distributing its product line to retail and grocery stores around the world. In the process of expanding its retail segment, Starbucks has gained two new competitors: Maxwell House and Folgers. Maxwell House is one of the top-performing subsidiaries of Kraft Corporation, and Folgers is not far behind. While these two brands currently dominate the dry coffee goods market, they are not in direct competition with Starbucks due to their lack of brick-and-mortar stores.