Trouble Brews for Starbucks Competitors With Shift to at-Home Coffee

As consumers are increasingly having their morning cup of joe at home, according to The J.M. Smucker Company, major coffeehouse chains — especially those without the devoted following of a category giant such as Starbucks — may have a rough go of it soon.

On a call with analysts Tuesday (June 6) discussing the food and beverage manufacturer’s fourth-quarter 2023 earnings results, Mark Smucker, the company’s chairman, CEO and president, noted that consumers are increasingly shifting to drinking coffee at home.

“Overall, at-home coffee remains strong, with at-home consumption representing 71% of all coffee drinking occasions,” Smucker said. “The at-home retail coffee market is positioned for continued growth, as macroeconomic conditions and changes in consumer habits all largely benefit at-home coffee.”

Consumers are looking for ways to cut back on their food and beverage spending, and shifting to at-home options is a key way that many are saving. According to a PYMNTS survey of more than 2,300 U.S. restaurant customers, anywhere from 67% to 88% of diners, depending on generation, report having made changes to their restaurant spending in response to inflation. The most popular change cited was purchasing from restaurants less often, followed by opting for restaurants with lower prices.

These behaviors are likely to only grow more common as inflation continues. According to data from PYMNTS’ report “Consumer Inflation Sentiment: The False Appeal of Deal-Chasing Consumers,” which drew from a survey of more than 2,100 U.S. consumers, the average consumer does not expect inflation to return to normal until the end of 2024.

Restaurant brands, too, are noting that cost-conscious consumers are dining out less often. For instance, Cracker Barrel, a Tennessee-based restaurant and retail chain, which has roughly 660 locations across 45 states, shared on its own earnings call Tuesday that, while consumers may not be pulling back on average check size, those feeling the macroeconomic pressure are visiting less often.

Indeed, it seems that coffee chains are feeling the pressure. For instance, drive-thru coffee brand Dutch Bros shared on its earnings call last month that it is anticipating challenges with regard to traffic.

“We are focused for the remainder of the year on proactively responding to potential macroeconomic challenges and driving traffic,” Dutch Bros President Christine Barone said. “We’re … leaning into throwback promotions that have served to drive traffic and trial in the past.”

These issues are compounded by the fact that, where for a long time restaurant inflation was significantly lower than grocery, that mix has shifted, making dining out all the more costly for consumers.

However, not all brands are concerned. Starbucks, for instance, the largest restaurant brand in the world by revenue, has seen visits high enough to prompt questions of capacity.

“Remarkably, store traffic has surpassed pre-pandemic levels in our busiest dayparts,” CEO Laxman Narasimhan told analysts on the company’s Q2 2023 earnings call. “And even with higher levels of beverage customization and complexity, we were able to serve the surge in traffic as we unlocked incremental store capacity through reinvention.”