Starbucks feeling the heat as more chains vie for US coffee drinkers

Americans are drinking more coffee than ever, but Starbucks is losing its grip on the market as competition intensifies across the country. The Seattle-based chain that transformed America’s coffee culture has seen its market share slip from 52% in 2023 to 48% in 2025, according to food industry consulting firm Technomic.

Despite maintaining its position as America’s largest coffee retailer with nearly 17,000 U.S. stores, Starbucks faces challenges on multiple fronts. Dunkin’, which recently opened its 10,000th U.S. location, has steadily gained market share over the past two years.

The competition extends well beyond traditional rivals. Fast-growing drive-thru chains like 7 Brew, Scooter’s Coffee, and Dutch Bros are rapidly expanding their footprints. Chinese chains including Luckin Coffee and Mixue are establishing U.S. operations, while upscale coffee shops such as Blue Bottle continue to open new locations. Even fast-food giants McDonald’s and Taco Bell have strengthened their beverage offerings to attract coffee drinkers.

“People haven’t fallen out of love with Starbucks, but they’re now polyamorous in their coffee choices,” explained Chris Kayes, chair of the management department at George Washington University’s School of Business. “People are now experimenting with other coffees, and they’re seeing what’s out there.”

The increased competition comes at a time when Americans’ appetite for coffee is booming. The National Coffee Association reports that 66% of Americans now consume coffee daily, up from 62% in 2020. Coffee chains have expanded accordingly, with the number of chain coffee stores in the U.S. increasing by 19% to more than 34,500 over the past six years.

Many smaller chains are experiencing explosive growth. Nebraska-based Scooter’s Coffee has expanded from 200 locations in 2019 to more than 850 today. Arkansas-based 7 Brew has grown even more dramatically, jumping from just 14 locations in 2019 to over 600 currently.

“There’s too much supply relative to demand,” noted Neil Saunders, managing director at GlobalData Retail. Saunders pointed out that Starbucks’ size limits its growth potential through new store openings. “Honestly, they’re pretty saturated. They’re a very mature business.”

Despite these challenges, Starbucks remains confident in its strategy. At a recent investor conference, the company revealed plans to add 25,000 seats to its U.S. cafes by fall and open more than 575 new U.S. stores over the next three years. The company is developing smaller-format stores that maintain indoor seating and drive-thru lanes but cost less to build, allowing expansion into previously unfeasible locations.

“Growth doesn’t require us to become something new. It requires us to be exceptionally good at what we already are,” said Starbucks Chief Operating Officer Mike Grams.

The company is also updating its menu offerings, including new pastries and protein-rich snacks, to recapture customer interest. However, some analysts believe Starbucks has fallen behind in menu innovation, particularly with younger consumers who value novelty and are willing to try new places.

Dutch Bros, led by former Starbucks executive Christine Barone, exemplifies this trend. The Arizona-based chain introduced protein coffee drinks in January 2024, nearly two years before Starbucks. Energy drinks, which Dutch Bros added 14 years ago, now account for 25% of its business. Starbucks only temporarily offered iced energy drinks in 2024, though executives have indicated that customizable energy drinks will soon appear on their menu.

Value is another competitive factor. Dutch Bros emphasizes that its medium drinks are 24 ounces, compared to Starbucks’ 16-ounce medium. Meanwhile, Luckin Coffee’s app features numerous coupons and promotions to attract price-conscious customers.

The price differential is significant: Morningstar reports that in 2024, customers spent an average of $9.34 at Starbucks, compared to $8.44 at Dutch Bros and $4.68 at Dunkin’.

Starbucks did not raise prices in its 2025 fiscal year and has promised restraint on future increases. However, Morningstar equity analyst Ari Felhandler believes competing on price would be a mistake for the company.

“Keep your prices the same and try to justify them,” Felhandler advised, suggesting that store redesigns and menu innovations will ultimately bring back customers.

Grams emphasized that Starbucks’ strategy focuses on creating comfortable spaces for customers rather than simply expanding drive-thru-only locations or mobile pickup kiosks. “There’s always going to be competition. We’re aware of it, we keep an eye on it for sure, but we don’t try to be them,” he told The Associated Press.

Whether this approach will be enough remains uncertain. As Kayes observed, “In some ways, I think they are a victim of their own success. I do think that the aura of Starbucks as being something special and unique and exciting isn’t there anymore.”