Starbucks Competitors and Alternatives: Who Stacks Up Against this Coffee Giant?

Brent Davis - May 18, 2021

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Starbucks is the world’s leading coffee shop and has more than 30,000 stores in 83 countries.

The company began as a seller of coffee beans in 1971 founded by Gordon Bowker, Zev Siegl, and Jerry Baldwin.

In 1987 the company would be sold to Howard Schultz who turned it into the brand it is today. 

Starbucks has expanded rapidly over the years thanks in part to being floated on the stock market.

The company has a 40% share of the United States coffee market and is the second most valuable fast-food chain, behind only McDonalds.

The company is publicly traded on Nasdaq under the ticker symbol SBUX.

Howard Schultz remains the company chairman and Kevin Johnson is the CEO.

Revenue for the company was reported to be $26.50 billion in 2019.

Operating income for the same period was reported as $4.07 billion.

The company employs over 340,000 people throughout its coffee shops.

Starbucks’ Biggest Competitors and AlternativesStarbucks Competitors

Starbucks drives most of its revenue from its coffee shops which are either wholly owned by the company or franchises that are licensed out.

The franchises make up just under 50% of all Starbucks coffee shops.

It sells a wide range of coffees such as Cappuccinos, Lattes, Flat whites, and much more.

It also offers a selection of bottled drinks, teas, blended drinks, and cold drinks.

The company also sells a range of hot and cold food including paninis, muffins, and biscotti.

The company also sells a range of merchandise for customers to make Starbucks at home.

You can pick up your own Starbucks branded cups, with seasonal designs.

They also sell their coffee beans which can be ground in-store or taken home whole.

Starbucks has become famous for its seasonal drinks such as the Pumpkin Spice Latte only available in the Fall.

The company provides free WiFi making it a popular destination for business people. Starbucks’ competitors and alternatives are the following:

  • Costa Coffee – The second-largest worldwide coffee shop behind Starbucks.
  • Caffè Nero – The leading coffee shop in Europe.
  • McCafé – The dedicated coffee shop brand introduced in Australia by McDonald’s and expanding internationally.

Starbucks Competitors: Costa CoffeeStarbucks Competitors

Costa Coffee is a coffee shop that started in the United Kingdom and has expanded to 32 total markets.

The company was founded in 1971 by the Costa Brothers in a similar fashion to Starbucks.

They originally distributed coffee beans to caterers and other coffee shops.

Despite being the second-largest worldwide chain, Starbucks eclipses them with almost 10 times the number of stores.

Costa became the first coffee shop to deliver by drone in 2017.

Customers on the beaches in Dubai could order a coffee and have delivered to them on the beach.

Costa was acquired by The Coca-Cola Company in 2019 and they have introduced a Costa branded canned coffee product.

The acquisition will see The Coca-Cola Company continue to expand the Costa brand worldwide.

The Coca-Cola Company is listed on the New York Stock Exchange under the ticker symbol KO.

It is one of the most successful beverage companies in the world reporting total revenues of $37.27 billion in 2019.

The company also reported an operating income of $10.09 billion.

Starbucks Competitors: Caffè NeroStarbucks Competitors

Caffè Nero owns and operates over 1000 coffee shops around the world, primarily throughout Europe but also a small number in the U.S.

The brand dates back to 1997 when Gerry Ford led a number of investors to purchase a small chain with 5 stores.

The brand is a prominent figure in the United Kingdom and competes with Starbucks and Costa in every major city.

Its international business is significantly smaller than Starbucks and behind Costa as well.

The company has around 9,000 employees worldwide. In 2019 the company reported total revenue of $532 million.

The company is well known for its reward scheme which entitles consumers to a free coffee after 9 stamps.

A stamp is collected every time a customer buys a coffee in the store.

Double stamps are given to those who use a reusable cup – an effort to decrease waste.

Starbucks Competitors: McCafé Starbucks Competitors

Starting in Australia and New Zealand, McDonald’s has been launching their own dedicated coffee line.

It started in Melbourne in 1993 and was conceived to increase footfall at the Swanston Street store.

The brand has grown significantly and can now be found in over 15,000 stores worldwide.

The introduction of the McCafé brand to certain McDonald’s stores has led to a 15% uptick in sales.

McDonald’s is the leading fast-food restaurant in the world with over 38,000 restaurants worldwide.

The introduction of McCafé and subsequent rollout has been the biggest challenger to Starbucks.

McCafé has been able to scale quickly using the McDonald’s infrastructure and established a distribution network.

The brand is also cheaper than a typical Starbucks order so it is a great choice for coffee on the go.

Starbucks’ Advantage

Starbucks is well known for its excellent customer service which gives it a competitive advantage.

Since its inception, Starbucks has worked on ensuring a positive customer experience.

The company has built up loyalty among its customers with many people not settling for anything other than a Starbucks.

 It has created popular seasonal coffees which builds hype and has people waiting for them to come back in stock.

Popular seasonal drinks include Falls Pumpkin Spiced Latte and Winters Gingerbread Latte.

They also have strong branding, most people have heard of Starbucks and picture its logo.

People enjoy the branding so much that they opt to merchandise and bring branded cups home with them.

Starbucks Competitors and Alternatives: Final Thoughts

Starbucks is miles ahead of its competition with dedicated coffee shops.

Costa Coffee, its nearest competitor, is around 10% of the size of Starbucks.

McCafé represents the biggest challenge to Starbucks due to McDonald’s reach and its budget prices.

Starbucks differentiates itself from McCafé as a more premium product.

Over the years Starbucks has created a loyal customer base.

These are customers who return to the company on a daily basis.

With its significant worldwide appeal, the company is likely to remain the industry leader for a long time.

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Brent Davis has been writing about the financial markets for 10 years and worked in research for the last five years at a Fortune 500 company. Brent's investing strategy is to buy high-quality companies and then let compounding do its thing.