Coffee wars

Most coffee wars for consumer market share involve the largest coffeehouse, Starbucks, pictured here in 2016.

Coffee wars involve a variety of sales and marketing tactics by coffeehouse chains and espresso machine manufacturers to increase brand and consumer market share. In North America belligerents in these wars typically include large coffeehouses, such as Starbucks, Dunkin', McDonald's, Tim Hortons, and Burger King. Major innovations in the coffee industry, particularly the advent of single-serve espresso pods, have lowered the market's barrier to entry. Although store count has traditionally been the primary method of gauging market share, both firms and analysts have incorporated revenue, balance sheets, organic growth, and stock market performance as comparable indicators.

According to The Economist, the largest coffee war of the late 2000s has been between Starbucks and McDonalds in the United States. The U.S. coffee market has since the early 2010s been primarily contested by its two largest players, Starbucks and Dunkin', which make up most of the country's commercial coffee shops. Since 2020, competition over the Chinese coffee market has intensified between Starbucks and Luckin Coffee.

United States

According to The Economist, the largest coffee war of the late 2000s has been between Starbucks and McDonalds in the United States. This dynamic between the two coffeehouses was shared by the Financial Times. During the 2008 financial crisis, Starbuck's market share tapered after consumer spending dropped. McDonald's launched a marketing blitz to capitalize on this from 2008 to 2009. In December 2008 McDonald's erected a billboard that read "four bucks is dumb" a play on words for "Starbucks is dumb" for selling coffee at higher price points than McDonalds. Another billboard read "large is the new grande", a jab at the social and cultural perceptions of Starbucks. However Starbucks chief executive Howard Schultz, a major proponent of coffee wars, voiced his concern about market saturation and vocally opposed the comparison between the McCafé and his firm's products. "We are up for the defense and we are going to get on the offense," Schultz told investors in late-2008. John Moore, the firm's marketing head, denounced McDonald's as "selling hot, brown liquid masquerading as coffee" in 2003, in reference to recent market gains. In line with this the spread of instant coffee has also intensified competition in the packed coffee markets, particularly at lower price points. The U.S. coffee market has since the early 2010s been primarily contested by its two largest players, Starbucks and Dunkin', which make up most of the country's commercial coffee shops. Originally named Dunkin' Donuts from 1950 to 2019, the donut company dropped "donuts" from its name in order to better compete in the beverage industry. In September 2019, Dunkin' committed $100 million to position itself against Starbucks and McDonalds, calling the former coffeeshop its "arch enemy". In 2014 The Guardian reported that "There is a war going on in America, and the battleground is coffee." Tim Hortons, a Canadian chain which historically had only a limited presence in the U.S. (primarily in Western New York), made a major expansion into the United States in the early part of the 21st century, culminating in its corporate merger with established U.S. fast food chain Burger King in 2014. Competing firms have retooled their market expansion by spinning off divisions to finance store openings. In 2018 Starbucks sold its packaged coffee business to Nestlé in order to free up $7.2 billion for their stores. In March 2020, Panera Bread launched a coffee subscription service to compete directly with Starbucks' national loyalty program.

Canada

Coffee chains that originated in Canada includes Blenz Coffee, Coffee Time, Second Cup, Tim Horton's, and Timothy's World Coffee. Tim Horton's is the largest coffee chain in the country by number of stores, with 4,613 stores in Canada on December 31, 2016. Several American coffee and fast food chains have also entered the Canadian market, including McDonald's, and Starbucks. McDonald's, and Starbucks both operate over 1,400 stores in Canada. In 2014, Canada has more Starbucks per capita than any other country in the world, with 39.54 Starbucks stores for every million residents in Canada. In an effort to gain further market share in the Canadian coffee market, McDonald's began opening standalone McCafés in Canada in 2015. In addition to coffee, several of these fast food retailers, including Country Style, McDonald's, Starbucks, and Tim Horton's also compete for the country's fast food breakfast market, referred to as the "breakfast wars".

Tim Horton's continues to market themselves as Canada's Favourite Coffee on their own website and semi-trucks. . However, according to surveys conducted in Canada this is actually not the case as most Canadians prefer McDonald's Coffee over the Tim Horton's Coffee.

China

Since 2017, competition over the Chinese coffee market has intensified between Starbucks and Luckin Coffee. From the early 1990s to the late 2010s,Starbucks was the largest coffeehouse in China. In January 2020, Luckin Coffee overtook Starbucks in store count in China, by 500 retail spaces. Luckin had 4,500 stores in China while Starbucks had 4,200. However, the Chinese firms' entry into the U.S. capital markets faltered in early April 2020 after reports surfaced of fraudulent accounting and inflating market share projections. Luckin Coffee's stock was halted on the U.S. stock market, meaning it could no longer trade, after a corporate fraud investigation was initiated by U.S. and Chinese authorities. The 2018 trade war between the U.S. and China, with the two companies serving as respective proxies, led to a resurgence of Luckin Coffee in China during late-April 2020. Chinese consumers were boosting Luckin Coffee's market share as a rejection of American-led companies, specifically Starbucks. The Chinese government cautioned domestic investors from doing this soon-after, writing "Luckin’s actions harm the reputation of Chinese companies overseas." Fearing a possible bankruptcy, Luckin Coffee customers flooded their online app with orders redeeming free drink vouchers leading to a temporary rise in market share.

Europe

The coffee wars in the U.S. and Canada have promoted a rise in mergers and acquisitions in the European coffee market to better compete in coffee wars. In October 2018, the Italian coffee proprietor Illy merged with the German JAB Holding Company to reconfigure its market share. The two respective companies also announced that they will be producing espresso pods, to compete with Nestlé's Nespresso brand. European, and particularly Italian, brands struggle to compete in U.S.-based coffee wars do their cultural rejection of third-wave coffee culture.

Espresso machine market

Along with the competition between coffeehouses, the manufactures of espresso machines have also competed to enlarge their respective shares. Typically coming in three styles, manual (pulls), automatic (pulls and serves), and super-automatic (grinds, pulls, and serves), the advent espresso pods, have lowered the market's barrier to entry. In 2010, Nespresso launched a home-brew method of pulling espresso shots by inventing a compact single-use coffee container. Typically contrasted with the more traditional ground coffee served by most major coffeeshops, the use of espresso pods have proliferated. In March 2014 Nespresso's patent expired, allowing Keurig and Green Mountain Coffee to market their own brands. From 2014 to 2018, Green Mountain was acquired by Keurig who was in turn acquired by Dr Pepper to create Keurig Dr Pepper. In March 2016, Starbucks announced a partnership with Keurig to distribute Starbucks-branded pods in their brewers officially entering the market. In April 2019 Starbucks launched a large suite of espresso pods, featuring all of their branded-espresso, with Nestlé. This linked the world largest coffeehouse with the largest pod-manufacturer. Since then many companies – including Italian manufactures Lavazza and Illy – have launched their own brands.

See also

• Burger wars
• Cola wars
• List of coffeehouse chains
• List of companies in the United States
• List of companies of Italy