Coffee wars

From Wikipedia, the free encyclopedia
Most coffee wars for consumer market share involve the largest coffeehouse, Starbucks, pictured here reflecting a sign for Tim Hortons in New Westminster, Canada.

Coffee wars, sometimes referred to as caffeine wars, involve a variety of sales and marketing tactics by coffeehouse chains and espresso machine manufacturers to increase brand and consumer market share.[1][2] In North America belligerents in these wars typically include large coffeehouses, such as Starbucks,[3] Dunkin',[3] McDonald's,[4] and Tim Hortons.[5] According to The Economist, the largest coffee war of the late 2000s was between Starbucks and McDonalds in the United States. The U.S. market has, since the early 2010s, been primarily contested by its two largest players, Starbucks and Dunkin'. Since 2020, competition over the Chinese coffee market has intensified between Starbucks and Luckin Coffee.

Periods of low economic activity and business recessions––which contribute to diminished consumer demand––have been linked to an increase in coffee wars. 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 been traditionally seen as gauging market share, both firms and analysts have incorporated revenue, balance sheets, organic growth, operating margin, and stock market performance as comparable indicators.[6][7]



Since 2020, Luckin Coffee has been China's largest coffee chain by store count.

From the early 1990s to the late 2010s, Starbucks was the largest coffeehouse in China.[8][9] However, since 2017, competition over the Chinese coffee market has intensified between Starbucks and Luckin Coffee.[10]

In August 2018, Luckin signed a distribution deal with e-commerce group Alibaba to increase their online retail presence in China.[11] The 2018 trade war between the U.S. and China, with the two companies serving as their respective proxies, also led to a resurgence of Luckin Coffee in China.[12]

In January 2020, Luckin Coffee had more stores than Starbucks in China,[13] with Luckin having 4,500 stores compared to Starbucks' 4,200.[14] However, the Chinese firm's entry into the U.S. capital markets faltered in early April 2020 after reports surfaced of fraudulent accounting and inflating market share projections.[15][16] Luckin Coffee's stock was halted on the U.S. stock market after a corporate fraud investigation was initiated by U.S. and Chinese authorities.[17] Chinese consumers were boosting Luckin Coffee's market share as a rejection of American-led companies, specifically Starbucks.[12] The Chinese government cautioned domestic investors from doing this soon-after, writing: "Luckin's actions harm the reputation of Chinese companies overseas."[12] 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.[18]


Since 2019, Louisa Coffee is Taiwan's largest coffee chain by number of locations.

Several popular Taiwanese coffee chains are in Taiwan, including 85C Bakery Cafe and Louisa Coffee. In December 2019, Louisa Coffee became the chain with the most locations in Taiwan.[19]


Rival outlets on Cheapside in London, England

The coffee wars in North America have promoted a rise in mergers and acquisitions in the European coffee market to better compete in coffee wars.[20] In October 2018, the Italian coffee proprietor Illy merged with the German JAB Holding Company to reconfigure its market share.[20] The two companies announced that they will be producing espresso pods, to compete with Nestlé's Nespresso brand.[21] European, and particularly Italian, brands struggle to compete in U.S.-based coffee wars due to their cultural rejection of third-wave coffee culture.[22] However, their Italian identity is "a big advantage over the multinationals" with respect to espresso.[1] The 2018 entrance of Starbucks and Nestlé into the Italian coffee market had Lavazza and Illy increase their merger and acquisition (M&A) activity.[1] In October 2018 Lavazza acquired Mars Inc.’s coffee business for $650 million while Illy signed a distribution deal with JAB.[1] The Wall Street Journal reported that the European coffee market was worth $83 billion in 2018, estimating a 16 percent increase in 2019.[1] The vice chairman of Lavazza, Giuseppe Lavazza, conceded in 2018 that Starbucks was competitive in the Italian market.[1]

North America[edit]


Several coffee chains operate in Canada, including Blenz Coffee, Coffee Time, Country Style, Second Cup, Starbucks, McDonald's Canada, Tim Hortons, and Timothy's World Coffee.

A Tim Hortons store in Shelburne, Ontario. Tim Hortons is Canada's largest coffee chain by number of locations.

A "coffee war" began in Canada in the late-2000s after Starbucks made an effort to attract the Canadian breakfast market, markets traditionally dominated by Tim Hortons and McDonalds.[23] During the 2010s, coffee chains offered several specials and promotions in an attempt to attract market shares from the competition.[23] McDonalds began to compete directly with Tim Hortons' annual "Roll Up the Rim" contest, by introducing a semi-annual promotion of a free small coffee in 2010.[24] In a 2011 report released by the NPD Group, the 3,295 Tim Hortons locations accounted for 26 percent of all restaurant traffic in Canada, whereas McDonalds' 1,400 locations accounted for 10 percent, and Starbucks locations accounted for 1.3 percent.[25] In 2011, Tim Hortons accounted for 76 percent of the baked food and coffee market in the country; with eight out of 10 cups of coffee sold at "quick-service restaurants" in Canada were from Tim Hortons.[24] Tim Hortons sold over 2.1 billion cups of coffee that year; Conversely, McDonalds sold 200 million cups of coffee that year.[25]

As of December 31, 2016, Tim Hortons remained the largest coffee chain by number of locations available in Canada, with 4,613 stores.[26] McDonald's, and Starbucks both operate over 1,400 stores in Canada.[27][28] 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.[29] In an effort to gain further market share in the Canadian coffee market, McDonald's began opening standalone McCafés in Canada in 2015.[30] McDonald's tripled its sales of brewed coffee in Canada from the 1970s to 2018, doubling its market share to 13 percent.[31] However, the same period also saw Dunkin' Donuts withdraw from the Canadian market, with the company closing its last three Canadian locations in September 2018.[32] Dunkin Donuts' decline in Canada has largely been attributed to its direct competition with Tim Hortons.[32][33]

In addition to coffee, several of these fast food retailers, including Country Style, McDonald's, Starbucks, and Tim Hortons also compete for the country's fast food breakfast market, referred to as the "breakfast wars".[34]

United States[edit]

According to The Economist, the largest coffee war of the late 2000s has been between Starbucks and McDonalds in the United States.[2] This dynamic between the two coffeehouses was shared by the Financial Times.[35] During the 2008 financial crisis, Starbucks' market share tapered after consumer spending dropped. McDonald's launched a marketing blitz to capitalize on this from 2008 to 2009.[36] 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.[37] Another billboard read "large is the new grande", a jab at the social and cultural perceptions of Starbucks.[38] 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.[39] "We are up for the defense and we are going to get on the offense," Schultz told investors in late-2008.[38] 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.[38] In line with this the spread of instant coffee has also intensified competition in the packed coffee markets, particularly at lower price points.[40] In 2009, McDonald's was seen to formally "kick off the coffee war" with Starbucks, particularly, by offering specialty espresso drinks.[41] However, coffee accounted for 6 percent of domestic sales for McDonald's during this time.[41] The Wall Street Journal reported in 2011 that the closer price points were for coffee the more competitive coffeehouses were with each other, in spite of different demographic markets.[41]

A cup of Dunkin' coffee, 2017

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.[42] In 2014 The Guardian reported that "There is a war going on in America, and the battleground is coffee."[43] In July 2011 Dunkin' Donuts went public on the U.S. stock market, raising $427.5 million to "heat up the fast-food java battle."[41] In 2011 Dunkin' Donuts controlled more than half of the New England coffee market.[41] Around 60 percent of the company's domestic sales were attributable to coffee and beverages.[41] In 2016, Dunkin' Donuts revamped their iced coffee offering, a departure from their portfolio of warm drip coffee and basic espresso-based drinks.[44] Two years later, in 2019, the donut company dropped "donuts" from its name in order to better compete in the beverage industry.[45] In September 2019, Dunkin' committed $100 million to position itself against Starbucks and McDonalds, calling the former coffeeshop its "arch enemy".[46] By June, both companies registered record, yet comparable stock market growth, Dunkin' rising by 24 percent, Starbucks by 29 percent.[47] A 2017 CNN analysis found that Dunkin' was "particularly aggressive in the coffee wars."[48] During that year's Starbucks annual meeting Schultz responded to Dunkin' market gains by telling shareholders to metaphorically bring the "sabers out."[48] 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 U.S. in the early part of the 21st century, culminating in its corporate merger with established U.S. fast food chain Burger King in 2014.[49]

In 2013, The Motley Fool speculated that the spread of Starbucks' gift cards and national loyalty program was a primary driver in coffee-driven market gains.[50] A year later, McDonalds conceded that Starbucks was "winning the coffee wars" by cornering the caffe latte market.[51] 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.[52] In an effort to undercut its competition, Starbucks released its signature Pumpkin Spice Latte in August 2019 – instead of its typical Autumn release.[53] In March 2020, Panera Bread launched a coffee subscription service to compete directly with Starbucks' national loyalty program.[54] The COVID-19 pandemic led to severe backsliding in market share for the largest coffeeshops, with smaller cafés closing permanently due to lack of demand.[55] Most of the major players initiated distribution deals with delivery platforms during the pandemic to sustain growth: Uber Eats (Starbucks),[56] GrubHub (Dunkin'),[57] and DoorDash (McDonald's).[58]

In 2023 McDonald's opened a trial of a few CosMc's cafes, selling afternoon snacks, drinks and coffee. This was seen as an attempt by McDonald's to reposition themselves in the United States coffee market.[59]

Espresso machine market[edit]

Along with the competition between coffeehouses, the manufacturers of espresso machines have also competed to enlarge their respective shares.[60] Typically coming in three styles, manual (pulls), automatic (pulls and serves), and super-automatic (grinds, pulls, and serves), the advent of espresso pods, have lowered the market's barrier to entry.[61] In 2010, Nespresso launched a home-brew method of pulling espresso shots by inventing a compact single-use coffee container.[62] 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,[63] allowing Keurig and Green Mountain Coffee to market their own brands. In 2018, Keurig Green Mountain merged with Dr Pepper to create Keurig Dr Pepper.[64] In March 2016, Starbucks announced a partnership with Keurig to distribute Starbucks-branded pods in their brewers officially entering the market.[65] In April 2019 Starbucks launched a large suite of espresso pods, featuring all of their branded-espresso, with Nestlé.[66] This linked the world largest coffeehouse with the largest pod-manufacturer.[52] Since then many companies – including Italian manufactures Lavazza and Illy – have launched their own brands.[67][68]

See also[edit]


  1. ^ a b c d e f Sylvers, Eric (October 13, 2019). "Lavazza and Illy Say 'Basta' as Global Coffee Wars Come to Italy". Wall Street Journal. ISSN 0099-9660. Retrieved April 20, 2020.
  2. ^ a b "Coffee wars". The Economist. January 10, 2008. ISSN 0013-0613. Retrieved April 14, 2020.
  3. ^ a b Hughes, Jennifer (20 November 2012). "The Coffee Wars Continue". National Real Estate Investor. Retrieved 12 April 2013.
  4. ^ Hill, Chris (13 February 2013). "1 New Player In The Coffee Wars". Motley Fools. Retrieved 12 April 2013.
  5. ^ Hiscock, Michael (December 19, 2020). "McDonald's just turned up the heat in the coffee wars". The Loop. Retrieved April 10, 2020.
  6. ^ Hall, Jason (April 20, 2020). "Forget Coronavirus: These 3 Starbucks Metrics Matter More". The Motley Fool. Retrieved April 20, 2020.
  7. ^ Perez, Marvin (March 23, 2019). "Starbucks Closures Can't Stop Coffee's Massive Rally, Here's Why". Retrieved April 20, 2020.
  8. ^ Lidsky, David (March 10, 2020). "How Luckin Coffee surpassed Starbucks as China's largest coffee chain…in just over two years". Fast Company. Retrieved April 5, 2020.
  9. ^ "China's Luckin Coffee Tries To Conquer A Nation Of Tea Drinkers". Retrieved 2020-04-12.
  10. ^ "瑞幸咖啡进军无人零售,直营门店4507家超星巴克". 投资界. 8 January 2020.
  11. ^ Pandey, Erica (August 5, 2018). "Starbucks stares down a buzzy, homegrown Chinese competitor". Axios. Retrieved April 20, 2020.
  12. ^ a b c Li, Jane (April 18, 2020). "Luckin Coffee, China's Starbucks rival, is getting a nationalist boost amid a huge fraud scandal". Quartz. Retrieved April 18, 2020.
  13. ^ McDonnell, Stephen (3 April 2020). "China's Luckin Coffee slumps on 'fake' data news". BBC News. Retrieved 10 April 2020.
  14. ^ Li, Jane (April 5, 2020). "Luckin Coffee, China's Starbucks rival, is getting a nationalist boost amid a huge fraud scandal". Quartz. Retrieved April 5, 2020.
  15. ^ Lucas, Amelia (April 2, 2020). "Shares of China's Luckin Coffee plummet 80% after investigation finds COO fabricated sales". CNBC. Retrieved April 2, 2020.
  16. ^ Wang, Yue (Apr 10, 2020). "China Stocks Face Increased Scrutiny After TAL Education And Luckin Coffee Reveal Inflated Sales". Forbes. Retrieved Apr 10, 2020.
  17. ^ Dogan, Inan (April 13, 2020). "Starbucks of China could soon be de-listed over fraud allegations". Retrieved April 13, 2020.
  18. ^ Lin, Connie (April 12, 2020). "Embattled Luckin Coffee sees wild surge as customers scramble to cash in on free drink vouchers". Fast Company. Retrieved April 12, 2020.
  19. ^ 何秀玲; 黃文奇 (December 24, 2019). "咖啡店龍頭換人做!路易莎上位 星巴克年賺110億稱霸" [A new king in the coffee chain world! Louisa surpasses Starbucks]. United Daily News. Retrieved May 30, 2020.
  20. ^ a b "Competition is hotting up in the coffee industry". The Economist. October 11, 2018. ISSN 0013-0613. Retrieved April 10, 2020.
  21. ^ Landini, Francesca (October 8, 2018). "UPDATE 3-Illycaffe and JAB team up on Nespresso-compatible coffee pods". Reuters. Retrieved April 10, 2020.
  22. ^ Marchetti, Silvia (March 19, 2020). "Are frappuccinos and pumpkin spice lattes really coffee at all?". South China Morning Post. Retrieved April 5, 2020.
  23. ^ a b Goldsman, Ryan (August 1, 2018). "The Coffee Wars Are Over: Here's Where We Find Growth!". The Motley Fool Canada, ULC. Retrieved August 3, 2020.
  24. ^ a b Taylor, Lesley Ciarula (March 1, 2010). "McD's goes free to counter Tim Hortons". The Toronto Star. Torstar Corporation. Retrieved August 3, 2020.
  25. ^ a b Tucker, Erika (March 8, 2012). "Who is winning the great Canadian coffee war?". Global News. Corus Entertainment Inc. Retrieved August 3, 2020.
  26. ^ Sagan, Aleksandra (January 10, 2018). "By the numbers: Tim Hortons franchisees and Ontario's minimum wage hike". The Globe and Mail. The Globe and Mail Inc. Retrieved September 10, 2019.
  27. ^ "Our Canadian Story". Starbucks. 2019. Retrieved September 10, 2019.
  28. ^ "University of the Fraser Valley and McDonald's team up to offer credit toward university credentials". Cision. CNW Group Ltd. August 27, 2019. Retrieved September 10, 2019.
  29. ^ "Canada Leads World In Starbucks Locations". Huffington Post. May 27, 2014. Retrieved September 10, 2019.
  30. ^ Henderson, Peter (December 9, 2015). "McDonald's opens first stand-alone McCafe at Toronto's Union Station". CityNews. Rogers Media. Retrieved September 10, 2019.
  31. ^ Shaw, Holly (June 22, 2018). "McDonald's extends its cafe chain rollout as it battles Tim Hortons and Starbucks | Financial Post". Financial Post. Retrieved April 20, 2020.
  32. ^ a b Spencer, Dan (6 October 2018). "Dunkin' Donuts done in Montreal". Global News. Corus Entertainment. Retrieved 25 December 2020.
  33. ^ Penfold, Steven (2008). The Donut: A Canadian History. University of Toronto Press. p. 135. ISBN 9780802095459.
  34. ^ Deschamps, Tara (May 10, 2018). "McDonald's serves up bagels amid breakfast war and Tim Hortons franchisee strife". The National Post. Postmedia Network Inc. Retrieved September 10, 2019.
  35. ^ "US coffee wars". Financial Times. January 7, 2007. Retrieved April 10, 2020.
  36. ^ Ordoñez, Jennifer (January 10, 2008). "Starbucks vs. McDonald's". Newsweek. Retrieved April 4, 2020.
  37. ^ Services, New York Times News (December 11, 2008). "Starbucks takes high road in coffee wars". Retrieved April 4, 2020.
  38. ^ a b c Adamy, Janet (January 7, 2008). "McDonald's Takes On A Weakened Starbucks". Wall Street Journal. ISSN 0099-9660. Retrieved April 4, 2020.
  39. ^ Jargon, Julie (November 7, 2011). "Coffee Talk: Starbucks Chief on Prices, McDonald's Rivalry". Wall Street Journal. ISSN 0099-9660. Retrieved April 4, 2020.
  40. ^ Golodryga, Bianna (September 28, 2009). "Starbucks CEO on Instant Coffee Wars". ABC News. Retrieved April 4, 2020.
  41. ^ a b c d e f Cowan, Julie (July 27, 2011). "Dunkin' to Fuel Coffee Wars". Wall Street Journal. ISSN 0099-9660. Retrieved April 20, 2020.
  42. ^ Rogers, Kate (November 9, 2018). "Dunkin' CEO has a plan to win the coffee wars in cafes and at the grocery store". CNBC. Retrieved April 10, 2020.
  43. ^ Wolff, Nicky (December 12, 2014). "Starbucks faces growing rivals as coffee wars reach boiling point". the Guardian. Retrieved April 10, 2020.
  44. ^ Taylor, Kate (June 21, 2016). "Dunkin' Donuts has a new weapon in the coffee wars against Starbucks". Business Insider. Retrieved April 20, 2020.
  45. ^ Taylor, Kate (September 28, 2018). "Dunkin' Donuts is officially dropping the 'Donuts' from its name despite earlier backlash". Business Insider. Retrieved April 20, 2020.
  46. ^ Hoffman, David (September 19, 2019). "Why Dunkin' Is Taking On Starbucks And Betting On Coffee". CNBC. Retrieved April 20, 2020.
  47. ^ Sanders, Anne (June 25, 2019). "Why Coffee Stocks Like Starbucks and Dunkin' Are Suddenly Piping Hot". Fortune. Retrieved April 20, 2020.
  48. ^ a b Monica, Paul (March 23, 2017). "Coffee wars! Wall Street runs on Dunkin', not Starbucks". CNNMoney. Retrieved April 20, 2020.
  49. ^ Team, Trefis (August 14, 2014). "Burger King-Tim Hortons Cross-Border Merger Much More Than Tax Inversion". Forbes. Retrieved April 5, 2020.
  50. ^ Yagalla, Mark (December 21, 2013). "Starbucks Is Winning The Coffee War With Its Gift Cards". The Motley Fool. Retrieved April 20, 2020.
  51. ^ Patton, Laura (January 29, 2014). "McDonald's Seeks to Out-Latte Starbucks in Coffee War". Retrieved April 20, 2020.
  52. ^ a b Blankenhorn, Dana (April 4, 2020). "Starbucks Stock Catches a Luckin Break, But Its Future Is Bleak". InvestorPlace. Retrieved April 4, 2020.
  53. ^ Tesler, Rachael (August 13, 2019). "Starbucks to release Pumpkin Spice Lattes early in coffee wars". Yahoo Finance. Retrieved April 20, 2020.
  54. ^ Kelso, Alicia (February 27, 2020). "Panera Launches $8.99 Unlimited Monthly Coffee Subscription Program". Forbes. Retrieved April 10, 2020.
  55. ^ Liao, Shannon (March 21, 2020). "Starbucks is closing its cafes due to coronavirus, with some exceptions". CNN. Retrieved April 21, 2020.
  56. ^ Walton, Chris (April 3, 2020). "3 Ways Starbucks Will Emerge From COVID-19 Stronger Than Before". Forbes. Retrieved April 20, 2020.
  57. ^ Voorhis, Scott Van (April 13, 2020). "Dunkin' Double Upgraded at Credit Suisse on Resilience During Pandemic". TheStreet. Retrieved April 20, 2020.
  58. ^ Biron, Bethany (April 21, 2020). "DoorDash is recreating the restaurant experience with virtual backgrounds and dining room playlists from popular chains like The Cheesecake Factory and Cracker Barrel". Business Insider. Retrieved April 21, 2020.
  59. ^ "McDonald's unveils US CosMc's trial and global expansion". BBC News. 7 December 2023. Archived from the original on December 7, 2023. Retrieved 7 December 2023.
  60. ^ Management, Strategic; Europe (June 3, 2012). "Coffee Wars Part II: Can Other Companies Unseat Nespresso?". Knowledge@Wharton. Retrieved 2020-04-20.
  61. ^ Ball, Deborah (June 6, 2010). "Nestlé Sues Sara Lee in Coffee War". Wall Street Journal. ISSN 0099-9660. Retrieved April 4, 2020.
  62. ^ Alderman, Liz (November 20, 2010). "Nespresso and Rivals Vie for Dominance in Coffee War". The New York Times. ISSN 0362-4331. Retrieved April 4, 2020.
  63. ^ Sorensen, Chris (March 11, 2014). "Patents expire and the single-serve coffee war heats up". Retrieved April 4, 2020.
  64. ^ McGrath, Maggie (January 29, 2018). "Coffee Meets Soda: Keurig And Dr Pepper Snapple Merge To Create Beverage Behemoth". Forbes. Retrieved April 4, 2020.
  65. ^ Beurteling, Lisa (March 23, 2016). "Starbucks announces Nespresso pod deal, new loyalty perks". Reuters. Retrieved April 2, 2020.
  66. ^ Hitt, Caitlyn (April 23, 2019). "Making Starbucks Espresso Drinks at Home Is About to Be Way Easier". Thrillist. Retrieved April 2, 2020.
  67. ^ Burke, Owen (May 10, 2019). "The best coffee and espresso pods you can buy". Business Insider. Retrieved April 10, 2020.
  68. ^ Anderson, Lydia (April 17, 2020). "How to pick a coffee machine". Good Housekeeping. Retrieved April 17, 2020.