Although big brands dominate the coffee market, Starbucks has remained the most popular globally.
If you want to invest in the coffee giant, you must be interested in how it has performed in 2022. So, how big is Starbucks’ market share in 2022?
Starbucks’ market share in 2022 is above 37% in the US. This year, the brand opened 1,878 new stores, closing the year with 35,711 stores in over 80 countries. The revenue amounted to $32.25 billion, a 10.98% increase from last year.
In this article, I’ll explore how Starbucks has been faring in 2022. Keep reading to learn more.
How is Starbucks doing in 2022?
Since 2021, Starbucks has been on a recovery journey from the effects of the coronavirus pandemic.
By the last quarter of 2021, the progress was promising because it had a market share of 34.74% in the US, with revenue growth of 25% from the previous year, 2020.
At the beginning of 2022, expectations were high for Starbucks’ market share to increase as the rest of the world’s economy reopens and recovers from the pandemic.
Let’s closely examine how Starbucks has been performing in 2022.
First quarter (Q1)
Starbucks’ fiscal first quarter begins in October, the company’s holiday line-up season. This period featured an acceleration in digital technology, which increased Starbucks Card activations and reloads.
As a result, the store traffic increased exponentially, with same-store sales hiking by 18% in the US and the Starbucks Loyalty program hitting 26.4 million active members, a growth of 21%.
However, in China, in-store sales decreased by 14%, mainly because of the outbreak of the Omicron variant and the lockdown in major cities.
Globally, the net revenue increased to $8.1 billion, a growth of 19% from 2021’s first quarter.
Although the company reported growth, the outbreak of the Omicron variant increased supply chain costs which were expected to influence the performance of subsequent periods.
Second quarter (Q2)
In the second quarter, ending 3 April 2022, the coffee giant recorded consolidated net revenue of $7.6 billion and earnings per share of 59 cents.
Though it decreased from $8.1 billion in the previous quarter, it was a 15% growth compared to the second quarter of 2021.
Since the economy was steadily reopening in the US, there was revenue growth of 17% to $5.4 billion.
This was the result of a 12% growth in comparable store sales. The operating profit in the region increased to $931.5 million from $896.4 million in the previous year’s second quarter.
The Asia Pacific region’s performance continued to derail because of the lockdown in more than 50% of Chinese cities where Starbucks has its stores. Same-store sales declined by 23% to $1.6 billion.
The international same-store sales declined by 8%, and there were expectations the sales would shrink further due to inflation and reimposed lockdown rules in China, the second-largest Starbucks market.
Starbucks expanded its global reach by opening 313 new stores, closing the quarter with 34,630 stores.
Third quarter (Q3)
In the third quarter ending 3 July 2022, the consolidated net revenue increased by 9% from the previous period to $8.15 billion. However, this was a decline from $1.15 billion during last year’s third quarter.
Although prices kept increasing in the US due to inflation, traffic in stores and demand for Starbucks’ coffee kept growing, with same-store sales rising by 9%.
Conversely, the Asia Pacific region saw same-store sales decline by 44% due to COVID restrictions.
Globally, comparable store sales increased by 3%. Starbucks’ CEO associated the growth with an increase in the popularity of cold and iced drinks in the US.
To learn more about Starbucks cold drinks, you can read my article on the best Frappuccino drinks.
Also, the company’s focus on its store expansion strategy (it opened new stores) and digital transformation investments contributed to the growth.
According to Howard Schultz, Starbucks’ interim chief executive officer, the improvement was in line with the mission of reinventing the company to meet customer and employee needs and to deliver shareholder value.
Fourth quarter (Q4)
The last quarter which ended on 3 October 2022, topped analyst estimates. They expected the consolidated sales to be $8.31 billion, but it increased by 3.3% from the previous period to $8.41 billion.
The US region reported an 11% increase in comparable store sales, while the Asia Pacific region saw a 16% decline.
Also, comparable international sales plunged by 5% and the operating margin by 4% due to inflationary pressures, expansion costs, and continued COVID-19 restrictions in China.
The last quarter recorded the highest number of new stores opened, 763, closing the financial year with a total store count of 35,711.
Overall
The demand for Starbucks coffee has been accelerating throughout the year. The net revenue increased by 11% to 32.5 billion, and in-store sales by 8%.
Overall, the brand opened 1,878 new stores, achieving a market share of over 37% among coffee brands.
How stiff is the competition in the coffee industry?
Although Starbucks has beaten all odds to become the most popular coffee chain globally, it still faces fierce competition from its rivals. Some competitors compete directly, while others compete indirectly.
Here is a review of Starbucks’ main competitors:
McDonald’s
McDonald’s has been expanding their McCafé line and improving its coffee quality. Although coffee is not its main specialty, its 38,000 stores in 100 countries put it in an excellent position to compete directly with Starbucks.
This year, McDonald’s has recorded a revenue of $23.265 billion, a 3.27% increase from last year.
In 2023, McDonald’s plans to open 4,000 stores in China, which could threaten Starbucks’ market share in China and Asia as a whole.
Costa Coffee
Costa Coffee competes with Starbucks for UK-based markets. It has 4,000 stores spread over 32 countries. This year, Costa Coffee has reported net revenue of $11.5 billion, recording a 10% growth from last year.
In 2023, the brand plans to expand its international footprint by introducing and distributing ready-to-drink coffee products globally.
This expansion could position Costa Coffee as a significant competitor to Starbucks in the ready-to-drink market.
Dunkin’ Donuts
Dunkin’ Donuts offers similar products to Starbucks but uses price differentiation to distinguish itself. Its annual revenue is $1.4 billion.
It operates its 11,300 stores in over 70 countries as franchises, reducing administrative expenses significantly. This is in contrast to Starbucks, which functions as a chain store, bearing all costs of the stores.
This strategy could enable Dunkin’ Donuts to gain a significant market share from Starbucks because it offers coffee at a lower price, which is appealing to low and middle-class earners.
Fact: Starbucks’ competitors are also gaining momentum after the pandemic. Starbucks’ market share might be further threatened as the industry becomes more competitive.
To maintain its position as the leading coffee chain, Starbucks must introduce innovative strategies to lure more customers into its stores.
What has enabled Starbucks to remain competitive?
Despite the world’s economic instability and stiff market competition, Starbucks has continued to grow in monetary terms and global reach. Which strategies have helped the brand to stay atop?
One of the company’s key strategies has been to expand its global reach by opening stores in new locations. This has helped Starbucks penetrate new international markets to increase sales and diversify its portfolio.
Currently, there are over 35,000 Starbucks stores in more than 80 countries. This way, the brand distributes risk in case one region performs poorly.
For instance, though the performance in China has been poor, the company is still leading because of sales in the US.
In addition to its store expansion strategy, Starbucks has also been successful due to its focus on creating a unique customer experience.
It provides a quiet and relaxing environment, which has helped it become a popular meeting place. Also, the brand concentrates on training employees to deliver excellent customer service.
Finally, using innovative technology to record and store data has also helped Starbucks improve customer loyalty.
For instance, the Starbucks Rewards loyalty program enables the brand to stay connected with its customers through the Starbucks app.
Starbucks’ future looks great in terms of growth and sustainability. Between 2023 and 2025, the company aims to achieve the following:
- Revenue growth of 10-12%, an improvement from 8-10%
- Increase in comparable store sales from 4-5% to 7-9%
- Growth of global store portfolio from 6% to 7%
In a September biennial Investors’ Day meeting, Howard Schultz, the interim chief executive officer, showcased the brand’s reinvention plan to achieve the above goals. The reinvention plan seeks to:
- Invest in purpose-built stores to access customers whenever and wherever they want.
- Use the siren system, a new proprietary innovation, to customize hot and cold drinks. The goal is to reduce the time it takes to make the drinks and to increase productivity.
- Expand Starbucks deliveries to meet the needs of growing digital consumers.
- Open more stores by accelerating the brand’s leadership position internationally.
- Center the partner experience in a solid and thriving network.
Starbucks’ SWOT Analysis
To know whether Starbucks has what it takes to strategically increase its market share next year, let’s look at its strengths, weaknesses, opportunities, and threats.
Strengths
- Unparalleled brand image: Although Starbucks offers the same products as its competitors, it has established itself as a brand that serves more value than a cup of coffee. Because customers associate the brand with quality, they are always willing to pay more for Starbucks coffee though they can find it elsewhere at a lower price.
- Embracing technology: Starbucks has incorporated technology into its operation, such as the Starbucks mobile app, to meet customers’ changing buyer behavior in the digital era.
- Customer loyalty: The brand has a custom of building lasting customer relationships through Starbucks Cards and Starbucks Rewards programs. These programs encourage customers to buy Starbucks products to earn points they can redeem in the future.
- Resource availability: With a net worth of around $104 billion, Starbucks has the necessary resources to expand its reach in international markets.
Weaknesses
- Expensive products: Although Starbucks’ brand differentiation lies more on quality or the Starbucks Experience, customers may shift to other affordable brands during economic recessions. This could reduce its revenue and earning potential.
- Overdependence on coffee beans: Coffee beans are Starbucks’ primary input, and the prices depend on the interplay of market forces. An adverse price change could cripple the brand’s ability to compete and reduce profitability.
Opportunities
- Expansion into untapped markets: Starbucks can leverage its financial prowess to venture into new markets such as India. This helps spread risk and reduce over-dependence on the same suppliers. Also, Starbucks can incorporate other products like fresh juice and snacks into its product mix like its competitors.
- Adopting price differentiation: Because Starbucks has large economies of scale, it can incorporate price differentiation into its marketing mix to reach low and middle-class customers. This would also prevent the brand from losing its market share to competitors.
Threats
- Aggressive competition: Local coffee houses compete aggressively to have a share of Starbucks’ customers. Other coffee giants such as McDonald’s and Dunkin’ donuts are expanding in Starbucks’ territories.
- Consumers shift into healthier lifestyles: Although there’s no proof that caffeine products are harmful to health, customer perception that it is could reduce Starbucks’ sales and profitability.
Verdict: Starbucks has the necessary resources to increase its market share in 2023. However, it has to embrace price differentiation, bring more technological innovation, and diversify into new products to remain competitive.
Final thoughts
Starbucks’ market share has gradually increased in 2022. However, COVID-19 restrictions in China and inflation have derailed the coffee chain’s growth.
But in the following financial year, there’s hope that the brand will exceed expectations as the company implements its reinvention plan.
Even when looking at the W and T of its “SWOT,” it appears that the company will continue going strong for at least the next few decades.
