Historically speaking, visits to coffee chains have been at the top of the list of things that consumers pull back on during tough economic times. Looking back on the last recession of 2008-2009, consumers generally took one of three approaches when it came to coffee consumption: (1) substitute specialty coffee chain visits for at-home coffee brewing (Keurig and Nespresso single-serving machines being early in their adoption phases helped this trend as well); (2) trading-down to lower priced coffee chains (several QSR chains had revamped their coffee programs around this time to justify higher prices); and (3) reduced specialty coffee visits or opting-out (this was particularly true among coffee brands catering to more affluent customers which were reluctant to trade down to mainstream brands).
We’ve received some questions recently about our outlook for the coffee sector and whether or not we can expect similar trends if we go through another recession this year. As a starting point, we thought we’d look at how visitation trends for coffee chains compare to the rest of the restaurant industry. Specialty coffee chains lagged other restaurant categories in the back half of 2022 with respect to year-over-year visitation trends, but this can be partly explained by more difficult comparison from the year ago period (recall that specialty coffee was one of the top performing restaurant categories in 2021 during the initial post-pandemic reopening phase).
While there are a number of variables at play and there will almost certainly be reduction in visitation trends over the coming months for specialty coffee chains, we believe that this category may not see the same impact that it has in past downturns. Why? First, coffee prices have contracted more than many other food categories, making it more affordable on a relative basis. Second, the coffee category saw more changes around different dayparts than perhaps any other restaurant category during the pandemic due to evolving consumer behavior patterns (partly a byproduct of work-from-home and other hybrid work situations), with more consumers opting out of the morning commute coffee run in lieu of later morning or afternoon visits (we’ve show percentage of visits by daypart for Starbucks for 2022 and 2019 below).
While the absence of a morning commute routine and other factors have impacted visit frequency for many coffee chains, the shift in behavior may have also led to new coffee drinkers. Below, we’ve presented the trendline for Starbucks visitors and unique visits. As we’ve discussed in the past, the number of unique Starbucks visits continues to trend below pre-pandemic levels while the number of visitors remains relatively stable (this is also reflective of other coffee chains).
Lastly, the rise of coffee drive-thru specialists like Dutch Bros, PJ’s Coffee, and Scooter’s Coffee have made coffee more accessible for many consumers. We’ve previously discussed the tremendous growth in visits per location among drive-thru coffee, and we believe consumer’s increasing preference for drive-thru will help the category avoid the same decrease in visits amid economic uncertainty in 2023.
