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When it comes to coffee, there may be too many options.
Coffee shops face similar issues to many retailers, including rising real estate prices and a saturated industry, but the added pressure of stores like McDonald’s and gas stations advertising specialty coffee is hurting even the largest coffee chains and crippling some independents.
There are now close to 33,000 coffee shops across the country. The total number is expected to grow by 2% this year, the slowest rate in six years. It is only expected to get worse, the Wall Street Journal reports.
Starbucks is not planning to slow its growth but did reduce its long-term sales and profit growth outlook last week and cited a difficult retail environment as the reason, the WSJ reports.
Despite facing hardships, larger chains can typically compete by catering to consumer demand for convenience with things like mobile apps, drive-thru lanes or bottled coffee. Smaller chains do not often have this luxury and can end up getting pushed out of the running because of their inability to compete.
As a result, a number of consolidations have taken place. JAB Holding Co., which owns Keurig Green Mountain and Peet’s Coffee, acquired a majority stake in Intelligentsia Coffee & Tea and Stumptown Coffee Roasters, and Nestlé acquired a majority stake in Blue Bottle Coffee Co.
If the market continues to play out this way, the dedicated coffee shop may soon be a thing of the past.
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