Dunkin’ has recovered more quickly from the pandemic than its cross-country rival Starbucks, even though consumers dramatically cut their commuting over the past several months.
There’s a key reason why: Dunkin’ has a lot more drive-thru sites, both on an absolute and on a percentage basis.
According to a recent report from the researcher Allegra World Coffee Portal, Dunkin’ has just under 6,400 drive-thru sites—or about two-thirds of its U.S. locations.
By contrast, Starbucks has 3,900 drive-thru locations, less than half of its company locations and a quarter of its total number of U.S. units.
That is a substantial difference. Coffee consumers clearly preferred the drive-thru during the pandemic—63% said in an Allegra survey that they preferred going through the drive-thru for their lattes rather than going inside. That was up substantially from the year before, when 48% said they preferred the drive-thru.
Historically, the Seattle-based Starbucks has outperformed the Canton, Mass.-based Dunkin just about every quarter since the latter chain went public in 2010—with an average gap of 270 basis points.
That changed significantly over the past two quarters. And in the third quarter, Dunkin’ outperformed Starbucks by 990 basis points. We’re unlikely to get Dunkin’s fourth-quarter numbers because it has since been sold to Inspire but that gap likely continued in the last three months of 2020.
Dunkin' SSS v. Starbucks
Source: SEC filings, Technomic
Much of the explanation given by Dunkin’ executives was this: Starbucks closed many of its stores in the aftermath of the pandemic. Consumers, especially in western markets where Dunkin’ locations are newer, shifted sales to Dunkin’.
The data above, however, provides a simpler explanation. Dunkin’ has more drive-thru lanes than Starbucks. Consumers used a lot more drive-thrus. That gave Dunkin’ a significant advantage during the pandemic.
The overall market for coffee shops plunged by 24% last year to $36 billion, according to the Allegra report. But much of that came in the form of sales declines and not unit closures—the total number of coffee shops declined by just 0.6% in 2020, according to Allegra. That is considerably lower than the overall industry, which likely lost about 10% of its units, depending on whom you ask.
Commuting patterns plunged last year. Almost a quarter of employees worked from home in December, according to the U.S. Labor Dept. That generally hurts coffee chains, which largely target commuters going to and from work.
But consumers shifted more of their business toward the mid-afternoon and later as they sought to take a break. They tended to prefer the drive-thru for its simplicity. That gave Dunkin’ an advantage over Starbucks.
Indeed, suburban and rural coffee shops “experienced significant upswings in sales during the pandemic as customers stayed home and shopped locally,” the report said.
Not surprisingly, Starbucks is dramatically shifting its own strategy—it is developing a lot more suburban locations with drive-thrus and is de-emphasizing urban markets, though it is building more takeout-only walk-in locations for such markets.
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