If it feels like coffee shops — and specifically drive-thru-only coffee shops — are suddenly popping up everywhere, there’s a good reason for that.
Coffee shops are suddenly popping up everywhere.
Indeed, the coffee category, long dominated by Starbucks and Dunkin’, has swiftly diversified into a host of concepts that are rapidly gobbling up white space across the U.S.
According to Technomic, the roughly 20 coffee chains occupying the data firm’s Top 500 for 2023 added nearly 1,400 cumulative locations last year, outpacing every other menu category. Six coffee chains added more than 50 units; besides Starbucks and Dunkin’, that includes Dutch Bros Coffee, 7 Brew Drive Thru Coffee, Scooter’s Coffee, and Biggby Coffee.
Unlike many category booms and boomlets that came before coffee, however, this explosion isn’t coming out of nowhere; it’s been percolating for decades. And there’s no evidence that a ceiling is anywhere in sight.
Evolving consumer behaviors
One of the more curious aspects of coffee’s recent wave is that, while many of the players riding the wave are new names to the communities they’re entering, they’re not strictly new. Dutch Bros got its start in 1992. Biggby showed up in 1995; The Human Bean, 1998. 7 Brew is the baby of the category, having opened its first location in 2017.
So what’s with the sudden surge?
There are a few ingredients coming together to fuel the new coffee wave, the first being the massive pivot to off-premises business that arrived with the pandemic. With more Americans working from home and with digital tools powering an explosion in delivery, take out, and drive thru, foodservice occasions have spread out across dayparts and driven restaurant brands to prioritize smaller footprints facilitating omnichannel service.
Nicole Miller Regan, head of strategy for 7 Brew, said the brand has about the same amount of sales in the afternoon as it does in the morning, which she chalks up to the fact that people are more often on the move at different times of day.
“The feel-good part of your day used to be, if you went back quite a while ago, I think that would happen in the office with like a candy bar and a soda, especially in the afternoon. And then came along convenience stores. But I feel like a lot more is happening in the car, and a lot more is happening on the move,” she said. “And so drive thru is an incredible channel where people are very comfortable and they can even come multiple times a week and multiple times a day.”
This shift in consumer behavior has turned 7 Brew in particular into a rocket-ship success story. The young concept closed 2022 with 40 locations and 2023 with 180 locations. It’s already crossed the 200-store mark in 2024, and Miller Regan said the brand anticipates opening the same number of units this year as in 2023, which would nearly double its physical footprint by the end of the year.
Having started as a coffee stand in Rogers, Ark., 7 Brew today focuses its growth on small-footprint, drive-thru-only shops. This is the same with Dutch Bros, The Human Bean, Scooter’s, and many other competitors in the category; by limiting growth to small boxes that can neatly fit within a parking lot of, say, a supermarket or big-box retailer and then directing traffic through one or even two drive-thru lanes with easy egress and ingress, the coffee brands immediately have access to potential real estate in every community in America, through which they can speedily serve customers.
Robert Byrne, senior director of consumer research for Technomic, said this new wave contrasts with what Starbucks has done for coffee since the early ’80s. Whereas that company emphasized a “third place” for high-quality brews where consumers could congregate and tap into a “vibe,” these drive-thru coffee chains have staked a claim in convenience and value.
“The drive-thru model is just very appealing because that drive-thru behavior is a part of the American experience as a consumer, especially as a foodservice consumer,” he said. “So they just tapped into that and said, not only do can we benefit from the drive-thru connection that people are making with foodservice, but because it's coffee and it's a beverage, our speed of service is never going to suffer; that drive-thru line is going to move because we're preparing beverages.”
The rise in specialty beverages
The second ingredient to coffee’s renaissance is the rise in snacking and the corresponding interest in specialty beverages, including iced coffee and other cold drinks. As Miller Regan noted, that’s particularly true in the afternoon; according to Technomic data, afternoon snacking grew by a full percentage point in 2023 as consumers sought affordable indulgences to break up their day.
Photo: Biggby is on a mission to source 100% of its coffee beans “farm direct.”
Specialty beverages, particularly caffeinated ones, perfectly meet that need state. And cold drinks like iced coffee, teas, lemonades, energy drinks, and boba have especially come to satisfy that need. To put cold drinks’ popularity in perspective, at one point in 2023, Starbucks reported that a full 75% of its sales were cold drinks.
“I think all along in the background, what's been helpful is the shift to iced drinks or colder drinks, and really the expansion … into specialty beverages, whether it's boba or cold brew or some of the other things that have happened to the legacy specialty coffee menu,” said Scott Anderson, COO of The Human Bean, in explaining why much of the 25-year-old concept’s growth has been in the past half decade.
Byrne describes specialty beverages as an “affordable indulgence” that fits neatly into a daily routine. While consumers can make their own drip coffee at home, they don’t have access to the kinds of beverages — and incredible flavor variation — offered at coffee concepts.
The diversification of beverage offerings has indeed become a calling card for the rising generation of coffee chains; Dutch Bros, in fact, doesn’t even serve drip coffee. Most coffee concepts now offer energy drinks plus some variation of teas, lemonades, boba, sparkling waters, smoothies and more.
Then there are the flavors. 7 Brew emphasizes that it offers 20,000 flavor combinations. Its signature Originals include flavors like Cinnamon Roll (white chocolate and brown sugar cinnamon), German Chocolate (coconut and caramel mocha) and the Sweet & Salty (salted caramel and white chocolate breve). Guests can also customize choosing from among roughly 70 SKUs, Miller Regan said, including 30 or so syrups and a handful of sauces. While that level of customization can seem overwhelming to some, she said 7 Brew employees are trained to engage with guests to help them land on a flavor that suits their needs. After the first couple visits, she added, many customers stick to one go-to order.
While 7 Brew’s unit expansion is red-hot, Miller Regan said the menu offers another lever for revenue growth.
“There's a lot we can do with the menu in and of itself that creates a secondary opportunity,” she said. “So we have our unit opportunity and we have our sales opportunity. We think they're both really, really big. I think we feel very good about all the other players in the industry, and frankly, it validates being in the space.”
Of course, these are still primarily coffee concepts, so the quality of the coffee bean remains king for some in their menu innovation.
The Human Bean, for its part, sources “thoughtfully and seasonally,” according to the company. It also participates in the Farm Friendly Direct Program, which ensures farmers are paid a premium that is invested in farm and community projects.
“It starts with coffee, of course — where we're sourcing our beans, the relationships that we have with the source points, how we roast,” said Dan Hawkins, cofounder and CEO of The Human Bean. “I think the importance of the base quality coffee and espresso beans is just critical … and then everything kind of flourishes from that point.”
Similarly, Biggby is on a mission to source 100% of its coffee beans “farm direct.” Cofounder Bob Fish and his wife, Michelle, have personally overseen this program and travel around the world visiting coffee farms to assess the quality of their operation. Over the past five years, Biggby has transitioned 50% of its beans to farm-direct and hopes to get to 100% in the next five years.
“Bob and Michelle have identified these producers that do three things: They care about the environment, they care about their people, and they're invested in their communities, and if they have those three things down, then we will buy their coffee from them,” said Rita Bettino, Biggby’s CMO. “And it's not an easy thing to be able to accomplish across those three areas … [but] when you do all these three things, your coffee tastes really good.”
She added that the direct relationship with the farms ensures a consistent and predictable supply chain.
Embracing a counter culture
The third ingredient that’s bubbling beneath the surface at each of the fast-growing coffee concepts is an emphasis on culture and hospitality. This one may seem counter-intuitive; drive-thru operations tend to equate more with quick convenience than hospitable experience. The point is to get customers through the drive thru as quickly as possible, which doesn’t leave much room for personable connections.
Dutch Bros, though, makes its “broistas” the star of its operation. Those employees are trained to engage with customers to make their days better. For example, CEO Christine Barone said employees have permission to give customers a free beverage if the moment calls for it.
“If you look at consumer trends, we're delivering on the convenience need state, but then we're also doing it with that personal interaction that I think is actually really hard to do at scale,” said Tana Davila, Dutch Bros CMO.
Photo: The diversification of beverage offerings has been a calling card for the rising generation of coffee chains; Dutch Bros doesn’t even serve drip coffee.
The company is even quick to credit its broistas for its rapid growth. Barone said the brand’s growth plan is “based on when our people ready to go open new markets.” Employees who start as broistas have an opportunity to move up to shift leader, then shop lead, shop manager, regional shop manager, and finally regional operator.
“What you can't replicate and what's so special about Dutch Bros is having operators who have started as broistas opening every single one of our new markets, building awesome teams as they go into new markets and oftentimes having people move with them from where they came from into those new markets,” she said. “This business is all about people. And so I think that is absolutely our special sauce and why we all get up every day.”
Miller Regan said 7 Brew’s drive thrus are different than what most consumers have come to expect. There are no speakerboxes or big displays, and while there is a menuboard, it’s not the prominent feature. That would be the employee who is standing outside taking the guest’s order in person.
“Sure, it has to be fast, it has to be accurate. But the human connection actually doesn't slow down any of that. It doesn't negate any of that,” she said. “It actually makes all of it better. It's just happening in a drive thru versus sitting in or dining in.”
Biggby empowers its employees to be personable and conversational with guests. Laura Eich, the brand’s chief people officer, said that even if they only spend 30 seconds with a customer, team members can learn a lot about that person and respond in kind. That’s especially true if the customer is a frequent visitor, which is often the case.
As a way to ensure its team members are dependably smiling happy faces for guests, Biggby is particularly invested in the wellbeing of employees. In fact, Biggby has done so much work around its employee development program that it’s branded the program Life You Love Laboratory, or LifeLab for short, and it’s offering the training to other companies and organizations.
“I call it the human R&D department,” Eich said, “where we're just trying to take some of the systematic things that we do and make them a little more human centric and a little better so that they better serve our purpose of supporting people in building a life they love.”
Limitless potential
The potential for the coffee category is seemingly limitless. The fact that coffee is consumed widely — a recent National Coffee Association survey reported that 67% of U.S. adults had coffee in the past day, a 37% increase since 2004 — means that the product will never go out of style, even if certain trends come and go.
Much of The Human Bean's growth has been in the past half decade.
This new generation of coffee concepts is certainly taking advantage. Besides 7 Brew’s massive growth, Dutch Bros has likewise been on a tear, particularly since it went public in 2021; the Grants Pass, Ore.-based concept grew unit counts by 23.8% in 2023, according to Technomic Ignite data, to 831 total locations, and it crossed $1.4 billion in sales. Meanwhile, Scooter’s grew its unit counts by 35.1% to 750, The Human Bean grew by 15.2% to 167 locations, and Biggby expanded by15.3% to 385 units.
It's a late-stage surge for most of them — removing 7-year-old 7 Brew from the equation, the average age of the other four brands is over 28 years — but surge it most certainly is. Dutch Bros encapsulates much of the category’s momentum: 35% of its locations have been open less than two years. While much of its footprint is concentrated in western states, Dutch Bros is marching eastward and will enter Florida this year, with the ultimate goal of having 4,000 locations. 7 Brew is likewise racing across the states, fueled by a recent investment from Blackstone. That brand, along with The Human Bean, Scooter’s, Biggby and several other rising coffee chains, is also capitalizing on massive franchise interest from operators who are eager to add a specialty beverage brand to their portfolio.
The connection these coffee concepts are establishing with American consumers is hard to understate. Just look at their loyalty efforts as a clue: Dutch Bros recently said that about 65% of its transactions are now generated through its app-based loyalty program. 7 Brew has said that over 90% of its sales include its loyalty program, which only requires the guest’s phone number and offers a free beverage after 10 orders.
“Because they're not asking you for anything other than a phone number, they're getting insane amounts of engagement,” Byrne said.
As this connection with Americans deepens and as operators and investors race to capitalize on momentum, one thing has become crystal clear: So long as there are available parking lots and beverage drinkers in the U.S., the coffee category will be buzzing.
“There's so much white space out there. There's so much need and desire,” said Anderson of The Human Bean. “It seems the way that the world is turning in terms of convenience and treating yourself, it just seems like we're going to be in the right spot for a long, long time.”
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