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The Suburban Coffee Revolution: How Dutch Bros is Stealing Starbucks' Crown
Why the battle for your morning cup has shifted from downtown towers to neighborhood drive-thrus
Dissecting the Markets
April 30, 2025
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Back in the heyday of my career, I use to commute to downtown San Francisco daily for work. I would always stop by a coffee shop before going to work, like many people. With San Francisco, we had an abundance of options. Besides Starbucks, we had:
Blue Bottle
Bluestone Lane
Philz
Peet’s
Equator Coffee
Newtree Cafe
Noah’s NY Bagel
Joe & The Juice
McDonald’s $MCD ( ▼ 0.41% )
Outset Coffee
Delah Coffee
And many more options. The list is so long that it felt like I was living in coffee paradise. Since I commuted from the suburbs, workdays were the only time when I could enjoy the abundance of coffee options. The suburbs don’t have many coffee options, and the coffee options available are either your in-home Nespresso machine, Starbucks, or a typically small business café.
A Blue Bottle café in the Ferry Building in San Francisco
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After the pandemic, some of the competing coffee chains like Philz, Peet’s, and Bluestone Lane started expanding in the suburbs. The move made sense because for a long time, Starbucks dominated the suburban café industry, and the pandemic was a catalyst for people to move to the suburbs.
Dutch Bros $BROS ( ▼ 4.57% ) has always had a presence in the subruban coffee scene and plans to expand to more suburban communities. Interestingly, it does not have a presence in San Francisco. The way I see it, as Dutch Bros and other competing cafés expand in the suburbs, Starbucks $SBUX ( ▼ 1.12% ) starts losing market share in suburban markets.
Since Dutch Bros has been keenly focused on the suburban market, I think they will win the café wars in the suburbs. The suburbs have longed for a new café alternative, and Dutch Bros has been focused on delivering on that longer than other café chains. Costar attributed Dutch Bros’s growing success to its drive-thru design and store layout. This type of focus on the suburban market reminds me of DoorDash’s story where the founders focused on expanding their food delivery services in the suburban markets instead of the densely populated areas because the demand for delivery services is greater.
It’s not only me who is observing the decline in Starbucks’s market share with my own eyes. It’s also Placer.ai, which noted considerable gains in foot traffic to smaller and mid-sized coffee chains.
Using the Dutch Bros Location Finder, I was able to confirm that the closest Dutch Bros location is over an hour away from SF.
Since the pandemic, café visitors have fallen into two distinct categories: those making quick drive-thru or mobile order pickups, and those seeking longer, more leisurely café experiences. This bifurcation explains why Starbucks CEO Brian Niccol is simultaneously focused on expediting order fulfillment while reinforcing Starbucks' identity as a welcoming "third place" destination.
However, despite Niccol's dual-pronged approach, suburban consumers continue to seek novel café alternatives, which makes me hesitant about the long-term viability of his strategy.
A Flash Mob dancing outside Starbucks
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Starbucks recently released its Q2’25 earnings results, and here are the highlights to note:
North America results
Net revenue grew by 1% YoY
Store count grew 3% YoY
International Results
Net Revenue grew by 6% YoY
Store count grew 6% YoY
Management scaled back plans to automate coffee-making and is staffing more baristas in each café
Management has canceled plans to deploy its Cold Pressed Cold Brew system and paused the rollout of equipment used to heat food
Service speeds are improving
For the future, management plans to improve its cafes with better seating and “premium touches” in the hopes of enticing customers to stay longer
These results reveal that Starbucks is at a crossroads. With modest growth figures and a notable pivot away from technological initiatives, this quarter looks to be dedicated to refocusing on the human element of the café experience. By improving service speeds and planning enhanced seating areas, management acknowledges that recapturing customer loyalty requires both efficiency and ambiance. Yet the question remains whether this back-to-basics approach can truly reignite innovation in an increasingly competitive café market.
On top of this, Starbucks, along with coffee giant Dunkin, has seen a decline in market share. The growth of smaller chains is undeniable. As chains like Dutch Bros, Scooter’s Coffee, and 7 Brew Coffee start seeing economies of scale, the market share losses that Starbucks and Dunkin will endure will be noticeable. At that point, either Starbucks should start investing in its competitors and ride their growth, or accept that it is now an income machine and not a growth machine for its investors.
The Future of Your Morning Cup
As I watch the coffee landscape transform before my eyes, I'm reminded that even giants like Starbucks aren't immune to market evolution. What we're witnessing is a fundamental shift in how Americans relate to their daily caffeine ritual.
Golfers drinking coffee at Starbucks
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The suburban coffee renaissance represents a broader post-pandemic reality: consumers want convenience without sacrificing quality, and they're increasingly hungry for alternatives to established brands. Dutch Bros has recognized this opportunity earlier than most, positioning itself as the suburban answer to urban coffee culture.
The coming years will likely see further fragmentation of the coffee market, with regional players claiming stronger footholds in suburban communities. For consumers, this means more choices and potentially better experiences. For Starbucks, it may mean accepting a new reality where growth comes not from market dominance but from optimizing the experience in their existing footprint.
As I drive past the increasingly crowded suburban coffee landscape, I can't help but wonder: Is this the beginning of the end for Starbucks' suburban empire, or will Niccol's strategy to recapture the "third place" magic prove the skeptics wrong? Either way, the coffee wars have moved to the suburbs, and the battle for your morning cup is just heating up.