Starbucks Needs More Than Oat Milk To Combat Rivals

Starbucks has long been the dominant brand in coffee, but its recently-released oat milk lattes won’t be enough to combat the growth of its rivals.

Jan. 9, 2020

One of the largest and most recognizable brands in the world, Starbucks (NASDAQ: SBUX) stock rose more than 1% on Wednesday due to the release of a number of swanky new lattes. The business is cashing in on the recent oat milk craze, and making its new Oatmilk Honey Latte available nationwide. However, this may not be enough to stave off the company’s closest rivals.

In 2019, Dunkin’ Brands Group (NASDAQ: DNKN) began to close the gap on it’s U.S. rival, while Starbucks’ surprising success in China has recently come under threat by indigenous group Luckin Coffee Inc (NASDAQ: LK). 

Starbucks’ biggest rival

Starbucks’ stock price may be up slightly today, but it is nothing compared to the market’s biggest mover on Wednesday. Luckin Coffee’s stock price rose more than 12% yesterday thanks to the launch of its ‘Luckin Pop’ and ‘Luckin Coffee Express’ smart vending machines. 

Luckin Coffee was only founded in 2017 but has since gone on to open more stores in China than Starbucks, which has been in China since 1999. Luckin Coffee reported more than 4,500 locations by the end of 2019, compared to Starbucks’ 4,300. This is made possible by Luckin’s smaller, ‘grab-and-go’ business model which has become prevalent in modern everyday China. 

By focusing on comfort and superficial expenditure as a ‘premium’ coffee brand, Starbucks has exposed itself as a stock that may suffer in a recession. Luckin may not have overthrown Starbucks in China yet, but it is on course. 

Starbucks’ domestic rivalry

Domestically, there is only one company that can knock Starbucks off its coffee throne: Dunkin’ Brands. Though not traditionally a rival in the coffee sphere, Dunkin’ rebranded itself in 2018 and focused on becoming a coffee chain, investing a whopping $100 million in the project. 

Dunkin’ is now looking to create a rivalry to match the likes of Coke (NYSE: KO) and Pepsi (NASDAQ: PEP) or Ford (NYSE: F) versus General Motors (NYSE: GM).

However, there is still a long way to go yet if Dunkin’ wishes to catch up to its biggest rival. Its 8,400 domestic and 3,200 international stores are eclipsed by Starbucks’ more than 31,000 chains globally. 

Dunkin’, however, don’t look to be going anywhere, so grab your venti, half-whole milk, one quarter 1%, one-quarter non-fat, extra hot, split quad shots, no foam latte, sit back, and enjoy the show.

MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in Coke, Ford, General Motors, Luckin Coffee and Starbucks. Read our full disclosure policy here.