Starbucks now ranks behind only No. 1 McDonald's and runner-up Subway, according to research firm Technomic's just-released listing of America's top 500 restaurant chains in total 2010 U.S. sales.
For decades, the nation's top three restaurant chains were the burger and fries triumvirate: McDonald's, Burger King and Wendy's. No longer. Two of 2010's top three — Subway and Starbucks — don't even sell burgers or fries.
Today, even as the coffee kingpin is expected to report stellar second-quarter earnings, it has got something else to crow about. "Starbucks keeps gaining and gaining," says Ron Paul, president of Technomic. "Carrying a Starbucks cup in your hand says something about you as a person."
One key to the recent success of Starbucks is an ongoing shift in how consumers define "healthy," says Sandra Stark, vice president of food at Starbucks. People used to think low-calorie or low-fat meant healthy food, she says. More recently, she says, that's evolved to food whose ingredients consumers understand and can pronounce. Two years ago, Starbucks was among the first chains to remove all artificial ingredients from its food.
Not that the chain doesn't have challenges. The prices it pays for coffee beans and milk have skyrocketed, forcing it to recently raise coffee prices. And the company is undertaking a massive — possibly risky — effort to evolve into a grocery store seller of much more than coffee products.
"Starbucks has become the default cup of coffee for most people," says Bryant Simon, history professor at Temple University and author of Everything but the Coffee: Learning About America.
"Starbucks has been one of the strongest growth stories in all of retail over the past 20 years," says Sharon Zackfia, analyst at William Blair & Co.
Starbucks' recent growth, however, is also due to the shared weakness of Burger King and Wendy's, says Paul. "They both need to figure out where their niche is."
Executives from Burger King and Wendy's declined to comment.
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