How many Starbucks stores are in the US? Market Sizing

Question

I don't have a problem with sizing the market for a general product, like the US coffee market or the US mattress market, but I'm having trouble estimating the # of specific stores, for example, this question.

I've tried breaking it down, but I keep getting stumped. I'll write out what I've thought of so far.

Since coffee is the primary product (at least in the US) I thought of doing:

(# of daily coffee drinkers in US) / (# of customers/store/day)

Obviously, I would break each of the branches down much, much more, but if I were to make a tree, those would be the first branches. However, there are a few issues with this. The demand for coffee in general, isn't what drives the creation of a Sbux store, right? Or is it? I'm not sure. Second, while coffee might be the primary product, they have so many other types of drinks that this wouldn't account for.

To make it more specific, I thought of doing:

(# of people in US who go to a Starbucks each day) / (# of customers/store/day)

Once again, I would break these branches down way more, but these would be the first branches. This doesn't seem right either. It seems like the first component would call for too many assumptions. If I were to break that component down further, I would probably look at the # of coffee drinkers → (US population) (% who drink coffee), I'd also make sure to focus on the relevant population, then those who drink coffee regularly. I'd also consider the # who drink coffee at home v. purchase elsewhere, then I'd consider % who go to Starbucks as opposed to other large suppliers. Overall, however, this is just not a good line of reasoning. I think it calls for far too many assumptions.

I'm really hoping someone can walk me through a full problem breakdown because, as you can see, I've clearly tried to think this out on my own. I've only seen vague answers so far, and they have not been helpful. I have an interview very soon, so I would really appreciate some assistance.

Answer 1

Using this approach or not depends on whether you need something quickly vs. having a full interview focused on market sizing.

Here's the quick approach (for a quick estimation, or to quickly test an estimation you have already done)

I lived in a small town in the US that had ~150.000 people and had 3 starbuck stores (town + neighbouring county). So that's about 1 starbuck per 50.000 population.

So the formula here is: US Population / (Population per starbucks): 330 000 000 / 50 000 = 6600.

Real number of starbucks stores is actually ~6400. :)

Here's the “more complete” way of doing this (only use this if you have the time… or even better, clarify with the interviewer which method is preferred):

# starbucks = Number of Coffees consumed per day / Coffee Shop capacity per day * Starbucks market share.

Number of coffees consumed per day: Population * % drinks coffee * % drinking in coffee shops * average per day consumption
Coffee Shop Capacity: Number of tables / table rotation + Take out ratio + drive thru capacity or ratio (or easier: hours open / time it takes to prepare a coffee * number of baristas * utilization rate)
Market share: % of premium market / number of relevant players.

Answer 2

Hi there,

You're trying a top-down approach which is going to make life difficult for you. In particular because you'll have to completely guess once you get to the # “% of all coffee drunk that is from Starbucks”.

Rather, why not try a bottom up approach?

Think about the following:

Where do you live? (State, city, etc.)
How many starbucks are there in that area?
Is where you live representative of the US (if so, to what extent, if not, would it have more or fewer than the average?)
Leverage 1-3 to extrapolate out to the rest of the US