Can millennials push Starbucks, Dunkin' Donuts to greater heights?

Millennials not only like their coffee, but they start drinking it earlier in life while being willing to spend seemingly any amount on it.

In addition to drinking more java overall, younger coffee drinkers are also pushing increasing consumption of espresso-based beverages. In fact, sales of espresso drinks have nearly tripled since 2008 and it's millennials pushing that trend, according to the National Coffee Association's (NCA) National Coffee Drinking Trends report, released earlier this year.

The shift to espresso drinks, which generally cost more than a basic cup of joe, coupled with more young people drinking coffee bodes well for chains including Starbucks (NASDAQ: SBUX) and Dunkin' Donuts (NASDAQ: DNKN) that push lattes, cappuccinos, and other high-end coffee drinks.

Discover the difference between popular coffee drinks below:

Coffee and espresso drinks explained
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Coffee and espresso drinks explained

A latte is espresso and steamed milk with a small amount of milk foam on top.

(Photo by Derek Davis/Portland Press Herald via Getty Images)

A cappuccino should be equal parts espresso, steamed milk, and milk foam. 

(Photo by Florian Gaertner/Photothek via Getty Images)

dry cappuccino features less of the traditional steamed milk and more milk foam in its place.

(Photo by Etienne Voss via Getty Images)

cafe au lait is traditional black coffee mixed with warmed milk.

(Photo by Waring Abbott/Getty Images)

Espresso is specially brewed coffee, created with finely ground coffee beans brewed under pressure with nearly-boiling water. 

(Photo by Jeremy Piper/Bloomberg via Getty Images)

macchiato, traditionally, is a 'stained' espresso -- espresso with just a dot of milk.

(Photo by Nigel Noyes via Getty Images)

An Americano is espresso mixed with hot water. 

(Photo by Ben Monk via Getty Images)

cortado is espresso that is 'cut' with an equal amount of milk. 

(Photo by Anthony Collins via Getty Images)

red eye is for the severely under-caffeinated -- espresso shots mixed in with a regular black coffee

(Photo by Dima Sobko via Shutterstock)


Between 2008 and 2016, the proportion of 18- to 24-year-olds who had consumed an espresso-based beverage in the past day rose from 9% to 22%, while it climbed from 8% to 29% for those 25-39, according to NCA.The numbers are similar in the broader "gourmet coffee beverages" category, according to NCA, where 18- to 24-year-olds saw a jump from 13% to 36% while the 25-39 category saw an increase to 41% from 19% in 2008.

Those are big jumps that benefit coffee purveyors that sell more than a basic cup. Starbucks has perhaps created some of that demand while Dunkin' has been very smart in following along.

Young people simply drink more coffee

There's no definitive starting point for what defines a millennial, but the term generally gets applied to people who became adults in the 2000s. That makes anyone 18-39 loosely part of that generation depending upon your personal definition of adult.

It's not an exact science, but younger folks are drinking more coffee of all types. Daily coffee consumption among 18- to 24-year-olds nearly doubled between 2000 and 2016, jumping from 25% to 48%, according to NCA. The increase was also substantial among 25- to 39-year-olds, who went from having 42% drinking the beverage everyday in 2000 to 60% doing it now.

Is this Starbucks' fault?

If you grew up in the 1980s, Starbucks, which closed 1989 with 55 stores , was not a thing yet. That meant the only places serving espresso-based drinks were funky local coffeehouses, Italian restaurants, and French cafes. Cappuccinos were still en exotic after-dinner drink, espresso was something rarely seen, macchiatos were barely sold in the United States, and the Frappuccino had yet-to-be invented (that came in 1995).

Before Starbucks, the outside-of-home coffee experience was diner coffee, convenience store coffee, and regular cups from Dunkin' Donuts. The Seattle-based coffee chain brought espresso-based drinks to prominence in the U.S., making them a status symbol of sorts for younger coffee consumers. According to NCA's research:

Older Millennials, the 25-39 group, are the most likely group to drink gourmet coffee beverages weekly, along with specific options including cappuccino, latte, café mocha, espresso, macchiato, flat white and cold-brew coffee. The younger Millennials, however, edge them out in frozen blended coffee. Overall, though, Millennials far outstrip consumption of all gourmet coffee beverage varieties among the 40-59 and 60+ age groups.

Most of these drinks were either largely or completely unknown before Starbucks built a market for them. Now, a Caramel Macchiato may seem as normal to coffee drinkers of a certain age as a large "light and sweet" from Dunkin' Donuts did to a now-older coffee consumer back in the early 1990s.

Compare a price of coffee at your favorite fast food joints:

Price of coffee at 10 fast-food places
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Price of coffee at 10 fast-food places


McCafe premium roast coffee, small: $1.00

Burger King

Smooth roast coffee, small: $1.00

Krispy Kreme

Coffee (smooth, rich, or decaf), small: $1.59

Dunkin' Donuts

Hot coffee, small: $1.59

Tim Hortons

Coffee (original blend, dark roast or decaf): $1.59

Caribou Coffee

Coffee of the day, small: $1.69

Panera Bread

Hot coffee, small: $1.89


Freshly brewed coffee, tall: $1.85

Bruegger's Bagels 

House blend coffee, small: $1.99


This is going to continue

As millennials get older it seems unlikely they will opt for cheaper, more traditional coffee drinks. That means that as younger millennials grow up they are likely to spread their coffee habits to their children. Accordingly, a generation that grew up with a coffeehouse on every corner will teach its kids that espresso-based drinks and de facto milkshakes are the new normal.

Going forward, that's very good news for Starbucks and Dunkin' Donuts even as fast-food chains, convenience stores, and nearly every place that sells coffee tries to get in on the action. Demand for more expensive, higher-end espresso drinks has increased, driven by millennials, and there's no reason to think that trend won't continue as new generations become old enough to order Frappuccinos, mochas, and whatever else passes for a cup of coffee these days.

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Daniel Kline has no position in any stocks mentioned. He sits somewhere between both generations and tends to drink cold brew because it's low-acid. The Motley Fool owns shares of and recommends Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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