This is an abridged version of an article ("More Bad News for Starbucks as McCafe Moves in For the Kill") printed on the BNET Industries website; BNET Food subcategory. The original article was posted on the morning of April 20, 2009 and was written by Katherine Glover.
Months ago, this same publication had high hopes for a Starbucks revival based on the return of CEO Howard Schultz. Now the view is not so optimistic...
Things are not looking good for Starbucks. McCafe's continue to spread - almost 70 percent of McDonald's outlets now offer specialty coffee, and the Chicago Tribune has reason to believe that McDonald's will launch a national advertising campaign for its coffee starting in May.
"McCafe is a game-changer in coffee," a Deutsche Bank analyst wrote in a recent memo to clients. "We expect McDonald's will extract a significant toll on Starbucks' performance, beginning this summer..." Deutsche Bank has downgraded Starbucks stock to "sell." And as McCafe expands its reach, Starbucks is moving in the opposite direction, closing 200 U.S. stores this year.
But the problem isn't just that McDonald's offers cheaper coffee than Starbucks. The problem is that Starbucks doesn't necessarily have anything to offer for its higher prices. The Starbucks phenomenon itself led to higher standards, and, as a result, more cheap coffee options that don't necessarily taste like dirt water.
QSR Web recently did its own blind taste test and found that a majority of its testers actually preferred McDonald's coffee drinks to Starbucks. So the question is not "Are customers willing to pay more for a better drink?" but "Is the drink really even better."
Photo: flickr
Note: For even more Starbucks-related updates, see http://twitter.com/Melody206
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