After McDonald’s went all fancy-pants with its coffee last year, it didn’t take a lot of financial acumen to suspect that the news wasn’t good for Starbucks—especially after a much-publicized Consumer Reports panel preferred McCoffee over the Seattle chain’s product.
McDonald’s has now introduced the better—faster! higher! stronger!—coffee at two-thirds of its stores. And Starbucks is indeed feeling it. A Bloomberg story brings the numbers:
Shares of Starbucks, the largest coffee-shop chain, are down 24 percent in 2007, on track for their worst annual performance amid the slowest sales growth in more than five years at stores open at least 13 months.
A Wall Street blog headlines the news “The Death of Starbucks Growth.” The company, clearly trying to reverse the decline, is learning from its competitor: It is reviewing its longstanding policy of not marketing to children. (Although as a mother and analyst notes, a lot of those drinks aren’t exclusively for adults: “Take the Blackberry Green Tea Frappuccino, which is low on caffeine and loved by my four-year-old and one-year-old alike.”) Meanwhile, under the hallowed Golden Arches, same-store sales were up over 8 percent, a gain that was widely attributed to increased breakfast and, yes, coffee sales.
I hate to say it — being the tree-hugging, Walmart-hating, McDonald’s-loathing person that I am — but I actually visited a McDonald’s tonight and was pleasantly surprised by the new decor. The food may still be crap, but the ambiance was 100% improved, with more upscale furnishings, more private seating, new and improved artwork, and TVs mounted to the walls. Gone are the garish red and yellow plastic seats and tables.
I don’t drink coffee, so I can’t comment on the appeal of McD coffee over Starbucks. But if the coffees are equal or close, of course people will go for the cheaper cup. Why pay $3 for a cup when you can get it for $1?
I am one of those that speak praises about the McDs coffee, and almost every time, someone in my captive audience will agree that McDs coffee is way better than the burnt tasting sludge of Starbucks.
So why IS Starbucks such a successful company? I don’t get it. Why did coffee go from 10c a cup to $3???
I haven’t tried McDonald’s coffee, but I do prefer thicker coffee’s such as Starbucks or other cafe coffee’s. Then again, I’m the kind of guy who grinds my own beans every morning.
I can understand Starbucks being afraid of getting cut out by the massive McDonald’s chain… I mean, if mere *price* is the only differentiator left that consumers are concerned with (after quality) then there’s no doubt that McDonald’s will win … Starbucks is a pretty expensive cup of joe.
I think the issue of marketing to children needs to be examined though. Something about marketing to children strikes me as exploitative at it’s core; against the most important and vulnerable portion of our society. This is, of course, merely my own opinion but it is undoubtedly one that’s shared by many professionals who are much more qualified to comment on the matter. McDonald’s and Disney created the art of marketing to children, and unfortunatley it’s been spreading since and I really don’t want to see Starbucks do it.
I vote with my dollars quite often and actually would continue supporting Starbucks if I knew they took this business “option” off the table … but if they take it up, then there go my dollars.