It has been assumed for several quarters that as McDonald's (NYSE: MCD) adds high-end coffee, Starbucks (NASDAQ: SBUX) might suffer. But, an analysis by Bloomberg shows that the coffee chain may be in for some very rough times. One money manager, speaking about McDonald's, told the news service, "They're a lot cheaper than Starbucks coffee in general, and they have the high quality to go with it.''
McDonald's says that it offers lattes, cappuccinos and iced brews in 9,000 U.S. restaurants. McDonald's coffee also tastes pretty good. Bloomberg reports that in March, a Consumer Reports taste test of basic black coffee found McDonald's stronger blend beat Starbucks, Burger King Holdings Inc. (NYSE: BKC) and Dunkin' Donuts Inc.
In June, rising sales of McDonald's coffee prompted Deutsche Bank Securities Inc. analyst Marc Greenberg to reduce his Starbucks stock-target price by 14 percent to $32. "The golden arches are doing coffee better,'' Greenberg wrote in an investors' note. He rates Starbucks as a "hold.''
The more Wall Street looks at the situation, the more it sees Starbucks in a bind. McDonald's has more locations and a lower price point for premium coffee. The value of Starbucks shares are based almost entirely on same-store growth and its goal to eventually have 40,000 stores worldwide.
None of that is working out for it.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 5)
9-12-2007 @ 4:03PM
Linda said...
Both my sister and I have always though McDonalds coffee was the best.
I never could figure out what is so great about Starbuck's. It's way overpriced and just plain isn't that great.
I think Starbuck's is for posers
9-12-2007 @ 6:48PM
Dave Kraus said...
I have coffee every weekday morning at McDonalds. The coffee is good and the staff andbd customers are friendlier than Starbucks.
9-16-2007 @ 8:10PM
Pat said...
Starbucks isn't as good as Dunkin Donuts, I don't know about McDonalds, don't go there very much...only 2x a mo. for lunch for my son as a special treat. But I did try Starbucks, wanted to see what all the HoopLa was all about...it was the worst cup of coffee, my home made was even better.
9-16-2007 @ 8:12PM
casey said...
love newmans own caramel iced, sweet enough so you need no sugar, add milk and a divine find for only 1.99.... awesome
9-16-2007 @ 8:17PM
jen77rmp said...
McDonalds coffee sucks
9-16-2007 @ 8:24PM
Jimmy said...
I think Starbuck is so bad...I have McDonald each day...It is the best coffee...Way go McDonalds...
9-16-2007 @ 8:23PM
Jimmy said...
Your comments: I think Starbuck is so bad...I have McDonald each day...It is the best
coffee...Way go McDonalds...
9-16-2007 @ 8:24PM
Jimmy said...
Your comments: I think Starbuck is so bad...I have McDonald each day...It is the best
coffee...Way go McDonalds...
9-16-2007 @ 8:26PM
Diane said...
Starbucks is way too strong and leaves a bitter taste, I think McDonalds is the best.
9-16-2007 @ 8:29PM
lovette said...
Had Mc D 's coffee still think Starbucks and Dunkin Donuts make a better coffee andworth the extra cost.
9-16-2007 @ 8:38PM
Larry said...
Who told McDonalds that they had "GOOD" coffee? PLEASE tell them that they are wrong!! And why would they ever call it Coffee?
9-16-2007 @ 8:38PM
justina said...
mckey d's is great for a burger but i go to wawa formy coffee they are not nation wide but they are getting there and they are competing with mcdonalds 69 cent coffee they have a new promotion out 59 cent coffee with a purchase of a bakery item or a warm sizzli (breakfast sandwhich) and their coffee is a reasonable price any other time try it they are great
9-16-2007 @ 8:45PM
Erin Xo said...
I think starbucks coffee is ok!i luv they're caramel frap but mc'ds coffee isnt too shady!its actually allways been delicious to me.I really prefer coffee bean though!man now they're a coffee chain to reckon with!and they're only pretty much in the san fran valley!oooh well the point im trying to make is mc'ds coffee rocks!!!
9-17-2007 @ 11:05AM
Sharon said...
I have to admit I am a starbucks freak, but only becuz they serve the light Frappicinos. If I could get light Frapps @ a cheaper price somewhere else I would be gone from Starbucks in a hot second.
9-16-2007 @ 8:49PM
Bree said...
I am a coffee drinker for 28 years. I have tried various brands of coffee. I tried McDonald's once at a pit stop and it was the worst coffee I have ever tasted. It tastes like mud. If I were to get coffee, Dunkin' Donuts or 7-11 taste best and are cheaper than Starbucks. Starbucks tastes like mud for $5 or $6 and has a bad aftertaste. Now I make coffee at home and I like Folgers than any coffee out.
10-08-2007 @ 2:38AM
peterpoley said...
Have you ever tried Tim Horton's Coffee, its the big chain they have in Canada. It truely is the best coffee anybody can get.
10-08-2007 @ 2:38AM
Peter said...
Tim Horton's is the best coffee ever, the rest suck.
9-16-2007 @ 9:00PM
Echo said...
By accident I had McD's coffee and LOVED it. Someone at work brought in SBUX and put it on my desk -- I swore there was a peed-in catbox somewhere in the office . . . the smell was disgusting. No one wanted it.
9-16-2007 @ 8:59PM
sam said...
Read Fast Food Nation. I did, and I will never purchase anything at McDonalds again, not even a bottle of water. I will buy a Coca Cola at the gas station if I need a jolt of caffeine. I think Starbucks is overpriced and the coffee is a liitle bitter, but it definitely does the trick, but I will always opt for that over McDonalds or any of its fast food competitors.
9-16-2007 @ 9:01PM
Elizabeth said...
Starbucks regular coffee sucks...but there lattes are the best...McDonalds regular Coffee rocks