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 5 of 5)
9-17-2007 @ 6:49AM
C. said...
Have those of you ripping on McD's coffee had it LATELY? It's way better now. And I trust the thorough testing of Consumer Reports WAY more than the random comment of someone who tried McD's coffee "once at a pit stop" or who has a bone to pick w/the chain because of a MOVIE for cryin' out loud. I think it's GREAT that Mc D's is giving Starbucks a run for their money. Good old American Capitalism/competition in action. Maybe this will force Starbucks to improve their product or lower their prices.
9-17-2007 @ 9:35AM
gourmet coffee snob said...
Anyone in America knows that Mickey D does one thing good...advertise...so it's not surprising that some may ( wrongfully ) think that they have good coffee...NOT...
Why not just forget all the hype and brew your own at home before you leave and take it with you...
You want GOOD coffee...limme share this with you...
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~~gourmetcoffeesnob~~
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9-17-2007 @ 11:47AM
Claire said...
I grew up on the real Italian coffee from my grandmother. We used to have daily. So once that ran out, I began to look for a close match. McD's is ok. I found that if I ask for a 2 shot in the dark from Starbucks is really good for a strong coffee and is good. I am not fond of all the coffees there. But McD's you can get the bottom of the pot, and YUK and it is never really just made. I only use the half and half. so it does make a bit of difference
9-21-2007 @ 9:37PM
Elise Farthing said...
Try Burger King's Turbo! It is really good-smooth and bold. I drank McDonald's for over 10 years and switched. I tried the stronger McD's and still prefer the BK's. Seniors get a discount too.
9-22-2007 @ 10:29AM
redrockviews said...
I find Sb too strong. Got to add half/half. Then it's not coffee. Sb's bakery is expensive; take it or leave it. I buy the senior coffee and dollar menue at McD's. Works for me.
9-23-2007 @ 9:00PM
joy herald said...
All these comments on coffee seem relative. "I've noted when the water supply is more nataural the coffee tastes better. Perhaps the manager of the store has something to do with it too. But lets get real, coffee is not just coffee, Ive tried them all and for me, Starbucks is king, then Dunkin'. McDonalds, in my opinion is for coffee morons, even dressed up it is barely tolerable. Chalk it up to inexperience, after all our country is still quite young and still inhabited with a formidable number of barbarians whose taste buds are still in the evolving stage.
9-27-2007 @ 2:37AM
Carlynn said...
And how much does MCD pay their employees??...-what is the atmosphere in MCD's???..rude and they don't even speak english. In Starbucks you aren't just paying for a cup of coffee, you are paying for the whole package.
Sorry but MCD's will NEVER measure up...