Try Starbucks under $10 where it should have been all along. McDonalds is also going to lose money on this. It is not a "coffee destination". Nevertheless, it is going to take away business from Starbucks even if they only get a couple of visitors in each store.

why doesn't mcd just buy sbux and save $$ on capital costs and staffing ? mcd should do a roi model ? bet it might work... seems like a no brainer !

I can't wait to try the McDonald's coffee. I drink a lot of cofee. I buy it from Dunkin Donuts or a local donut shop. I do buy Starbucks sometimes, but a) I am not fond of their regular mud like coffee, b) I can feed a family of 4 for what is costs my husband and I to get 2 "fancy coffees" and c) The typical starbucks drinker is a "coffee snob" and I am not attracted to people like that.
Go Mickey D's - Hurry and start brewin'

Alas,

I see an interesting phenomenon here . . .

SBUX might be down as a stock and might be rated as undervalued . . .

I think what will probably happen is that coffee will become more and more popular here in the states as a whole just as the coffee bean culture in Italy has been popular for quite some time (The espresso bar culture took off in Italy in the very early 1900's when "La Pavoni Ideale" espresso machine was brought to market in 1905). Let's look at the metaphorology of the situation by examining alcoholic beverage consumption . . . drinking alcohol has been popular the world over for quite some time. Why would it be any different with coffee? People do not really sit down and convene over a say a bottle of water. They sit down over lunch, meet for drinks at the local pub, or get together over a cup of coffee.

Ergo, McDonald's is attempting to capture market share for a way of life that Starbucks helped popularize here in the States. McDonald's is only helping to massively disseminate the proliferation of the coffee bean culture further especially since it will make coffee purchasing more affordable to the public, especially those that tend to shy away from SBUX as it is a wee bit pricey.

Henceforth, McDonalds - just like Starbucks did in the early 90's - will be CREATING their own market share (getting more people interested in specialty coffee since they will be capturing a somewhat different and also wider demographic than Starbucks is able to capture) and thus generate the market share it seeks to earn from this new throng of converts.

Market share will definitely overlap (read: taken away to an extent from Starbucks) but I think a good deal of it will turn out from people who are now buying coffee (albeit from MCD's) more often since it is now more affordable to them.

Thus we see the benefits of true free market capitalism. People want it perceivably better (connoisseurs are really a niche demographic; thus the non-connoisseur doesn't care and such if it tastes better they will buy it), they want it faster, and they want it for less.

McDonalds will provide all of this by creating competition, which will lower prices and as a result will benefit the consumer in addition to creating mass converts pilgramming to the altar of coffee. And of course some of these individuals will also go to Starbucks as well, just as was the case when Starbucks popularized coffee, local coffee shops started seeing an increase in business as opposed to being decimated.

If anything Starbucks SHOULD BE thanking McDonald's and Dunkin' Donuts. If I were Starbucks I would also invest in local mom and pop shops, so long as they DO NOT stick the Starbucks brand anywhere on the shop. Create a seperate entity that SBUX would own, for the sole purpose of buying local mom and pops. Unfortunately Starbucks is everywhere and seeing the brand has now become synonymous with being too corporate and too sterile. Not too hip with too many folks.

Basic market dissociation corolloary theory: create a spinoff brand, or buy out independent brands to capture the demographic your current brand isn't capturing (and keep the prestige of your brand intact), and consequently capture more market share. Toyota, and Miller Brewing Company rightfully learned the lesson (i.e. Scion and Plank Road Brewery respectively).

And now Howard Schultz has re-manned the helms.

I think I know where I'm putting my bets.

McDonald's has had McCafe up and running for +/- two years in Hong Kong and Singapore. I don't think they would go into the US market unless they were satisfied with these results. Some of the McCafe business is in the same facility but segregated from the regular McDonald's business and others are seperate operations (Singapore). The general local opinion is that the McCafe is hurting Starbucks.