You don't have to be a genius to know that coffee king Starbucks Corp. (NASDAQ: SBUX) is in a big pot of coffee beans.

The rapid deterioration in business at Starbucks has been predictable, and not even the great entrepreneur, Howard Schultz, can stop the decline.

As the gambler, Kenny Rogers says, "You gotta know when to hold 'em, know when to fold 'em." In the case of SBUX, it is long past the time to fold 'em.

I mean seriously, who in God's name can afford a $4 latte or $2-plus premium cup of coffee in this economy?

You know, that cup of black tar from Juan Valdez is not looking all that bad after all.

And lots of you are feeling the same way. If not Juan Valdez, how about McDonald's (NYSE: MCD). It is clear from its results that many of you are giving up the bling in exchange for the ka-ching.

SBUX reported earnings confirming the malaise on Monday after the close. The company said that profits in the quarter ended Sept. 28 dropped an earth-shattering 97%. Now, granted, the headline number included $105.1 million in restructuring charges and turnaround efforts, but my goodness.

Coffee is keeping Procter & Gamble (NYSE: PG) wired, even as it exits the home-brew business, finalizing the sale of Folgers to The J.M. Smucker Co (NYSE: SJM). The company raised its fiscal second-quarter and full-year 2009 forecasts due to better-than-expected proceeds from the sale of America's biggest-selling coffee brand. Previously, Procter & Gamble had expected a gain of 50 cents per share; now the company expects 63 cents per share in profit. The gain is partly due to the unusual method of sale called a "reverse Morris Trust" transaction; P&G will spin off Folgers to its shareholders, then simultaneously Folgers and J.M. Smucker will merge to form a new company.

As a result, earnings per share will be $1.63 for the quarter, the company said, and between $4.28 and $4.38 for fiscal 2009.

The sale of Folgers may have been timely for Procter & Gamble, as consumers who have been pressed financially have not yet returned to brewing coffee at home, instead downgrading from pricey independent coffeeshops and Starbucks (NASDAQ: SBUX) to better values for enormous cups of brewed coffee (with a side of deep-fried pastries) at Dunkin' Donuts and the like. If the economy continues to decline, perhaps Folgers will see a resurgence; for now, P&G is happily focusing on its core brands while Smucker works in a different customer base which values "iconic" comfort food brands.

Perhaps it is too obvious to spend much time on, but sales of premium coffee are not going very well at McDonald's (NYSE: MCD). A recession will do that. According to The Wall Street Journal, "The weak economy has prompted some consumers to brew coffee at home instead of buying it at coffee shops."

McDonald's will be just fine. In its most recent earnings report, same-store sales were up an impressive amount in every region of the world. If its new coffee plans fail, why should anyone care? At $53, its shares have done better than most.

The less obvious message to be taken from the McDonald's trouble is that Starbucks (NASDAQ: SBUX) is likely to have its worse quarter ever and its stock is about to get hammered into the ground. Unlike McDonald's, expensive coffee and food is all its sells. Trading under $10, Starbucks is near a 52-week low, down from a period high to $26.75.

Wall Street expects Q3 EPS at Starbucks to come at 14 cents. Don't believe it. The figure is likely to be much worse than that and the company's shares could trade down to $6.

Douglas A. McIntyre is an editor at 24//7 Wall St.

When McDonald's (NYSE: MCD) went into coffee, the fast-food giant went whole-hog (or bean?). The chain planned to add separate coffee bars to every one of its about 14,000 U.S. stores, and got to about 3,000 when the credit crunch hit and Bank of America pulled back on the availability of funds for its franchisees. This would be a relatively minor setback if it weren't for a problem:

McDonald's customers don't really like coffee.

In a Wall Street Journal article today, which examines whether the coffee rollout came at a bad time, I was struck by a couple of "tweaks" McDonald's has made to its coffee strategy. One, changing the title of the employee who prepares the coffee drinks to "beverage specialist" from "barista" betrays a generality that would indicate a widening of the strategy (if not baldly changing the strategy away from coffee to other drinks). The other is that McDonald's is testing drinks made without coffee (think blended cream beverages at Starbucks). "The strategy is to appeal to customers who like the idea of coffee drinks but not the actual taste. Chocolate "gives people permission to introduce themselves to these drinks," says Darci Forrest, a McDonald's senior director of marketing."

Brother, can you spare a nickel?

In a sign of the oh-so-like- the-Great-Depression times, Krispy Kreme Doughnuts (NYSE: KKD) franchises in Seattle, Washington and Portland, Oregon, along with other related franchisees in the Pacific Northwest and Hawaii, are selling coffee for five cents. The one-per-customer-per-visit bargain is being named the Krispy Kreme New Deal.

I love the concept. Dunkin Donuts has been offering lattes and breakfast sandwiches for 99 cents in the afternoons to boost traffic in the slow time; and Starbucks (NASDAQ: SBUX) is about to roll out a "gold card" good for 10% discounts on all products. The card, which carries a $25 annual membership fee, is not a credit card but is a parallel program with the regular Starbucks gift card, which allow you to receive bonuses (a free flavoring or other upgrade for your latte beverage, for instance).

Unfortunately, the two simultaneous and mutually exclusive card programs are confusing and a scant benefit. Customers used to buy 10, get one free punch cards at independent coffee houses will see quickly that paying for a 10% discount is hardly a great deal.

In a climate of disappearing disposable income on one hand, and a contingent of consumers that are always seeking out better and more sustainably-grown and traded coffee beans on the other hand, Starbucks (NASDAQ: SBUX) is losing in all fronts. Today, Dunkin Donuts announced that its coffee had beaten Starbucks' brew in independent taste tests across the country; 476 adults in Atlanta, Boston, Chicago, Cleveland, Dallas, Detroit, Los Angeles, Miami, New York City, and Seattle participated in a double-blind taste test, comparing Dunkin Donuts Original Blend against Starbucks House Blend. Exact numbers were not released, but the research firm said the customers "clearly indicated a preference" for the Dunkin.

This isn't the only blow against Starbucks in the media this week; last week, a story about the new Juan Valdez Cafe chain highlighted the pressure from the other end of the competition spectrum: quality and sustainability. Coffee sold at the 101 stores across Colombia and in New York, Seattle, Philadelphia, Spain, and Santiago, Chile is grown by 22,000 shareholders who are looking to market their beans; according to this article, they're not hoping to profit from the cafe enterprise, even though the collective plans to open 500 more stores across the U.S., Latin America and Europe in the next two years. What's more, coffee is slightly cheaper at Juan Valdez Cafe than at Starbucks in New York City.

Starbucks is being squeezed into an uncomfortable middle ground between the low-price, blue collar product on one end (Dunkin Donuts) and the eco-friendly, high-quality product on the other end (Juan Valdez). The only thing it has going to keep its profits from splattering all over the wall is customer loyalty ... and oatmeal. Will it survive?

Starbucks Corp. (NASDAQ: SBUX), reeling from declining consumer spending, is betting that healthier breakfast items such as a hard boiled egg platter will lure new customers. I wonder whether this gamble will pay off.

First of all, anyone who has eaten in a Starbucks can testify that food is not its forte. I just don't see people craving their morning Starbucks muffin. Plus, in places such as New York City, people have tons of breakfast options ranging from fast-food joints to delis to food trucks. They view Starbucks as a mid-afternoon indulgence. At least, that's how I thought of Starbucks when I worked in New York.

Getting people to change their breakfast habits will be difficult. In tight economic times, people will gulp down their morning meal at home. If they do eat out, they will look for cheaper alternatives than Starbucks. McDonald's Corp. (NYSE: MCD) has made serious inroads in the breakfast market, as has Dunkin' Donuts. Sorry, Starbucks lovers, but I found their coffee far less biter than Starbucks. I even have two bags of Dunkin' java (regular and decaffeinated) in my house.

McDonald's (NYSE: MCD) program to sell premium coffee is not going well. That would make some sense. Even Starbucks (NASDAQ: SBUX), the kings of expensive Java, is doing poorly.

According to The Wall Street Journal, "Management may have to defend its giant bet on lattes and cappuccinos, which they want to add at all McDonald's 14,000 U.S. restaurants by next year." The newspaper says that early sales figures for the new drinks are mediocre.

If McDonald's did pull back on its sales of high end coffee-based drinks, it would be the best news Starbucks has had in a couple of years. As US same-store sales growth rates at the chain have fallen, the company's stock has moved from over $40 to below $15. Getting some competition out of the market could be critical to Starbucks recovery.

But Starbucks is not likely to be so lucky. With its massive size and tremendous cash-flow, McDonald's can afford to stay in the premium coffee business for years without a meaningful impact on its earnings. It sells too many hamburgers to be hurt by a slow start in latte sales.

McDonald's can wait Starbucks out and hope that, as things get worse for the coffee company, customers will turn to Ronald McDonald more frequently.

Douglas A. McIntyre can be reached at 247wallst.com.

Starbucks (NASDAQ: SBUX) is in such a pickle. On the one hand, it's famous for its java-room atmosphere and its quality coffees that cost an arm and a leg to acquire. On the other hand, growth is gone and its stock is in the dumps, forcing management to do what is necessary to bring traffic into its locations. According to this article, the company will be experimenting with vouchers and discounts at many of its stores throughout the summer. One example given involves a free iced coffee promotion in several major cities.

Just the other day, I wrote about increased competition in the coffee wars from McDonald's (NYSE: MCD), which continues to bolster its java strategy. Things are getting tough out there for Starbucks, and it's a shame that the company has to go this discount route. It's a funny thing when it comes to sales -- people get used to them awfully quick, and in the case of Starbucks, it sort of blemishes their model of making people pay up for their exotic lattes. Starbucks needs to be careful and not be too aggressive in offering discounts. Of course, the natural response to my assertion is, if the company is doing badly, isn't it management's responsibility to step up and get people to cross the threshold of their locations? It sure is, but one thing I've always noticed when any kind of retailer isn't performing like it used to is that it doesn't tend to implement new marketing campaigns that focus on the experience a consumer gets when she walks through the door. I think that can be more effective than waging a price war.

That's what I would say to Starbucks. Create an innovative, unique marketing campaign based on the image of Starbucks and try to keep people paying those high prices. Granted, that's easier said than done, considering everyone has a tight budget these days. Giving away free coffees is fine on one level, but it's a slippery slope for a company that based its model on expensive beverages.

Disclosure: I don't own any company mentioned; positions can change at any time.

Patrons and employees alike await the final decision about which Starbucks (NASDAQ: SBUX) stores will be closing and who will be getting kind notes explaining why closing 600 stores is necessary, making their jobs not.

According to a report in The Wall Street Journal, about 50 stores have already been notified that they will be closing by July 31, and the list will be made public by July 15. The Journal writes of anxiety for the Starbucks faithful who have come to appreciate the caffeine brew and do not have satisfactory alternatives.

There are two stores in walking distance of my office and when Starbucks opened the second one about 18 months ago I was very surprised. However, I will not be surprised if the newer store is among the casualties.

McDonald's (NYSE: MCD) has always been known for its famous French fries. Interestingly enough, though, it seems to me that the fast-food chain is becoming known these days for its coffee. I never thought McDonald's would invest as much as it has in coffee, but it looks like it's doing the right thing. According to this Bizjournals piece, McDonald's is putting its weight behind a coffee-bar initiative called McCafe. The program is being tested in various locations now and will be available nationally sometime next year.

I love the timing on this. After all, Starbucks (NASDAQ: SBUX) isn't doing so well. Not only is its stock hovering around 52-week-low territory, but the java king recently announced some store closings. That's almost unimaginable. Remember the days when every street corner needed a Starbucks? Yeah, those days are long gone. And I think McDonald's is smart in attempting to expand the brand equity of its coffee-brand portfolio. People need more of a reason to go to the palace of the hamburger-serving clown than just Big Macs these days, since the Big Mac and its various fat-saturated colleagues aren't as popular in these health-conscious times. I'm not saying drinking coffee is an exercise in life preservation, I'm just saying that it's good for McDonald's to focus on less controversial fare.

This significant foray into coffee is arguably a key reason for the company's stellar stock performance over the last few years and its competitive edge against rivals Burger King (NYSE: BKC) and Wendy's (NYSE: WEN). According to the AOL Finance snapshot, McDonald's is very much in the green for every timeframe save for year-to-date, which sees the stock down less than 1%. That's strength. McDonald's is a little below its 52-week high, and it might make for an interesting investment idea. At the very least, you can look forward to its McCafe program.

Disclosure: I don't own any company mentioned; positions can change at any time.

I hemmed and hawed when I saw Jennifer Openshaw's piece on MarketWatch a few weeks ago; her opinion was that Starbucks (NASDAQ: SBUX) would recover much of its lost value in these past several months of sluggish sales, rising milk costs and slipping coolness, no matter what the naysayers, say. Her argument: that Starbucks was great because of its atmosphere and general quality standards in coffee. While I certainly agree that Starbucks is still an attractive "third place" and would pick Pike Place brew every time over McDonald's or Dunkin Donuts coffee, I hesitated. Had management already made too many mis-steps? Had hubris got the best of the 'Bucks?

The latest news; that Starbucks management has plans to close 600 stores in the U.S. this year; could be an indication of positive things in the company's stock price. It certainly had traders in after-hours activity eagerly snapping up shares, sending 72 cents, or 4.6%, to $16.34 around 2 a.m. I'm always leery, though, of a huge strategy reversal such as this. In my analysis of Starbucks' financial statements, the company spends about $300,000 to start a new store, and this is largely funded through cash. Management regularly offers old furniture and equipment to its high-ranking employees when upgrading or shutting down a store, so it's unlikely that much of the cost will be recouped. Doug McIntyre noted further that Starbucks will continue to pay more millions in lease costs; the company is known for locking up prime real estate with serious long-term lease agreements. Sure, the loss won't affect the cash balance much, and the charge will be "one-time," so the financial picture will still look rosy in a year when the charge has dropped into "historical financial statements." Investors don't look back.

But by acknowledging that some $180 million in costs, not to mention the hundreds of millions probably spent to train and employ staff at these locations, was a big waste of money, Starbucks management is owning up to a future of slow growth.

Starbucks (NASDAQ:SBUX) can't seem to do well in the US. People who feel poor don't want $5 coffee and the chain seems to have built too many stores here. The company has even gone so far as to close some.

But, bright on the horizon, the Seattle-based company sees Europe as a potential region for expansion. So, the company will open 150 new stories on the continent. According to Reuters, "The coffee shops are to be opened at airports and railway stations and come as the chain looks to offset a slumping U.S. market with overseas growth." The new stores will be franchised and run by a UK company called SSP. At least that probably means Starbucks will not be taking all of the financial risk.

Starbucks may find that a recession in Europe is likely to keep people out of expensive coffee shops just as much as its has in the US. But, the new push into the continent has a more telling aspect. Starbucks does not have the taste for risk that it once did. There was a time when the company would have taken all of the risk and all of the reward to push more aggressively into a large market.

Starbucks is not only suffering from slowing sales. It is getting timid.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

Drinkers of fine coffee may turn their noses up at Folgers or Maxwell House, but these two brands have been household names for decades. And they're not the just offering plain, old coffee for the commoners anymore. They've both added a variety of coffees to their product mixes in an effort to lure more upscale (picky? elitist?) coffee drinkers to their brands.

Folgers, one of the Procter & Gamble (NYSE: PG) family of products, has added roasts such as Black Silk, French Roast, Gourmet Supreme, and House Blend. They've also got a line of flavored coffees that include Crème Brulee, Vanilla Biscotti, and Caramel Drizzle. You will also find instant cappuccino in French Vanilla and Mocha Chocolate flavors, and the trusty old plain instant coffee is still available. I've had it, and it's not all that bad when you're in a pinch!

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

Oh, how the sugary have fallen. Ten years ago, even five, you and I both know how this would have come out. In the standoff between longtime national fried-dough pusher Dunkin' Donuts and upstart sweet freak Krispy Kreme Doughnuts (NYSE: KKD), Krispy reigned supreme. The chain was rolling out new franchises as fast as dough circles could parade around its restaurants on shiny metal racks, and each time it did local police stations did overtime directing traffic.

Somehow, the mighty fell after the considerable sugar high, largely connected to poorly-managed finances, badly-handled expansion, and a sudden national fear of carbohydrates. All the while, Dunkin' Donut managers everywhere continued to plod along, making the doughnuts, and quietly stirring a blue-collar breakfast revolution. One day America woke up and realized, hey, Dunkin' Donuts' coffee is good! Someone named it "Better than Starbucks" and it soon became clear that the product guys had realized something: we make a lotta money off of coffee. Actually, more than half of the company's revenue.