McDonald's Corp. (NYSE: MCD) and Starbucks Corp. (NASDAQ: SBUX) have been trying to cut into each other's businesses for a while now, with McDonald's introducing premium coffee and Starbucks its breakfast sandwiches. After test-marketing iced coffee and cappuccinos in various markets, McDonald's is ready to take its rivalry with Starbucks to the next level by rolling out a makeover of all its U.S. restaurants by 2009 to feature specialty beverages such as coffee drinks, smoothies, energy drinks, and other bottled beverages.

Specialty drinks have higher profit margins than sandwiches, and McDonald's estimates this "Made for You" campaign could boost sales by as much as $1 billion a year. Results from test markets in which the plan has already been tried suggest that it doesn't require additional staff and that it doesn't slow down service, but counters and drive-thru areas do have to be remodeled to make room for new equipment. Some franchisees are concerned about the costs of such renovations.

This has to be better news for McDonald's investors and watchers than Moody's downgrade of McDonald's last week due in part to competition and labor and energy costs. Shares fell 54 cents, or 1.1 percent, to $54.26 after the Moody's announcement, but closed Sept. 28 at $54.47. On the other hand, a Goldman Sachs analyst has McDonald's as a top pick in the otherwise mixed restaurant sector, for its global strength. Starbucks was downgraded last week as well.

Earlier Sarah Gilbert discussed the economic squeeze that could mean trouble for Starbucks (SBUX) and other retailers of premium-priced gourmet items. The Korean Times reports on a debate that is forming in the country over this type of spending, which for better or worse, Starbucks and the "Starbucks experience" seems to typify in many minds. Becoming a target is part-and-parcel of extraordinary success in branding.

Throughout Asia, rushing through a metropolis Starbucks in hand can be seen as a way to tap into a feeling a sophistication and the idea that one is on globalization's winning team. This is part of a lifestyle called "toenjang-nyo" in Korean cyberspace, according to the rather admonishingly-toned Korean Times story by reporter Park Chung-a (linked above) -- at least, it's called so, when the this practice pertains to young professional or college-age women.

Competition is lively as snack-pushers like Starbucks (SBUX), Dunkin' Donuts, Cold Stone Creamery, and Jamba Juice roll out their new summer offerings in the way of fruit-flavored smoothies, blends and shakes:  Fruity Summer Drinks are a Tropical Paradise of Profit: AOL Money & Finance. To the popular coffee and tea-based Frappuccino, Starbucks has added blends based on pomegranate or tangerine. The coffee giant still has whipped-cream and syrups available to top yours, an option maybe not found at Jamba Juice, if you were worried that the new choices are not decadent enough.

Reuters reports SBUX is preparing to up noncoffee merchandise for holidays, a move consistent with this summer's strategy, and with the overall aim of the Starbucks Corporation to continually introduce new products and new ideas.  Starbucks does not just expand geographically, and those store shelves and menu boards are always threatening to explode from the sheer number of new kinds of, well, stuff, seemingly always being introduced: Board games, CD's, home brewing equipment -- some of it useful or interesting, some of it obscure and even puzzling.

Not all of it works, but I have to admire the energy and will that goes into the process. A company that is so committed to continually trying out new ideas has plenty of growing room on its horizon. 

An organization called The Organic Consumers Association (OCA) issued a press release last week objecting that the Starbucks Corporation [SBUX] is still serving milk containing Bovine Growth Hormone (rBGH --a.k.a. Bovine somatotropin), despite what OCA claims is a five-year old commitment by the coffee company to offer alternatives to consumers. The OCA now believes that earlier promise was a "ploy" by the corporation to grab a feel-good headline.

The same press release also says Starbucks does offer alternatives upon request but makes no effort to inform customers or employees of the choice. Not sure I follow that, what do the employees think that rBGH free organic milk is for, if they in fact have it on hand? This is same hormone that folks like Ben & Jerry's (scroll down to the bottom of the link) won't allow to touch their own fat and sugar-laden treats and is said to cause udder-inflamation in dairy cows and leaves antibiotic residue in the milk that is then consumed by humans.

There are so many health alerts issued, studies done, boycotts called for, on a seemingly increasing variety of issues every day, that I cannot see this one as a major factor for investors. Featuring "organic milk" on the menu board, however, couldn't hurt. Who doesn't like choice? I like to believe I do, at least. That's assuming I can find the new choice among the several hundred possible drink combinations already on offer.

My son Everett, who's almost four, was so excited when a "Starbooks" (as he calls it) was built on the corner a few blocks from our front door. He knows Starbucks as a reliable outlet for chocolate cow (the little Horizon milks with the picture of the cow) and glazed doughnuts. Several local Starbucks have little reading areas for families with children. Every time we drop in to our corner coffee shop, we run into other children packed in strollers and baby carriers. In our neighborhood, at least, Starbucks is all about young children.

The company officially has a policy that it won't market to kids. Yet anyone who's been in a Starbucks outlet recently has noted a not-subtle shift. First there was the Laurie Berkner DVD (the first DVD marketed in Starbucks) -- she's a wildly popular children's singer. Then Dan Zanes CDs joined Berkner on the shelf. A few months ago I was unsurprised to see, next to heaps of stuffed bears, barrels of brightly-colored children's books (Dot and Dash, a ladybug and a turtle, go on adventures through "Mango Mooka Forest" and "Strawberry Summit," where muffins grow in the trees and chocolate rice krispie treats peak from behind oversized fruit).

According to a recent article in the Wall Street Journal, Starbucks' "written policy says its 'overall marketing, advertising and event sponsorship efforts are not directed at children or youth,' although some 'community activities' end up reaching kids. The company reviews marketing materials to avoid distributing ones that could be 'inadvertently appealing to youth.' " Yet June was welcomed in with the company's summer drink lineup; many of them available in non-caffeinated and decidedly kid-focused versions. As the Journal pointed out, the company staged marketing events at zoos and other kid-friendly locales.