"Once the undisputed king of premium brew, Starbucks is suddenly besieged by tough competitors"

I bet Starbucks' PR department is sick of the steady drumbeat of stories about the company's lousy 2007, which is expected to be the third straight year of declining revenue growth. McDonald's is the Seattle-based coffee giant's biggest threat, according to this story. (BusinessWeek via MSNBC.com)

Comments

[jt]

OK, I have tried all three flavors of the McD's iced coffees.

Pros:
1. Cheaper than SB iced coffee
2. Size-for-size, a LOT more coffee (and again cheaper at size-size)
3. A decent coffee - they use Seattle's Best coffee (at least here in the Seattle area, so SB still "wins")
4. Can get flavored (vanilla/hazelnut) without paying for extra flavoring

Cons:
1. It is drip-based, and not espresso based (for those that care)
2. The flavors ARE sweetened (all of them) so those that do not like the sweetened ice coffees will not like these

Overall
They are a good value for people who want a sweetened iced coffee. I grab one every now and then, but I still prefer non-sweetened ice coffees (iced americanos), so I keep returning to SB.

Competition is good, but the selection is limited. However, I see this as a big win for McDs, and for SB, because people might be brought in to drink something more than hot/drip coffee, which would lead them to SB or other speciality coffee shops. A win for everyone.

[Northern Latte]

Intresting about the McDonald's ice coffee being Seattle's Best. Here in New England the McDonald's use Newman's Organic which is put out by Green Mountian Coffee out of Vermont....I different regions all use different blend. I love their ice coffee and drink quite a bit of it when there s no Bucks to be found!

[atownsbuxrules]

Eh....
I tried the iced vanilla coffee at McDonald's. It was a lot of coffee for a little money, but it sure tasted watered down. I'd say the closest comparison would be an iced venti solo vanilla nonfat latte with extra ice.

I might get it again in a pinch but I'd rather drive the few extra miles to my Starbucks DT and order iced coffee there.

[volusia]

Certainly you must mean an Iced Single Venti Vanilla Nonfat Extra Ice Latte?

[jt]

At least here (seattle) the McDs are told to brew the coffee double strength, to 1) give it more taste and 2) to counter the effects of all the ice in the larger sizes.

[BigBallaJ]

McDonald's as a competitor to Starbucks in the coffee industry is a bit overblown.

[Lovodo]

At the end of the day the media coverage on the battle of the best coffee helps both companies. Those who are pro SBUX want to see what MD's has to offer and those true to MD's will most likely try SBUX coffee at least once.Marketing 101 teaches that any company getting media coverage usually increases sales. For example, Cubs vs Cards - both Cubs and Cards seats were sold out making both teams money.

[Borrowed Partner]

JT-

SBUX Iced Coffee is drip based as well, and Seattle's Best is actually a SBUX brand...

[Ron]

I think many of you, including the author of the article, miss the point.

The completition from McD's has nothing to do with the quality of the beverage. McD's could never compete with SB on that due to the cost of goods (COGS) would be may too high for a business model like McD. I would argue they also have a massive quality control problem IMHO.

The threat from McD's is one of distribution. Most business saavy people would know that McD's is not a food business......it's a real estate business that sells food. The primary drivers of McD's revenue is from finding, buying or locking in development rights and opening prime real estate locations.

That is the main threat to SB. Overnight they can offer a product across the world at over 25K locations and growing at prime retail real estate sites. It is McD's real estate machine that SB primarily competes against and is one of the main reasons why the company needs to grow so quickly.

[jt]

Just to add to the "story" McD's is also experimenting with actual expresso and wil be test marketing that next year. It will be interesting how they will be able to handle it in a high-volume business (yes, I know SB is high-volume as well, but will they have dedicated McBaristas to handle the coffee while everyone else is running around grabbing burgers & fries").

To me, I can understand the Ice Coffee idea, as it is a good "to go" drink, but with something warm, I get the olfactory image of the smell of burgers/fries clinging to the coffee cup and ruining the coffee "experience".

[Lovodo]

Great post Ron!

[P-Row Shift]

JT-
1. If you're getting charged for flavored syrups in your iced coffee at Sbux, call them out on it. It comes with classic by default, but any other syrup would be just a swap for classic, and shouldn't cost you a dime. That's why they put the vanilla iced coffee on the menu, to let people know that flavored syrups aren't an extra charge.
2. McDonalds has been playing with the McCafe idea for awhile now, they're all over Europe. I made the mistake of getting an espresso in a McDonalds in Vienna, and it tasted like just a splash of their regular watery coffee. There was no body, no heart, no crema, just black putridity.

[Bong]

Are you people seriously talking about McDonalds as a meaningful contender in the coffee business? I'm sorry, but a silly child-molesting clown and his "golden arches" don't inspire me. Even if Starbucks insists on vending machine espresso machines, its still got buku's of taste over anything McDonalds has or could have. Moreover, who do you want making your coffee? A clean looking neatly dressed Starbucks barista? Or a fat, greasy fry-stinkin' McExconvict?

[Jeff]

All this talk about how McD's and Dunkin are going to bury Starbucks is crazy. Keep in mind that we have a secret weapon which hasn't been used yet - advertising. We'll put it off as long as possible, but when the time is right (enough stores, desperation) you'll see the gloves come off.

[20secondshotguy]

Starbucks Secret Weapon? It's not advertising.

The Green Mountain coffee McDonald's serves is good. Dunkin's coffee is also good. The flavor profile IS different, but it's still pretty good.

What if Dunkin and McDonald's start building stores that look like ours? That'll probably happen sooner than later.

We still have an edge.

It's our partners.

Behar's wisdom has always been the key: "We are not in the coffee business serving people. We're in the people business, serving coffee."

As long as we remember that and bring our core purpose to life, we'll be successful.

I think we make a mistake if we just write Dunkin and McDonalds off as if they didn't stand a chance. That kind of hubris is dangerous stuff. We're privileged to have the patronage of our customers. We don't have a right to any of it, or to expect it to continue.

Treasure your partners. Treasure your customers. Treasure our coffee.

[STARBLOGGER]

Awesome point Jeff. Starbucks chooses to raise awareness of its promotions primarily through its stores and therefore saves the gobs of money it would take to air as many commercials and print ads as McDonalds used to promote its iced coffee. Indeed, McD would be hard pressed to truly "take over" in the specialty coffee area. It is, however a SERIOUS threat to our market share and has a strong appeal with that portion of the market who favor SB's lighter roasts or sweeter, milkier drinks.

I think the most pointed remark comes from RON. While SB may have much of the US specialty coffee market well in hand, internationally McD has more infrastructure with which to launch new coffee beverages, effectively beating SB to market in country after country. These are areas that may be "aware" of our identity as a coffee retailer, yet may only have exposure from McD's coffee, and may soon adopt their flavor profile as the norm. We created the idea of the recreational coffee drink, but if we don't gain a significant presence in certain international markets, McDonalds may literally be the only show in town...

[STARBLOGGER]

Amen 20Second...

[Taylor]

I find it funny the McDonalds stores in Seattle serve Seattle's Best, because as a previous poster mentioned Starbucks does in fact own Seattle's Best.

So in truth, Starbucks wins either way in that market. Either they buy Starbucks at Starbucks, or Starbucks via SB via McDonalds.

[starblogger]

I'll put money on a guess: McDonalds is, at this very moment, thinking of ways logistically to serve any other kind of coffee than Seattle's Best in the northwest market. If they could replace SBC as their default in the region they would, even with a moderate increase in cost of goods...

[kcbarista]

I think that McDonald's or Dunkin' Donuts can't match the customer service, quality, or passion that most baristas have. At the end of the day, the Starbucks experience is what keeps our regulars coming back.

[Jeff]

I agree that customer service is our core strength, but apparently it's not working as a growth strategy. We're no longer in a "business as usual" mode. We've got to fight back. We must keep the strong commitment to exceeding expectations, but also do more.

There are two global, overlapping strategies- get more people thru the doors (more stores, new customers, new products) and get customers to spend more (price increase, upsell, new products, etc.)

The good news is that our management seems to be willing to take risks, to try new things. Let's hope that they keep it up and focus on the top-line (sales).

I worked for a (very large) company that tried to grow profits primarily by cutting costs. It was no fun. The company is now in bankruptcy. Let's hope we never get to that point!

[zenjewel]

It's a bit worrying to see how McD's is having too many fingers in too many pies... And SB is losing out. In Singapore there are SB cafe's almost every half a mile and yet when the McCafe places opened.. it was rejoiced; as there's food along with the coffee.. something a lot of people look out for in Asia...

[Latte Rebel]

I was surprised how awful the vanilla lattes are at McDonald's, I expected them to taste really great, but they were pretty nasty. At this point in time, Starbucks espresso drinks are totally first rate and McDonald's aren't very good at all. I am fond of McDonald's "regular" coffee, especially when I am in New England and can enjoy Newman's awesome coffee with a breakfast sandwich.

[Matt]

Here in the Southeast several Starbucks customers got very nice coffee samples from www.coffeesofhawaii.com pinned to their wind shields while they were inside the stores.

[ILeany]

20secondshotguy - Thanks for your comment. I see many comments on this site from baristas that just blow off other brands of coffee as crap, or not worth anyone's time. The biggest mistake that any business can make is to write off the competition.

Personally, if I'm having a plain coffee, I brew Dunkin' Donuts at home because I like the flavor. I go to Starbucks for the specialty drinks. If I want a little sweetness in my coffee, Starbucks can do it without making it seem like drinking a gallon of sugar water. The Starbucks espresso balances out really well with flavored syrups, etc.

I also enjoy the baristas at the Starbucks on my way to work. I'll let them make my caramel macchiattos and vanilla lattes with a smile as I am still waking up.

[Loraine]

Here in Minnesota Newman's Organic is brewed for McDonald's coffee, iced and otherwise. I read a piece in Newsweek (I believe) stating that McD's struck up a deal with Newman's on the coffee gig, so it's highly unlikely that they use Seattle's Best. And fyi, McD's DOES charge for extra vanilla syrup in the iced coffee. At least they do here. 25 cents extra.

[tricia]

Seems as each Mc D's make the iced coffee different.
There were some that were excellent, others I tossed.
The mochas are excellent, and I've never tried the hot
lattes.

[Mary]

Does anyone know what brand of flavored, sugar-free syrups SB uses?
Thanks.

[Mary]

Does anyone know what brand of flavored, sugar-free syrups SB uses?
Thanks.