Bloomberg News via AZ Central
Jun. 8, 2007
Starbucks Corp., the world's largest chain of coffee shops, may see sales slow as people increasingly turn to McDonald's Corp. for their daily brew, a Deutsche Bank Securities Inc. analyst said.
Marc Greenberg, who is based in New York, cut his target price for Starbucks shares by 14 percent to $32 from $37. He said McDonald's switch to a new coffee blend last year has improved its reputation among consumers.
"The coffee house is facing a new world order," Greenberg wrote in a note late yesterday. McDonald's is "the very last company we would choose as competition" for Starbucks.
McDonald's, which reported monthly sales today that rose the most in three years, is selling iced coffee and other specialty brews at some U.S. stores. In February, Consumer Reports magazine ranked McDonald's coffee ahead of Starbucks, saying it tastes better and costs less.
McDonald's coffee has "surprisingly high" appeal, with 35 percent of consumers surveyed by the bank saying McDonald's brew got better in the past year, Greenberg said.
Starbucks spokesman Brandon Borrman declined to comment on the analyst's note. He said Starbucks is focused on giving its customers "a unique combination of premium coffee and an exceptional experience that they can get nowhere else."
McDonald's had 31,677 restaurants in 118 countries at the end of March. Starbucks operated 13,728 locations as of April.
Shares of Seattle-based Starbucks fell 13 cents to $27.31 at 1:19 p.m. New York time in Nasdaq Stock Market composite trading. They have dropped 23 percent this year.
Jun. 8, 2007
Starbucks Corp., the world's largest chain of coffee shops, may see sales slow as people increasingly turn to McDonald's Corp. for their daily brew, a Deutsche Bank Securities Inc. analyst said.
Marc Greenberg, who is based in New York, cut his target price for Starbucks shares by 14 percent to $32 from $37. He said McDonald's switch to a new coffee blend last year has improved its reputation among consumers.
"The coffee house is facing a new world order," Greenberg wrote in a note late yesterday. McDonald's is "the very last company we would choose as competition" for Starbucks.
McDonald's, which reported monthly sales today that rose the most in three years, is selling iced coffee and other specialty brews at some U.S. stores. In February, Consumer Reports magazine ranked McDonald's coffee ahead of Starbucks, saying it tastes better and costs less.
McDonald's coffee has "surprisingly high" appeal, with 35 percent of consumers surveyed by the bank saying McDonald's brew got better in the past year, Greenberg said.
Starbucks spokesman Brandon Borrman declined to comment on the analyst's note. He said Starbucks is focused on giving its customers "a unique combination of premium coffee and an exceptional experience that they can get nowhere else."
McDonald's had 31,677 restaurants in 118 countries at the end of March. Starbucks operated 13,728 locations as of April.
Shares of Seattle-based Starbucks fell 13 cents to $27.31 at 1:19 p.m. New York time in Nasdaq Stock Market composite trading. They have dropped 23 percent this year.
How often would you say the average Starbuck's consumer frequents McDonalds?
ReplyDeleteWouldn't it make more sense that McDonalds will gain traction with your average Dunkin Donuts or Denny's consumer, in search of a good cup of joe, rather than the average Starbucks fan in search of a triple shot grande caramel machiatto? The 1st rule of Starbucks customers is that they don't care about the cost, because they're brand loyal. They identify with the company and McDonalds has an entirely different emotional connection with the consumer. They will not flood McDonald's in search of coffee anytime soon, no mater how many consumer reports are issued.
I really think the analyst in question is a mistaken, as he completely fails to see that McDonald's and Starbucks serve two entirely different class of consumers, and in the end, compete for different dollars.