A Tale Of Two Food Giants

The economic downturn has become a bitter brew for Starbucks, but McDonald's is lovin' its latest results.

Consumers are making it clear, observed Early Show National Correspondent Hattie Kauffman Tuesday, when it comes to food, inexpensive is hot, pricey is not.

The sagging economy took a Venti-sized gulp out of Starbucks earnings, while McDonald's was seeing beefy sales.

Starbucks profits plunged 97 percent in its latest quarter compared to the same three-month span last year, down from $158.5 million to $5.4 million.

Part of the drop was due to the cost of closing stores here and oversees, the company reported, but it's also seeing customers cut back on those expensive drinks.

"We drink coffee at home now, pretty much always" one woman told Kauffman, "and then just, maybe once a week, we'll have coffee out."

McDonald's first took on Starbucks last year, when it introduced its premium coffee. Now, overall same store sales for McDonald's rose 8.2 percent last month, fueled mostly by folks looking for a cheap meal.

"We don't eat out as often, and when we do, we go to the cheaper places," one man said. "We're teenagers, and we don't have much money, so the more we can get for less money is better for us," one teen explained to Kauffman.

At McDonald's, you can buy three cheeseburgers for less than what it would cost you for one Grande Latte at Starbucks, Kauffman pointed out.

It's not just Starbucks that's suffering, she adds. Many restaurant chains are reporting steep declines, as consumers put themselves on a financial diet.
  • CBSNews

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