McDonald's-Starbucks Coffee War Heats Up

The coffee war is on, and the spoils are big: 57 percent of American adults drink coffee every day. And as CBS News correspondent Seth Doane reports, McDonald's is taking aim at Starbucks and making its biggest menu addition in three decades.

There are drive-up windows at Starbucks, and there's more comfortable seating at McDonald's. In the battle for customers, the two giants are looking more alike. But McDonald's is now making the next move.

Cappuccinos, blended coffees and pastries are traditionally Starbucks' ground. But, now, McDonald's wants a shot at the espresso market, too.

Famous for the Big Mac, the fast food chain has brewed up a plan to add high-end coffees and bottled beverages to their menu. By doing so, they hope also to add a billion dollars to their bottom line.

"This is really all about giving our customers yet another reason to come into our restaurants in addition to the great tasting food," says McDonald's spokesman Bill Whitman.

New commercials are currently running in Michigan and Kansas City, both test markets for the expansion. McDonald's ultimately plans to put coffee bars in nearly 14,000 locations across the country.

And their coffee will be roughly 60 cents cheaper than Starbucks, so if you drink a cup a day, that could save you over $200 a year.

But will this send Starbucks fans to the golden arches? "It won't mean that Starbucks will lose, but probably that Starbucks won't have the gains as much over the next two years," predicts restaurant industry expert Malcolm Knapp.

Adding coffee is McDonald's latest effort to adjust to market trends, and they've seen shares prices increase more than 30 percent in the last year. Meanwhile, Starbucks is down 48 percent.

Looking to stop this slide, Starbucks announced late Monday that chairman Howard Schultz would take over again as CEO.

And, while Starbucks declined CBS News' request for an interview, they stated on their Web site that this is part of a plan to refocus on the "customer experience in the stores."

So, just who may win this battle of the brew isn't certain, but one thing is: "Those other folks are probably sitting up and taking a closer look at McDonald's these days - our customers are doing that and they're responding," says Whitman.

This all started for McDonald's two years ago when it upgraded its coffee to a blend it called "premium." The idea was to compete with major coffee chains like Dunkin' Donuts and Starbucks.
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