Starbucks, Dunkin' Donuts, McDonald's: Coffee Rivals Fight Breakfast War

Last Updated Jun 1, 2009 10:30 PM EDT

In an economy that increasingly favors cheap deals, Starbucks has been flailing while its competitors take advantage. McDonald's is expanding its McCafe into more and more markets, while Dunkin' Donuts is running various promotions as well as investing in advertising and new stores. Both companies are aggressively targeting Starbucks customers.

But Starbucks CEO Howard Schultz this week announced an offensive play: the company is launching its own value meals. The details are still vague -- Schultz said only that there will be "several breakfast pairings" at "attractive" prices.

But a Starbucks value meal may be a hard sell to those who aren't already Starbucks regulars. As one analyst told AP, "people automatically see Starbucks as being more expensive." McDonald's has been making the best of that reputation and going out of its way to portray the coffee chain as upscale and pretentious. It ran billboards in Seattle that said "four bucks is dumb" and started a website at the url "unsnobbycoffee.com."

Plus, the new Starbucks deals won't be the only debuts. Dunkin' Donuts also introduced a new breakfast special this week -- a waffle sandwich for $2.99. And it got aggressive on coffee in the New York Tri-State Area, offering 99-cent lattes all day there. (Dunkin' sold 99-cent lattes in a previous promotion, but only in the afternoon.)

Burger King has its own new breakfast special as well, but the Whopper-maker isn't really a player in the coffee game. It's so non-threatening that when Jim Donald left Starbucks as CEO, his severance package stipulated that he could not work for McDonald's or Dunkin' Donuts, but Burger King was okay. And when Consumer Reports tested coffee from all four chains, McDonald's beat Starbucks, while BK's coffee was described as tasting "more like hot water."

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