McDonald's-Starbucks Coffee War Heats Up

(CBS)  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.

[cantshutup]

everything at mcdonalds suckxs and will kill you...starbuck rocks@!!!

[rudy654-2009]

Posted by USAyesterday at 05:16 PM

Well said.

[rudy654-2009]

I don''t know about others who go and buy the so-called "premium" coffee, but when I go to Starbucks or some other facility, I only go once in a while, not every day - usually just weekends. I really don''t think one can compare that to the high price of gas which I need every day to go to work.

[usayesterday]

People here have talked about the service they get at Starbucks, and though it is all based on the attitude of the individual serving you at the time, Starbucks employees are given extensive training. The training by itself, totally rivals that of McDonalds. The employees at Starbucks are also compensated much better than the average McDonalds employee, and, Starbucks employees are even allowed to join in the company health care plan whether they are part time or full time employees.

This is basic business 101:
A better trained and better compensated employee will, on average, will be more productive and provide better customer service (on average).

[oscarez]

younger generation .yeah but they have the cash, because they buy much less booze and drugs then previous generations

Posted by billpl at 01:05 PM : Jan 08, 2008

They have the cash because they live off their credit cards.

[u836203]

Hey Walt1944, sounds you have some common sense and you have worked for a dollar and know the value of it. You''ll do all right in life.

[mitywhity]

Waaaaaaaah! Waaaah! Conservatives have money to burn because they have the yearn to earn! Get a job Walt1944 and stop crying in your re-used grounds coffe you made this morning!

[kkcbs]

Hey Walt, what in hill does SIG HEIL, BUSH!!!! have to do with coffee?

[walt1944-2009]

With gas going for $3.20 a gallon and maybe $4 by Easter, who can afford "premium" coffee anyway, except the big bucks neocons. A lot of people, including me, are drinking the stuff you get at a gas station which is "pricey" too, but not as expensive as Starbucks.

SIG HEIL, BUSH!!!!

[kkcbs]

I put my coffee money into small local fair-trade coffee joints. That''s where the real quality and atmosphere are.