McDonalds vs. StarbucksSylvia, Nick, Mark, Kristin

Introducing…… Mc Café

• Starting in 14,000 U.S. locations• Serving cappuccinos, lattes, mochas,

smoothies, and the Frappe. All priced .60 to .80 cents cheaper than Starbucks.

Mc Cafe• These drinks will be either small,

medium, or large without the confusion.

• Using Espresso machines displayed on the front counter.–Customers will see the beans being

ground and baristas topping the drinks.

So Why the Change…

• McDonald’s executives say that they McDonald’s executives say that they aren’t launching specialty drinks to aren’t launching specialty drinks to compete with Starbucks.compete with Starbucks.

• They are instead trying to cater to They are instead trying to cater to customers growing interests in these customers growing interests in these drinks.drinks.

• Coffee and Iced tea are increasing and Coffee and Iced tea are increasing and carbonated drinks are declining. So, carbonated drinks are declining. So, McDonald’s didn’t want to miss out on the McDonald’s didn’t want to miss out on the growing parts of the beverage business.growing parts of the beverage business.

So Why the Change...

• McDonalds implemented the Plan to Win strategy where they remodeled their stores with large chairs, flat screen televisions, and wireless internet access.

• With the Plan to Win Strategy McDonalds executives realized the potential for coffee sales in that environment.

So Why the Change…• This will add $1 billion to McDonald's annual

sales of $21.6 billion. • Drinks are priced from $1.99 to $3.29 and

come in vanilla, caramel and mocha flavors. • Customers were buying food at McDonald's,

then going to convenience stores to get bottled energy drinks, sports drinks and tea, as well as sodas by Coke competitors.

So Why the Change

• Only about 800 of McDonald's U.S. restaurants have the specialty coffee drinks now, and some may not get the full beverage program until 2009.

• In 2006, McDonald's changed its drip coffee to a stronger blend and began marketing it as a "premium" roast.

• Starbucks responded that taste is subjective and its millions of customer visits per week demonstrated the popularity of its coffee.

So Why the Change…

Starbucks seeing a threat?

• After downplaying threats from After downplaying threats from competition, Starbucks are now ready competition, Starbucks are now ready to compete with their rivals.to compete with their rivals.

• Starbucks are beginning to see fast food Starbucks are beginning to see fast food chains as a threat.chains as a threat.

• They have recently added a drive thru They have recently added a drive thru window, breakfast, and lunch window, breakfast, and lunch sandwiches.sandwiches.

Starbucks seeing a threat?

• Howard Schultz, Starbuck’s chairman, has said that the new competition will help Starbucks.

• By expanding the specialty coffee category, over time, customers will trade to Starbucks because they will be unsatisfied with the experience and the flavor.

• Howard Schultz wanted to create a comfortable atmosphere in Starbuck’s

• He wanted people to fall in love with the European environment like he did when he went to Italy into espresso bars

Starbuck’s Declining

Even through the recent changes, Starbucks stocks are still declining, as McDonalds are rising.Starbuck’s executives are attributing the slowdown in sales to a weak economy.

It Ain’t All Good For McDonalds

• This could slowdown the “fast food” aspect of McDonalds.

• Mc Café could push away customers who come for cheap food and quick delivery.

• Most McDonalds say that most of their customers do not even know what a “latte” is.

Reaction of the Public• “The idea that McDonalds will provide a high quality cup of coffee with their trans-

fat menu items is a joke. I equate McDonalds coffee with truck stop coffee, which would be the last place I would go. Starbucks is and will continue to be the gold standard. McDonalds is just flushing money down the toilet, and they will realize it soon enough.”

• “McDonald’s coffee is better. I got a iced coffee for half the price that was just as good or better. Plus, has anyone ever noticed that you have to wait 10 minutes every time you go to Starbucks. McDonald’s service has really improved just as I have seen Starbuck’s decline.”

• Lets all hang out at McDonalds on plastic chairs with fry grease and burger condiments all over the table. Wow that sounds classy as the guy next to you stuffs a big Mac in his mouth.

• “There was a blind taste test done last year by consumer reports that compared all of the “typical” coffee vendors such as Starbucks, Dunkin Donuts, Burger King, McDonald’s etc. Who do you think won the test? That’s right, McDonald’s!”

Questions?