Could McDonald's Really Beat Starbucks?


Did you ever think that America was silently lusting for a quarter-pounder with cheese, fries and a mocha latte? I sure didn't. But maybe that's why I'm stuck at a desk blogging about coffee marketing while the guys at McDonald's roll in their big piles of money. With sales are up more than 5 percent (more than Burger King or Wendy's), McDonald's is boasting about its McCafe campaign's stronger-than-expected debut. Is the time nigh when, thirsting for a cup of joe, you trade the faux-Francaise atmosphere of Starbucks for the bright plastic counters of McDonald's?

Starbucks has been posting negative sales for more than a year. Same stores sales last quarter were down 8%. That's not good, and the company is fighting back with a series of ads (eg "Beware of a Chaper Cup of Coffee. It Comes With a Price.") which argue, pretty explicitly, that yes, Starbucks is more expensive than some other coffee brands, but that's only because it's better. As Chief Marketer Terry Davenport said in an interview with Ad Age, Starbucks is hoping that nobody who cares about coffee will go to McDonald's. And that anybody who goes to McDonald's eventually learns to like (and think they need) better coffee.

Mr. Davenport: ...If people get into the category, get comfortable and want to trade up to a premium, higher-quality version, we're in a great position to capture some of those
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I would say two things to that. The first is that Starbucks' coffee isn't actually very good. I don't think that's a controversial point. I know lots of coffee lovers and none of them praise Starbucks for the coffee, even if they return morning after morning for one of the sweeter lattes. In this Consumer Reports survey, McDonald's coffee actually beat Starbucks (and Dunkin' Donuts) in a blind taste test. Even if the coffee at McDonald's is barely cheaper-per-cup, this is still an important advantage that could help McD steal market share.

Second, where Starbucks will continue to thrive, I'd wager, is the $4 latte area, judging from personal experience with McDonald's new "mochas." And I don't use scare quote to subtly persuade you from trying one. I use them explicitly to scare you from ever considering one. The last two I've had taste a bit like what happened when you would try to make chocolate milk in front of the television as a kid. You start pouring the Hershey's syrup into a glass of milk and something funny happens on TV that makes you forget about the drink, so 20 seconds later you look down and see the stream of chocolate is bobbing like a dead worm in your glass, and you've got yourself a nice cup of Hershey's syrup with trace amounts of milk. I don't know that's the company's actual recipe (or if the guy at the Gallery Place McDonald's is always distracted) but that's what it tastes like. And as long as McDonald's tries to supplant Starbucks by making bad chocolate milk and calling it a mocha, the yuppies will keep paying for the $4 cups and the faux-French scenery.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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