Speaking of McDonald’s… it recently announced the biggest addition to its menu in decades – the barista. Its 14,000 US locations will install coffee bars starting this year, serving lattes, cappuccinos, mochas, and Frappes. This is very, very bad for Starbucks.
Starbs has already seen diminished growth last year even before the reinvention of Dunkin Donuts & McD’s as specialty coffee makers. They are blaming the slowdown in consumer traffic on “pressures on consumer spending.” I personally think it’s from market oversaturation (how long can they keep seeng amazing growth? How many Starbucks is too many? In my hometown there are 3 within a quarter of a mile from each other. On Astor place there are two across the street from each other.) Either way, SBUX shares have lost half of their value in the past year. See the above graph (McD’s blue, Starbucks red).
So what is Starbucks doing to combat this? Testing $1 cups of coffee in Seattle. With free refills! And they’re bringing Howard Schultz (former CEO) back. Should be an interesting year for Starbucks, so stay tuned. To honor it I’ve started reading Schultz’s book.
