Begun, the Coffee Wars Have

Actually, there have been coffee wars going on in the United States for decades, and in recent years the efforts of various national and regional coffee-house chains to resist the all-conquering Starbucks brand have provided business teachers like me with hours of easily-accessible lessons. It’s just that one rarely gets the chance to paraphrase Yoda in the title of a post – and it looks as if the spread of the ongoing coffee wars into additional sectors is beginning to gain momentum…

According to a story in USA Today by way of Cincinnati.com, Burger King is about to respond to the highly successful McDonald’s premium coffee product line with the introduction of coffee-house coffee, plus lattes, mochas, iced varieties and related beverages. What makes this new lineup so interesting – and potentially so problematic for the competition – is that the coffee Burger King is going to be selling is made and distributed by Starbucks. It’s the “Seattle’s Best” branded coffee – the results of an earlier attempt by Starbucks to expand their market share by developing a different brand (and to some extent a second chain of coffee houses) – which means that the company won’t technically be competing with any of its own retail locations, but this still has significant potential for both companies. Burger King now has a real answer for the “McCafe” product line (as opposed to its fairly unimpressive “BK Joe” product concept), and Starbucks is getting back at McDonald’s – which has been taking aim at Starbucks ever since their premium coffee line came out…

It remains to be seen if this development will improve Burger King’s position in the larger ongoing fast-food wars. With so-called “premium” coffee now available in fast-food restaurants, convenience stores, gas stations and bookstores as well as coffee houses, the key to marketing that product category is probably not going to be stand-alone coffee houses, just as the key to marketing soft drinks is no longer the ubiquitous “soda fountain” operations of the earlier 20th Century. If you can get what is essentially the same beverage at Burger King for $2.00 that you would wait twice as long and pay twice as much for at a Starbucks, you are not likely to bother going to the coffee house – unless that was the whole point of your purchase all along…

As I have previously noted, Starbucks isn’t really selling coffee. Since the Starbucks beverage you pay $3.50 for is made from perhaps 20 cents worth of coffee and another 10 cents worth of milk, clearly the point isn’t just buying coffee. People go to Starbucks for convenience, for the experience, for a lifestyle, sometimes for a certain degree of community – and all of these are things you can’t get in a burger stand, except possibly the convenience. To remain competitive in the midst of these expanded coffee wars, Starbucks (and the other coffee house chains) will have to emphasize the ways they create value for their customer that don’t involve speed, convenience or lower prices. They will need to move away from the fast-food model and return to the concept of a non-exclusive neighborhood social club from whence they came; more “Central Perk” than McDonald’s…

Or they can try to fight the burger chains, matching their weakest features against their competitor’s strengths, and vanish onto the scrap-heap of history next to the neighborhood soda fountain…