Counterstrike

Last week I wrote about the next volley in the ongoing Coffee Wars – the introduction of a new, larger size for iced beverages known as a Trenta , by Starbucks. I continue to wonder how much good a larger size is going to do, especially when you consider that it will also be more expensive, given that McDonald’s is already featuring $1 large and extra-large iced tea products in several markets (including this one). But apparently the Golden Arches aren’t planning to sit around and wait for it, since they’ve just fired their own next strike – and it looks like a good one…

The McDonald’s location nearest to campus is now selling oatmeal (for years a mainstay of the Starbuck’s morning offerings) as part of its regular breakfast menu. Now personally, I’ve always felt that oatmeal tastes too much like wallpaper paste, and thus avoid both products, but people who know tell me that the McDonald’s product is superior to the competition in flavor and price. If this is correct – or even if a significant percentage of the market feels that it is – this could make things even worse for the coffee chain, which already trails the burger stand in categories like variety/menu options and price. I think the real question here is how much overlap there actually is in the customer demographics for the two companies – and how much of it can be persuaded to change sides in return for new products…

Starbuck’s can boost revenue by offering drive-through windows and meal convenience, but it’s never going to be an all-up restaurant, and probably shouldn’t be; the core of their customer base is coffeehouse patrons, who want a destination and even inclusion as part of the service. People go to a coffee house to sit, read, socialize, transact business, do homework, and generally feel as if they are part of a community and that they matter to the company, even though they know that Starbuck’s only loves them for their money. By the same token, nobody over the age of six ever felt included by a McDonald’s franchise; even the ones with clean and well-lighted dining areas are clearly oriented around a “get your food and get out” mentality. I’ve used each chain to fill the opposite need – camped out in a McDonald’s when that was all we had available for the afternoon, and obtained quick, portable food from a Starbuck’s when that was the only think open – but it doesn’t seem possible for either company to fill the niche the other one occupies…

Clearly, McDonald’s gets that – their efforts have all been directed towards other products their customers can use within the existing framework, like cheap drinks and expanded types of portable food. Whether Starbuck’s does or not is a little murkier; it’s hard to say how a larger iced tea product enhances their social or entertainment roles, and it’s hard to imagine that adding two or three new products is going to have much impact on the bottom line, no matter how profitable those products might be. If Starbuck’s were to add entertainment, or shopping, or any other destination-based products or services to its repertory, that might be more helpful in expanding their customer base. On the other hand, they’re an insanely profitable multi-national company, and I’m a doctoral student earning less than an apprentice plumber, so maybe they’re right. All I know for sure is that McDonald’s has won the last few rounds, and eventually that’s going to be a problem…