Starbucks Corp. is hoping to find some sales salvation in its own value meal variety as McDonald’s continues to make inroads with its new coffee offerings, The Associated Press reported.
The coffee tug-of-war has heated up in recent months as McDonald’s began offering new, lower-priced specialty coffee drinks and Dunkin’ Donuts has been advertising value-minded deals, The AP reported.
Starbucks has yet to offer many details about what CEO Howard Schultz described to investors last week as “several breakfast pairings” at “attractive” prices, though more details could arrive as early as this week, The AP said.
Analysts, though, are wondering if the plan will be enough to keep value-seeking customers from abandoning the mermaid for the clown, The AP reported, adding that McDonald’s coffee drinks are now in about half of the company’s U.S. stores.
Starbucks is looking to rebound from dismal sales in the U.S. as more consumers cut back on spending in the deepening recession. In its fiscal first-quarter report last week, same-store sales — a key indicator of a retailer’s performance — dropped 10%, The AP reported.
Starbucks won’t say whether competition from its lower-priced rivals has contributed to its sales decline. Analysts say the economy may be driving more value-minded consumers to switch brands rather than just cut back.
McDonald’s is halfway through its nationwide launch of its new espresso-based drinks, and sales are hitting or exceeding internal targets. The company declined to elaborate but cited the popularity of the drinks as one factor in its better than expected fourth-quarter results, The AP said.
The McCafe drinks are about 65 cents (or about 25%) cheaper on average than those at Starbucks. When flavor shots are added, the savings increase because a flavor shot costs 35 cents each on average at Starbucks. The shots are free at McDonald’s.
Dunkin’ Donuts is also offering specially priced coffee and food combinations, such as a medium drip coffee and an egg white flatbread sandwich for $1.99.