The Coffee Wars have started as McDonalds and Dunkin Donuts aggressively pitch their coffee offerings in an attempt to steal business from Starbucks. Undoubtedly, Starbucks is the dominate leaders in coffee throughout the United States, if not the World. From a marketing perspective, if McDonalds pursues a strategy of offering good coffee at a good price, they can be successful. McDonalds has already started to close the gap by improving and expanding their product offering. Starbucks owns the upscale “coffee house” space. Moreover, Starbucks markets the experience and ambiance. Starbucks customers are willing to shell out $6 for a Grande coffee because they value the quality of the coffee and the “Starbucks Experience.” In responding to this competition, Starbucks CEO Howard Shultz has to carefully balance product and pricing strategies while not hurting the Starbucks brand. A key asset that McDonald’s has is market presence, with over 14,000 U.S. locations, they have reached market saturation in the country. Just this week, Starbucks closed all of its locations for several hours to provide training to its employees. While Starbucks regulars were locked out of the stores for several hours, Dunkin Donuts ran promotions offering its coffee at 99 cents. Starbucks also recently announced a $2.50 coffee offering and is considering a refillable $1 coffee offering. Starbucks is also planning to roll out healthier breakfast offerings and specialty drinks this year. It will be interesting to see how Starbucks responds to these aggressive attempts by McDonalds and Dunkin Donuts to grow their coffee business. In the meantime, sit back and have a coffee.
