The faceoff comes at a critical time for both companies: Starbucks is struggling to hold on to cash-strapped consumers, while McDonald's, which has [image-nocss] been riding a strong wave of sales, helped by its inexpensive menu, is betting it can persuade people to buy fancy, though still relatively cheap, coffee drinks during a recession.
Today, McDonald's will begin marketing its coffee drinks on TV, radio, the Internet and in print, portraying McCafe as a fun, affordable brand. McDonald's espresso-based coffee drinks typically range from $2.29 for a 12-oz. cup to $3.29 for a 22-oz. cup. A caffe mocha at a Starbucks in Chicago ranges from $3.10 for a 12-oz. cup to $3.95 for a 20-oz. cup.
"I assure you that we're going to be surrounding the consumer with very relevant messaging," said Neil Golden, chief marketing officer for McDonald's USA, told Advertising Age. He said the initial ads "will pulse on and off very strongly through the summer, with sustained weight well into 2010." McDonald's has already started the push with coupon booklets in newspapers for McCaf a a' a', which will initially include cappuccinos, hot and iced lattes and mochas, hot and iced coffees, and hot chocolate. McDonald's will add smoothies and frappes to the line later this year and into 2010.
Oak Brook, Ill.-based McDonald's said the new campaign isn't planning to target Starbucks, though some past marketing efforts took direct aim at the Seattle-based coffee chain, ridiculing its prices, said the report.
On Sunday, Seattle-based Starbucks began running newspaper ads advising consumers against trading down to cheaper coffee. "If your coffee isn't perfect, we'll make it over," one ad says, "If it's still not perfect make sure you're in a Starbucks." (Click on the video below.)
"We don't want the public to be misled that all coffee is equal, because it's not," Starbucks CEO Howard Schultz told the Journal, adding that his company buys the best beans and takes other steps to assure quality.
Starbucks plans to raise awareness of its coffee by communicating directly with consumers on Facebook, where it has 1.5 million friends, and on Twitter, where it has 140,000 followers.
And some Starbucks customers will see reduced prices in the coming weeks, as the company plans to lower prices on some drinks in certain markets, reported Fare magazine. A grande iced coffee, for example, will cost less than $2. Meanwhile, more complicated drinks will get a price boost.
During a conference call last Wednesday, Schultz defended his company against rivals' claims that Starbucks' expensive drinks are losing share to cheaper brands. "Speculation that Starbucks is losing retail market share to competitors has been grossly exaggerated," Schultz said during the call. "We know customers are looking for meaningful value, not just a lower price. In the coming days we're going to arm our consumers and partners with the facts about Starbucks coffee."
Meanwhile, after keeping a low profile since its acquisition by Starbucks Corp. in 2003, Seattle's Best Coffee is ready to do its part to keep its parent company afloat, said Fare. Starbucks is planning to open more stores under the Seattle's Best banner through franchisees and switch existing Starbucks stores to the brand, even as it shutters hundreds of Starbucks stores and cuts jobs.
The plan to expand the brand with more franchises, set forth by CEO Howard Schultz in January, would not only keep the company as a whole growing without increasing its operating costs but also help it pursue two niches in the coffee market.
Seattle's Best differs from Starbucks with lower prices and more prepared food offerings, including ice cream and hot sandwiches. Also, its milder coffee has been available in more than 2,800 Subway restaurants since the beginning of the year. Further, many consumers are not even aware that Seattle's Best is a Starbucks brand: in Seattle's Best stores, the Starbucks green is replaced by red, and there is no mention of its parent company.
And Canton, Mass.-based Dunkin' Donuts, another would-be coffee superpower, has opened up another front in the war with its announcement yesterday that participating shops in the New York Tri-State (New York, New Jersey and Connecticut) area will roll back prices for its entire line of Latte beverages. The price roll back applies to all sizes, flavors and varieties of Hot and Iced Lattes, including the DDSMART menu option, Latte Lite, made with skim milk and Splenda.
Latte prices will be reduced by roughly 15%. "This rollback allows consumers...to purchase a Latte for less than $2," said field marketing manager Louis Conte. "In these difficult economic times, we're hoping that rolling back prices will help keep America running and moving forward. This Latte offer reaffirms our commitment to offer high-quality beverages at an everyday value for our customers."
The price rollback program is part of Dunkin' Donuts "You Kin' Do It" rallying cry, the newest iteration of the "America Runs on Dunkin'" campaign.
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